Transfer of shares in a privately held company is governed by the Articles of Association, which is a document that lays down the rules and regulations regarding share capital transfer, transmission, board of directors, general meetings and winding up, among others.

Share of any member in a company is movable property and is transferable in the manner provided by the Articles of Association (Articles) of the company.

Section 2(68) of the Companies Act 2013 provides that the Articles of a private company shall restrict the right to transfer the company’s shares. This restriction is binding upon the company and members thereof. In other words, if the restriction is not mentioned in the Articles and is enforced by way of a private agreement between shareholders, it is not binding either on the company or on the shareholders.

To buy share of another company no bank would loan you money without the security of immovable property as collateral. 

However there are angel broking investment firm which promote this kind of entrepreneurial take overs.

You can do the same by talking business loan it's a right move

First things first, the Articles of Association are the best place to start insofar as transfer of shares in a private limiter company is concerned. With this being a transfer of shares between two existing shareholders of the company, there shouldn’t be any issues. But it is best that you scan that document or have it scanned for exact restrictions on transfer that exist in AOA of private limited companies in terms of S. 2(68) of the Companies Act.

Coming to your question, if you want you could buy the shares in instalments. This will allow you some time to secure the loan amount you mentioned. The shares can be made to vest in a staggered manner — in lockstep with your payment. This will of course be subject to your ability to negotiate such a deal.

You will need a well drafted share purchase agreement to this end. 

I hope that answers your question. Follow-up questions welcome.

Transferability of shares in a privately held company is governed by the Articles which is a document that lays down the rules and regulations regarding share capital transfer,

2)The right of pre-emption or first option to buy requires that if a member wishes to sell some or all of his shares, such shares shall first be offered to other existing members of the company at a price determined by the directors or company’s auditors or by using the formula set out in the Articles. If the existing members do not wish to exercise their pre-emptive right, the shares can be transferred by the transferor to the proposed transferee

3) 

• Transferor has to give a notice in writing to convey his intention to transfer his share
• On receipt of such notice, the company has to notify the other members regarding the availability of such shares and the price as determined by the directors or the auditors of the company
• The company has to intimate to the members the time limit within which they should communicate their options to purchase such shares
• If none of the members show interest in purchasing the shares, such shares can be transferred to an outsider and such transfer will be accepted by the company

Please enter into a MOU with your partner and frame the clauses the way you want.

From examining all the facts of your query I want to say that-you

You know that business partnership buyouts can occur for a number of reasons. Sometimes, a business partner is no longer aligned with the vision of the company. More commonly, a business partner is looking to retire or move onto a new venture. Whatever the scenario, it is important to cover your bases to ensure that the buyout is favorable for all business partners and the viability of the company. Once the terms are defined, you will be able to make an informed decision on how to best finance the buyout.
The right of pre-emption or first option to buy requires that if a member wishes to sell some or all of his shares, such shares shall first be offered to other existing members of the company at a price determined by the directors or company’s auditors or by using the formula set out in the Articles. I have dealt with some cases of mergers and acquisitions in Supreme Court.

I perceive that before you can make an informed decision on the structure of the deal or how to finance the buyout, it is important for the partners to agree upon a valuation of the company. Even in scenarios in which the buyout begins on amicable terms, disputes about details of the buyout can sour the process. Ideally, the partnership agreement drafted during the formation of the partnership outlined a buy-sell agreement, with specific terms and conditions for the buyout. This can help mitigate potential risks or arguments over the terms of the buyout. Both company metrics and partner metrics can influence the valuation of the business. If the selling business partner is highly valuable to the business, they can demand a higher payout. However, without the value this business partner adds, the business’s future cash flows will likely decrease, lowering the valuation of the business.

To my mind a common approach to valuing a business is to have each partner develop their own valuation and take the average of the values. If the numbers are too far apart or you cannot agree for other reasons, find an independent third party to provide a valuation for the company.

There are several ways to structure the financing of your partnership buyout, including lump-sum payments, buyouts over time and earnouts. These all involve debt financing, which is more common than equity financing. Equity financing is primarily used in scenarios where the selling partner has a particular expertise, skill or connections that the business cannot thrive without. In essence, you’re bringing a new partner into the business with the new equity owner. It is critical that the purchasing business owner runs a conservative assessment on the company’s ability to service debt. No matter how healthy the company is, an unserviceable loan can sink the company. If your business has a solid operating history, has become more profitable the last six months, and the purchasing partner has an excellent credit history, loans may be the best option. However, many traditional banks avoid underwriting loans for partnership buyouts. From the bank’s perspective, buying out a business partner can damage the health of the company and is unlikely to improve the viability of the company. Many alternative and creative lenders have recognized the opportunity and are becoming better at financing partnership buyouts. It is better to discuss in detail with complete facts. 

You may contact my secretary to connect with me for clarification. 

I hope you and your family are safe and healthy. Stay home and be safe during Covid-19. 

Gopal Verma,

Advocate on Record & Amicus Curiae,

Supreme Court of India

A agreement must be done with the other shareholder and amount ti be transferred fixed.

Loan must be taken and paid. All this should be written and registered agreement.

private company can provide loan to its directors subject to compliance with following conditions:-

1. In its share capital no other body corporate has invested any money;
2. It’s borrowings from banks or financial institution or any body corporate is less than twice of its paid up share capital or fifty crore rupees whichever is lower.; and
3. It has no default in repayment of such borrowings subsisting at the time of giving such loan.

You should go with the 1st option as it is in fact a loan only and you don't need to fudge any books etc. You may return the loan amount at the earliest without any questions.

For option 1 and 2 or 3 ,Please take opinion of Chartered Accountant who is competent to answer your questions. 

First option is more ideal. Expenses can have ceiling limit

You cannot use amount of company to buy equity. Laon or debt should be taken in your name only.

Transferring from business to personal account is an offence and can booked for using company amount for personal use and purchase of equity from this money is illegal and hence your share holding may loose.

Loan to director to buy equity of same company is prohibited.

In both options you will face problem as purchase through both option is invalid.

Your banker can be convinced to agree to advance loan to you  on the basis of collateral security in the form of the shares now you are desirous of buying or any other collateral security that yo may be furnishing for this purpose instead of complicating the simple thing.

The options what you hav proposed may or may not be fruitful specially considering the long term loan that you plan to avail.

So, in my opinion, your CA's advise appears to be a better option.

Go for a share transfer agreement with your partner. 

You cannot transfer the funds from your joint business to buy share of same business. You need to arrange funds from personal loan and Not from business loan.