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avinish (abc)     20 February 2011

Equity

Hi,

 I am working with a small start-up. I am working in this company for last 10 years and during which company has offered me some private equity (not ESOP and not SWEAT). These shares are allotted though share transfer. I paid for it as per the face value and got share certificate.

Now I resigned the company. After resignation, the company is asking to return back the equity. The reason they gave is "articles of association" has a clause as follows
 

"Any person who has been allotted shares in the company by virtue of his being an employee of the Company shall, on ceasing to be so employed, for any reason whatsoever, at the discretion of the Board, transfer his shares in the company to such a person as the board may decide, at a value
mutually agreed upon by person and the board"

It would be great if you could help me on following....
 

 1. Does law says that I should return equity even though it is not SWEAT or ESOP?

 2. What legal action will be taken if I do not return the equity?

 3. If I want to return equity and the value is not accepted by board, do i need to give the shares as the board decides?

 Thanks in advance



Learning

 1 Replies


(Guest)

No you are not bound to return equity shares. Any clause in the Articles of the Company restricting the right to transfer equiy shares by its owner whose name has been entered in the register of member is invalid.

Once shares has been allotted to you and your name is entered in the Register of Member then you can exercise all rights of member and you are free to keep shares with you.

Preeti Jaiswal


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