by Ferdous Ara Tuly
According to Section 2(1)(v) of the Companies 1994, “Share” means a share in the capital of the company, and includes stock except when a distinction between stock and shares is expressed or implied.
One of the elements of a company is that its debentures or shares are moveable property and these are transferable, following the method provided in the Articles of Association (AOA) of the company. For both public and private limited companies in Bangladesh, the share transfer process can be a consistent or uninterrupted process though the right to transfer of shares can be restricted in a private limited company. This transfer will be monitored by the Registrar of Joint Stock Companies and Firms (RJSC) and Section 38 of the Companies Act 1994 will be followed in this regard.
If a person does not want to carry on as a shareholder of the company and who wants to leave his/her shares, may transfer to someone else following the steps given below:
- Step 1: As the right to transfer of shares in a private limited company can be restricted, hence, the Article of Association (AOA) of that Company must be evaluated before planning for the transfer proceedings. The shares of the company can be freely transferred to an outsider provided the shareholder satisfied the “Pre-emption” clause, which means that if a shareholder wishes to sell or transfer a few or total of his/her shares, that shares should be offered to the existing shareholders at first, at a price determined by the Directors or the Auditors of the Company and no existing shareholder is interested.
- Step 2: The shareholder who wants to transfer his/her shares shall notify to the Board of Directors of the Company in writing. The Board of Directors may exercise the power to deny the movement of shares in certain circumstances endorsed in Article of Association (AOA). The Board of Directors should hold a board meeting in respect of approving share transfer and also grant a declaration in this regard.
- In this reagad, the Board must also take into account whether any of the license of the companies mandates that a prior approval for regulatgory authroites must be obtained prior to approval of share transfer. For example, lincesing regulatons of telecom companies requires that a prior approval from Bangladesh Telecomunication Regulatory Authority must be otbained prior to making any share transfer of any telecommunication company.
- Step 3: After getting the company’s approval, the payment of the price of the shares should tqke place. An important addition has been made in Section 38(3)(ka) whereby, the signature of the share transferee must be confirmed in the transfer deed. After submitting the necessary share transfer documentation to the Registrar’s Office; the concerned share transferee will then have to appear in person and re-sign to confirm the authenticity of the share transfer [(as inserted under Section 38(3)(Ka) Ka)]. If the transferee is a foreign national or NRB (Non Resident Bangladeshis), the transfer documents and affidavits in support of the transfer of shares must be certified by the authorized officer of the Bangladesh Embassy/High Commission [Section 38(3)(Ka) Kha)]. According to Section 38(3)(Ka) (Ga), if the transferee fails to appear at the office of the Registrar due to cogent reason, the Registrar can construe a commission for verifying the signature, upon the payment of fees.
Moreover, if the transferor and the transferee both are local or foreign nationals then they do not have to provide any proof of payment. If the transferor is a Bangladeshi and the transferee is a foreign national, the Joint Stock Companies and Firms Registrar (RJSC) may require a letter of bank encashment for the transfer of the share. Also, there are certain compliance issues mandated by Bangladesh bank in relation to the transfer of shares between foreign nationals & local nationals.
- Step 4: After that, the shareholder who is transferring his/her shares should submit the required documents and also sign the Form 117 at the presence of the officials of the RJSC and RJSC will record the transfer.
Stamp duty is payable on the face value of each share and after signing Form 117, a copy of the document should be sent to the Company for the record.
- Step 5: After completion of the above-mentioned steps, the company should update its share registrar, share transfer registrar, minutes registrar and issue a share certificate in favor of the new shareholder or modify the existing share certificate to reflect the changes.
Required Documents for Share Transfer Of the Company:
(i) A letter containing that the Board of Directors of the Company approved the share transfer;
(ii) A document containing a number of shares to be transferred of the Company;
(iii) Form 117( singed);
(iv) Board Resolution by the company approving the transfer of the shares; and
(v) Share Transfer Certificate.
Note: More documents might be needed depending on the situation.