Both Transfer and Transmission of Shares result in a change in ownership of the share. However, there is a distinction between these terms according to the Company’s Act 2063.
A share transfer is accomplished through shareholder action, whereas transmission occurs by operation of law upon the death or bankruptcy of the original holder.
A. Single ownership company:
A one-person company (OPC) or single-ownership company means a company formed with only one (single) person as a member.
In this type of company if the shareholder of a single shareholder company dies then his/her heir or the person acquiring the title to his/her shares will acquire the right of a shareholder, and such heir or person should do all acts inclusive of the transfer and transmissions of shares as the single shareholder can do. While deciding to transfer and transmit shares, the person acquiring the title is required to make such a decision in writing. However, if no heir to such a shareholder is found, the Office shall appoint a liquidator and liquidate the company in accordance with the prevailing law.
The steps for the transfer of shares in single ownership company are provided under section 152 of the Company’s Act 2063, which involves the following steps:
Step 1: Provide information to the OCR
A person acquiring the title to shares should give information with evidence to prove such entitlement, to the Office within one month of the acquisition of such title.
Step 2: Recording the information by the OCR
After receiving such information about the inheritance of the share of such a company the Office
Will have to record the information received by collecting the prescribed fees and give information on such actions to the person who acquires the title to shares.
Step 3: Transferring the title to one Shareholder
When there is more than one heir to the share they are to be considered to be the directors of the company for the time being until the other heirs transfer the title to only one heir. However, if a question arises for such entitlement then the matter should be taken to the competent court and should be decided according to the given judgement.
Step 4: Amendment of the MOA and AOA
Amendment of the Memorandum of Association(MOA) and Articles of Association(AOA) of the company shall be amended on that basis.
B. Private limited company
Private companies are those where the number of shareholders can start from one but cannot exceed 50. They cannot invite the general public to share subscriptions. The Company Act 2063 outlines the process of transferring shares in a private company. It involves a valid sale deed between the transferor(seller) and transferee(buyer), followed by a recording of the transaction with the company. The transferee’s name must be recorded in the company’s shareholder register book to be recognized as a shareholder. Only those recorded in the register can exercise voting rights. Until the transfer is registered, the transferor acts as a trustee for the transferee.
The Legal procedure for selling shares of the company is provided under sections 42 and 43 of the Companies Act 2063. The share of a company can be sold in the way provided under the company’s memorandum of association (MOA) and articles of association of the company (AOA). As provided by the act the following steps can be followed to transfer the ownership of such company’s share:
Step 1: Preparation of Deed and Obtaining Approvals:
Prepare a deed of transfer between the buyer and the seller with all the necessary terms and conditions. And if it’s not a single ownership company then approvals of Board members are necessary before making an application to transfer or sell the share in the OCR.
Step 2: Applications to the OCR:
The buyer who wishes to buy the share of the company should make an application to the registered office of the company, in a format along with fees as prescribed, to have the share of that respective company transmitted to his/her name. The applicant should also submit a copy of the deed relating to the sale and purchase of the share certificate along with such application.
Step 3: Registration under new ownership:
The OCR after careful verification of the received application will register the new owner’s name and provide a registration certificate.
Step 4: Crossing off the name:
After an application is made the company should cross off the name of the transferor (seller) and record the name of the transferee (buyer) of such share in the register within fifteen days as a process of recording the changed ownership.
C. A Sole proprietorship and a partnership firm
Sole proprietorship and partnership firms have a similar procedure for selling/transferring ownership. In a partnership business, when a partner decides to leave the partnership or a partner dies the partnership dissolves.
The ownership of these kinds of businesses can be transferred by selling the business, and there is no transfer of shares like in a company.
The Legal procedure for selling a partnership firm or sole proprietorship is provided by the local level administrative authority i.e. the ward office of that Municipality/Village Development Committee (VDC). As these kinds of business are small scale businesses the local level departments are responsible for conducting all the regulating activities of these businesses.
A stepwise guide for selling the business is as follows:
Step 1: Arrangement of all the necessary documents:
- The deed between the buyer and seller.
- Photographs of the buyer.
- Certificate of registered business.
- Rental agreements if not submitted before.
- Citizenship of both the parties.
- Any necessary documents related to the running of business which may be a license, permit, etc.
- Partnership agreement if it’s a partnership business.
(Note: additional documents may be required as any special requirement of that specific ward or businesses)
Step 2: Both the parties must visit the Ward office and submit the application for change of ownership.
Step 3: Pay the necessary fees/ revenues.
Step 4: Wait for the approval by the Ward office. After the approval by the Ward, it will issue stamped and signed certificates along with the new owner’s name.
If you require any help the officers of the ward office will guide the entire process.
