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Private Limited

How to Issue Shares in Private Limited Company

A stockholder of a public company can issue equity shares or preference shares by making a general offer through an Initial Public Offering (IPO), but how does one obtain equity in private limited companies? Let’s find out.

Shares in Private Limited Company

A company’s stock is the equity that it issues in order to raise funds. The share of the private limited company would have to be issued to induct new investors. In this article, we will take a look at how to issue shares in a private limited business.

Issue of Private Limited Company  Shares via Private Placement

A firm can make a private placement to a small group of people under Section 42 of the Companies Act, 2013. A private placement offer letter is a letter in which a company offers its shares or invites a select group of people to subscribe to its securities in lieu of a public offering.

In a financial year, the number of persons to whom the firm can make a private placement should not exceed fifty or such a greater number as the Rules require. Qualified institutional buyers and employees of the company who are offered securities in the financial year under a scheme of employees’ stock options under Section 62 of the Act are not included in the fifty-person limit.

Issue of Private Limited Company Shares via Rights Issue

According to section 62 of the Act, whenever a private limited company registration is done and as share capital seeks to enhance its subscribed capital by issuing more shares, those shares must be offered—

  • to its existing investors’
  • employees under a stock option scheme, subject to a special resolution passed by the company
  •  if the price of such shares is determined by the valuation report of a registered valuer, to any persons, whether or not those persons include the persons referred to in clauses (a) or (b), for cash or for a consideration other than cash, if it is authorised 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: Obtain a share transfer deed through the experts at Vakilsearch

Step 2: Our experts will then finalize the share transfer deed by having both the transferor and the transferee sign it.

Step 3: We will then stamp the share transfer document in accordance with the Indian Stamp Act or the respective State’s Stamp Duty Notification.

Step 4: Then we will have a witness sign 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 as per the laws of company registration in india.

If you wish to issue or transfer private limited company issues, seek expert advice from corporate law veterans at Vakilsearch at the earliest and propel your business aspirations to the moon.

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