The relocation, aimed at guaranteeing compliance with the Association and Companies Act, is seen as a double-edged sword-it improving the board but probably delays and adding procedural costs. | Photocredit: Shailesh Andrade
Off-market sharing transfers in private limitaire companies will now require prior written permission from the company, according to a new NSDL directive. The relocation, aimed at guaranteeing compliance with the Association and Companies Act, is seen as a double-edged sword-it improving the board but probably delays and adding procedural costs.
According to the new standards, off-market transfers of dematerialized shares in private companies will now need a “consent letter” from the company, signed by the business secretary, managing director or an authorized functioner, which states that the transaction complies with the articles of association (AOA) and the Companies instruction, 2013. This is an additional assistation instructions. Stamp.
Although the move is aimed at guaranteeing transfers that are not carried out in violation of internal business rules, investors and companies are now struggling with the added compliance tax and uncertainty about timelines, according to experts.
Timeline uncertainty
“Without a legally defined timeline for companies to issue such letters, companies can unintentionally transfers that can lead to delays in timelines for closing such transfers,” said Pallavi Puri, partner at DMD lawyers.
The lack of a fixed lead time is a recurring care. IFRAZUNNISA KHAN, counsel for Initium Legal Services, said: “All procedural delays from the company can influence valid sharing transfer between shareholders.” She advised NSDL to consider changing the rule to prescribe clear timelines for approval.
Although the change is tailored to the fundamental principles of private limited company according to the Companies ACT 2013, Rohit Jain, managing partner at Singhania & Co said: “This can also offer the opportunity to block sharing transfers in the event of conflicts.”
Higher compliance
Investors will have to adhere to increased dedication and governance, because they have to ensure that the company has the approval of the council and the compliance controls. Similarly, private companies are confronted with extra compliance that obliges the company to give approvals for a transaction between two private parties, experts said.
Although the process is now more annoying, it can reduce legal disputes after the transaction for investors. “This extra compliance layer will only lead to transparency and strengthening their transaction, which will be delayed in the transfer,” says Mahafeer Singh Amaravat, a lawyer at the High Court of Rajasthan. “… The scope of the destruction of the transfer by the company is brought to zero after obtaining an earlier statement.”
On the other hand, private companies can be able to regard it as an additional compliance with costs and man-force to manage the added documentation, Amaravat said.
This is also seen as a boost for higher corporate governance, both from an investor and business perspective, and requires companies to have a process for screening and issuing confirmation letters, Puri said.
Published on June 24, 2025
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