Overview

Whether it’s due to the implementation of new strategies, the introduction of new investments, or succession planning, changes in shareholding patterns in a private limited company have become quite common these days. However, navigating the process of changing the shareholding pattern requires careful consideration of legal, regulatory, and procedural aspects. This web page will help you dig deeper into the intricacies of altering the shareholding pattern in a private limited company and provide a brief guide for the stakeholders involved.

Before moving ahead to the process of changing the shareholding pattern, it’s essential to understand what ‘Shareholding Pattern’ means. The shareholding pattern refers to the distribution of shares among shareholders, detailing the number of shares different shareholders own and their corresponding percentage of ownership. This is crucial information for investors, regulators, and stakeholders to understand the ownership structure and its implications on decision-making and control within the company.

Reasons of Change in Shareholding

There are several reasons that can encourage or effect change in shareholding some of them are as follows: -

• Increasing Authorised Capital

Authorized capital is the amount of maximum capital that company is allowed to raise, in case the company is issuing some fresh shares and already has consumed authorized capital, the company is required to increase its authorized capital. The first company has to increase its capital and complete the process by paying a nominal fee or stamp duty to the Central Government by filing Form SH-7.

• Allotment of Fresh Shares

A private limited company can allot its share up to 200 persons without seeking the permission of government. Existing shareholders are the first, who have right on newly issued shares. Such allotment of fresh shares can be made after the Board of Directors meeting. The company has to file a return to the government of India within the 15 days of such allotment.

• Transfers of Shares

Transfer of shares can be done between two persons with their consent, it is prescribed that share transfer form has to be filed and also signed by transferrer and transferee in the presence of witness. It has to be sent to the registered office with the original share certificate for the necessary alteration in the register of members and share transfer share.

• Transmission of Shares

In case of the death of a shareholder of the company, the legal heirs/nominees are entitled for the transfer of shares in their name.  The transfer share request must be represented in company along with the court order.

• Buy-back of Shares

In the case of buy-back of own shares from the shareholders against the consideration, which should not be less than valuation of shares. As per the regulations, only profit-making companies are eligible for buy-back of shares.

Process of Change in Shareholding 

There are some certain steps that need to be followed as per the guidelines for the change in shareholding: -

• Board Approval 

Before changing in shareholding, there is the requirement of approval from the company’s board of directors. The board meeting has to be conducted to discuss and authorize change in shareholding, also it has to comply with the company’s strategic objectives and legal obligations.

• Share Transfer Agreement, If any

After the board of directors gives approval for the change in shareholding pattern, the transfer agreement has to be executed between the transferrer and transferee. This agreement is all about terms and conditions of the transfer for future reference.

• Shareholders’ Approval

Shareholder’s approval may require, as it depends on the company’s legal obligations and provisions, which are outlined by Company’s Article of Association (AOA). In such cases, shareholders are informed about the proposed change in shareholding and are given the opportunity to vote on the resolution.

• Regulatory Compliance

Regulatory compliances are important to follow for the smooth and simple process of change in shareholding. Filing depends on the nature of change and jurisdiction with regulatory authorities including ROC.

• Companies Records Update
  

Now it is time for post completion of the change in shareholding pattern in corporate records, register of members and share certificates. Updating needs to be reflected for the shareholding pattern accurately. It helps in ensuring the transparency and legal compliance.

Why to Choose CRSPL Business Consultants?

• Detailed Guidance: The experts of CRSPL will provide your every single detail and guidance so that you do not miss any step. We will keep you updated about eligibility criteria, document requirements, and processing of applications. 
• Preparation & Assistance: CRSPL assists you in preparing all necessary documents for the successful application and guides you for further processing. 
• Application Submission and Approval: CRSPL handles the entire application submission process by ensuring all the details are accurate and in proper manner on behalf of our client.
• Expert Consultants: For any query related to business or company, you can meet business consultants at CRSPL, they are readily available to assist you.