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questions regarding entitlement of shares
13-Aug-2023 (In Corporate Law)
I am 90% shareholder of a Pvt company, total authorised capital is 5 lakh of 5000 shares of Rs.100 each. Paid up capital is Rs.90,000 for 900 shares. Now I want to exit the company if the company valuation is today Rs.20 lakh, then how much I am entitled for. Am I entitled only equivalent to 900 shares for which I have paid or I am entitled for 90% 5000 shares?
You are entitled for the 90% of the shares which you hold by the virtue of being a director and shareholder in that company.
You may claim the amount as per the shareholding which you have with the company and you are not required to be bothered about the paid up share capital
You may claim the amount as per the shareholding which you have with the company and you are not required to be bothered about the paid up share capital
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Adv. Pulkit Prakash
Delhi | 400+ Answers
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Well, it would all depend on how you structure the sale. The sale can happen on mere face value or based on valuation of the company and the value per share as on date as may be estimated. Since this is a pvt. co. there will be restriction on who you can sell the shares to. Please check the articles of the company and if any shareholders agreement exists. Contact for further advise.
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Adv. Joydeep Nath
Delhi | 100+ Answers
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Hi,
The first thing you must keep in mind is that since your company is a private limited company, its shares are generally not as freely transferable as the shares of a public listed company. This means that even if someone values your company's shares to be worth INR 20 lakh, you would still need a buyer willing to purchase those shares from you.
Technically, you are only eligible to sell those shares which are paid-up, that means, shares which are registered in your name and for which you have paid the necessary amounts to the Company. Since your paid up capital is worth 900 shares, you can only sell those 900 shares.
Coming to valuation, if someone has valued your entire company at INR 20 lakh, this means that such person has valued each share to be INR 400 per share (INR 20 lakh/5000 shares). So the value of your shareholding, technically, is 900*400 = INR 3,60,000/-
But here's the interesting bit. If you are considering to completely sell your shareholding, you can command a price greater than just the value of the shares based on valuation. There are certain aspects concerning your shareholding in the Company that you can use to your advantage to obtain a greater price, provided you have a willing buyer.
The first thing you must keep in mind is that since your company is a private limited company, its shares are generally not as freely transferable as the shares of a public listed company. This means that even if someone values your company's shares to be worth INR 20 lakh, you would still need a buyer willing to purchase those shares from you.
Technically, you are only eligible to sell those shares which are paid-up, that means, shares which are registered in your name and for which you have paid the necessary amounts to the Company. Since your paid up capital is worth 900 shares, you can only sell those 900 shares.
Coming to valuation, if someone has valued your entire company at INR 20 lakh, this means that such person has valued each share to be INR 400 per share (INR 20 lakh/5000 shares). So the value of your shareholding, technically, is 900*400 = INR 3,60,000/-
But here's the interesting bit. If you are considering to completely sell your shareholding, you can command a price greater than just the value of the shares based on valuation. There are certain aspects concerning your shareholding in the Company that you can use to your advantage to obtain a greater price, provided you have a willing buyer.
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Adv. Aditya Singha
Delhi | 25+ Answers
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