Sumit Goel
Asked December 06, 2016

Legal procedure for Gifting of shares

  • 2 Answers
  • 7143 Views

I work in a Pvt Ltd Company, having shares as 100. There are 3 Directors, out of which my dad is one. One of his brother who is shareholder wants to gift the shares to me through Gift deed & paying Stamp Duty. Do we need to get it approved from board & what if the board dont approve it due to their personal differences.

Answers 2

Dear Sumit,

The shares of the private Company can be transferred as by the way of gifting the share, if the Article of association doesn’t prohibit transferring the shares, Basically Article of association is the document which contains rules to govern the inner functioning of the company. Section 56 of the companies Act provides the right to transfer the Shares by the way of gift. Two conditions when shares are gifted as follows:-

  • When there is no objection from the Board: - If the consent is given by the transferor and transferee then shares can be gifting without following the procedure under the Companies Act, 2013.
  • When there is an objection from the Board:- If the consent is not given by the board due to personal difference then it will not hold because the circumstances which are mentioned under Article of association then only one has the power to refuse to transfer initially the shares.

Basic procedure to be followed to gift a share the procedure for registration of shares gifted is same as the procedure for a normal transfer as firstly it is permitted under the Article of association then consent of the parties is required then it is required to be approved by the board and The stamp duty payable for registration of gifted shares would be @ 25 paise for every Rs 100 or part thereof, of the face value or the market value of the shares prevailing as on the date of the document.

Regards,

Jayant Garg

 

Agree Comment 0 Agrees almost 4 years ago
  • Default avatar
    Sumit Goel
    Dear Mr. Jayant,
    Agree 0 Agrees almost 4 years ago

  • Default avatar
    Sumit Goel

    As per Our Company Article of association - Board may on behalf of the Company & at its own absolute & uncontrolled discretion & without assigning any reason, decline to register or acknowledge any Transfer of Shares but in such case it shall, within 2 months from the date on which the instrument of transfer was dodged with the company, send to the Transferee & the Transferror notice of refusal to register such Transfer & return the documents lodged as aforesaid to the Transferor.

     

    Please advise how to proceed in such a situation to get the shares registered in the Company with Board.

    Agree 0 Agrees almost 4 years ago

  • Default avatar
    Sumit Goel
    Our Company Article of association read as -- The Board may, on behalf of the Company & at it own absolute & uncontrolled discreation & without assigning any reason, decline to register or acknowledge any Transfer of Shares but in such case it shall, within 2 months from the date on which the instrument of Transfer was dodged with the Company, send to the Transferee and the Transferror notice of the refusal to register such Transfer and return the documents lodged as aforesaid to the Transferor
    Agree 0 Agrees almost 4 years ago


Dear Sumit,

In this case the condition cannot be which is arbitrary in nature as in the case the power to refuse the transfer of shares which is excised cannot be arbitrary or for any other collateral purpose and can only be exercised for a bonafide reason in the interest of the company and the general interest of the shareholders and While there may be restrictions on the transferability of the shares, there cannot be an absolute prohibition on the right to transfer of shares. In this regard, it is helpful to note that a right of pre-emption has been held to not amount to a prohibition upon transfer and further if the issue is not resolved it can be challenged in the court by proving the intention was not bonafide.

Agree Comment 0 Agrees almost 4 years ago

Please Login or Register to Submit Answer

Directory ads
Need to talk to a lawyer?

Book a phone consultation with a top-rated lawyer on Lawfarm.