12.9.1 (TRANSFER AND TRANSMISSION OF SHARES)

The Power to Transfer Shares. One of the most important features of a company is that its shares are transferable. Section 82 empowers every shareholder to transfer his shares in the manner laid down in the Articles and in accordance with the various provisions of law. Thus, a private company is statutorily obliged to place certain restrictions on the right of its members to transfer shares. One of the most common restrictions on transfer of shares in a private company is the "Pre-emption clause", which states that the intending transferor must offer his shares to the existing members of the company, before offering them to non-members, so long as a member can be found to purchase them at a fair price to be determined in accordance with the Articles.

In the case of public companies also, there may be some restrictions on the right of members to transfer shares. Regulation 21 (Table A)provides that the Board of directors may refuse to register the transfer of partly paid shares to a person of whom they do not approve. Further, the Board of Directors may refuse to register the transfer of any share on which the company has a lien. Regulation 22 also envisages certain conditions which may be introduced by a company in its Articles or restrict transfer of shares. It provides that the Board may also decline to recognize any instrument of transfer unless: (a) the instrument of transfer is accompanied by the certificate of the shares to which it relates and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer; and (b) the instrument of transfer is in respect of only one class of shares.

Right of a shareholder to transfer his share is always subject to provisions in

Articles of association[Mathrubhumi Printing and Publishing Co. Ltd. v, Vardhaman

Publishers Ltd. (1992) 73 Comp. Cas. 150 (Ker).