Padmanabh R. Merchant
Specimen excerpt of Board Minutes relating to Approval and Registration of Transfer of a Share of a Private Limited Company is stated herein for eliciting comments thereon.
Whereas Section 56 of the Companies Act, 2013 (the Act) deals with transfer of corporate securities, Section 118 of the Act deals with the minutes of the proceedings of the corporate meetings.
The Share Transfer in a Private Limited Company can be restricted by provisions of Articles of Association, which lay down two main condition in the form of-
(a) Rights of Pre-emption in favour of the other member; and
(b) Power of the Directors to refuse registration of transfer of shares.
Typical clause in the Articles of Association of a Private Limited Company, pertaining to restrictive conditions for transfer of its Share is as under:
“Any Member of the Company desiring to sell and transfer any of the Shares of the Company, held in his name, must notify the particulars of his Shares, fair value of the Shares and the name of the proposed Transferee to the Board of Directors…….”
In view of the above, specific contents of the Minutes pertaining to approval of Transfer of its Shares, of the Board Meeting of a Private Limited Company could be somewhat peculiar, particularly because the Articles of Association of a Private Limited Company are supposed to contain restrictive provisions for approval of transfer of its shares of an existing Shareholder or Transferor to a Transferee.
Specimen excerpt of the Minutes of the Board Meeting of a Private Limited Company is given below for perusal and comments of the readers hereof.
07/00-09-2022/XXPL/ APPROVAL AND REGISTRATION OF TRANSFER OF THE SHARES OF THE COMPANY, BEING A PRIVATE LIMITED COMPANY:
The Chairperson placed before the Board –
(1) a Share Transfer Deed dated September 00, 2022 duly executed by both –
(a) the Transferor, being a Shareholder and Director of the Company, namely, Mrs. ABC, of 1 (one only) Equity Share of Face Value of Rs. 100/-, fully paid up, of the Company, namely, XYZ Private Limited, at a consideration of Rs. 1,00,000/-; and
(b) the Transferee, being an Investor / an Associate Company, namely, PQR Private Limited, of the aforesaid 1 (one only) Equity Share of the Company;
(2) a Share Certificate No. 00 dated September 00, 2022 of 1 Equity Share of the Face Value of Rs. 100/-, fully paid up, of the Company, held in the name of the said Mrs. ABC,
(3) a certified true copy of PAN Card of the proposed Transferee / Investor / Associate Company, namely, PQR Private Limited; and
(4) Certified True Copy of Board Resolution dated September 00, 2022 of the aforesaid Transferee / Investor / Associate Company approving-
(a) Its Inter Corporate Investment of an amount of Rs.1,00,000/- for purchase / acquisition of the aforesaid 1 (one only) Equity Share of the Company; and
(b) appointment of its Authorised Representatives pursuant to Section 113 of the Companies Act, 2013 for attending and voting at the General Meetings of the Company.
The Board found the aforesaid documents relating to Transfer of a Share of a Private Limited Company to be in compliance of Section 56(1) of the Companies Act, 2013. The Board ascertained that the restrictive provisions relating to Share Transfer contained in the Articles of Association of the Company, being a Private Limited Company, were duly complied with.
The Chairperson suggested that the transfer and registration of 1 Equity Share of the Company held in the name of the said Mrs. ABC to the name of the Transferee / Investor Company, namely, PQR Private Limited, be approved.
After discussion in the matter, the Board passed the following Resolution unanimously:
“RESOLVED THAT following four documents–
(1) pursuant to Section 56(1) of the Companies Act, 2013 (the Act) a Share Transfer Deed dated September 00, 2022 duly executed both by-
(a) the Transferor, being a Shareholder and Director of the Company, namely, Mrs. ABC, of 1 (one only) Equity Share of Face Value of Rs. 100/-, fully paid up, of the Company, namely, XYZ Private Limited, at a consideration of Rs. 1,00,000/-; and
(b) the Transferee, being an Investor / Associate Company, namely, PQR Private Limited, of the aforesaid 1 (one only) Equity Share of the Company;
(2) a Share Certificate No. 00 dated September 00, 2022 in respect of transfer of 1 Equity Share of the Face Value of Rs. 100/-, fully paid up, of the Company held in the name of the said Mrs. ABC,
(3) a certified true copy of PAN Card of the aforesaid Transferee / Investor / Associate Company, namely, PQR Private Limited; and
(4) Certified True Copy of Board Resolution dated September 00, 2022 of the aforesaid Transferee / Investor / Associate Company approving-
(a) its Inter Corporate Investment of an amount of Rs.1,00,000/- for purchase / acquisition of the said 1 (one only) Equity Share of the Company; and
(b) appointment of its Authorised Representatives pursuant to Section 113 of the Companies Act, 2013 for attending and voting at the General Meetings of the Company.
placed before the Board, being in compliance of Section 56 (1) of the Companies Act, 2013, be and are hereby approved for registration thereof”
“RESOLVED FURTHER THAT on compliance of the restrictive provisions relating to Share Transfer contained in the Articles of Association of the Company, being a Private Limited Company, the Transfer of the aforesaid 1 (one only) Equity Share of the Company
from
the Transferor, being a Shareholder and Director of the Company, namely, Mrs. ABC (Folio No. 00) named in the aforesaid Share Transfer Deed
to
the Transferee / Investor / Associate Company, PQR Private Limited named in the aforesaid Share Transfer Deed be and is hereby approved for registration thereof”
“RESOLVED FURTHER THAT any one of the Directors of the Company be and is hereby authorised to-
(a) authenticate –
(i) an endorsement on the aforesaid Share Certificate No. 00.. dated September 00, 2022 in respect of transfer of 1 (one only) Equity Share of the Company, so approved;
(ii) entries in Share Transfer Register and Register of Members maintained by the Company, about the aforesaid approval of the Transfer of a Share of the Company; and
(b) arrange for the delivery of the aforesaid duly endorsed Share Certificate No. 00 dated September 00, 2022 so transferred to the aforesaid Transferee / Investor / Associate Company in compliance of Section 56(4) of the Act”
“RESOLVED FURTHER THAT the Authorised Representatives appointed by the said Transferee / Investor / Associate Company (PQR Private Limited) pursuant to Section 113 of the Companies Act, 2013 for the purpose of attending and voting at the General Meetings of the Company, be taken on record”
After receiving feedback on the article, the finalised specimen Excerpt of Board Minutes could form part of the Guidance Notes on Secretarial Standards for Board Minutes published pursuant to Section 118 of the Act.
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