The ownership of a company (limited by shares) is held by the shareholders of the Company. The shareholders thus, appoint the Directors to manage the affairs of the Company. Hence, the shareholders are the owners of a company and not the Directors. The transfer of ownership can be accomplished by transferring shares of the company from one individual or business entity to another.
In a private limited company; share transfer is generally more restricted when compared to a listed company (publicly traded). Usually the entire shares of a private limited company are owned by families or a small group of persons or entities. Most of the Articles of Association (AoA) of Private Limited Companies limit the rights of a shareholder to transfer the company’s shares to an outsider. Therefore, it is important to check the Articles of Association of the company carefully before transferring the shares.
Shareholders being the legal owners of the shares are also owners of the company. They can either be natural persons (also NRI’s) or corporate entities (also foreign nationals or foreign entities).
The shareholders of the company appoint the directors to manage the daily affairs of the company. Directors are not legal owners of the company. But they can also be shareholders and shareholders can also be Directors of the company.
It states the rights and responsibilities of shareholders and Directors. Articles of Association (AoA) can restrict the share transfer in a private limited company.