Shares in Private Limited Company
In order to raise funds, a company issues stock as equity. To induct new investors, the shares of the private limited company would have to be issued. In this article, we’ll discuss how to issue shares in a private limited company.
Issue of Private Limited Company Shares via Private Placement
Section 42 of the Companies Act, 2013 allows a company to make a private placement to a few people. It is a letter through which a company offers its securities or invites a select group of people to subscribe for them instead of doing a public offering.
A firm may not make a private placement to more than fifty individuals in a financial year, or as many as required by the Rules. This limitation does not apply to qualified institutional buyers and employees of the company who receive stock options under Section 62 of the Act in the current financial year.
Issue of Private Limited Company Shares via Rights Issue
Whenever a company with a share capital seeks to enhance its subscribed capital, it needs to offer more shares – as defined in section 62 of the Act.
- to its existing investors’
- Employees covered by a stock option plan, if the company passes a special resolution
- The price for such shares may be determined by the valuation report of a registered valuer and may be paid to any person, whether or not that person includes those in clauses (a) or (b), for cash or for an alternative consideration, if it is authorized by a special resolution.
How to Transfer a Private Limited Company’s Shares
The following steps must be followed in order to complete a share transfer:
Step 1: Let the experts at Vakilsearch assist you with a share transfer deed
Step 2: Next, our experts will have both the transferor and the transferee sign the share transfer deed.
Step 3: The share transfer document will then be stamped in accordance with the Indian Stamp Act or Stamp Duty Notification of the respective state.
Step 4: The witness then signs the share transfer deed with his or her name, address, and signature.
Step 5: We will then deliver the transfer deed to the Company together with the share certificate or allocation letter.
Step 6: Once the paperwork is approved, we will facilitate the issue a new share certificate in the transferee’s name.
Get expert legal advice from Vakilsearch’s corporate law veterans at the earliest if you wish to issue or transfer private limited company issues.