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Statutory restriction on transfer of shares

Under various sections of the Companies Act, the following restrictions have been imposed in relation to the transfer of shares. Huh.

2. Compulsory Restrictions – Every private company has to impose restrictions on the right of its members to transfer securities in its Articles. Only by doing this a private company can keep its membership number limited.

3. Minor Transferee – The memorandum of a company may contain restrictions on the transfer of securities in the name of a minor, but the companies may allow the transfer of fully paid-up securities in the name of the minor if the transfer deed is signed by his guardian.

4. Persons of unsound mind – The Articles may prohibit transfer of securities to a person of unsound mind.

5. Transfer of shares of an insolvent person If a person is a security holder of the company and that person is declared insolvent, the provisions of the Articles may also apply to transfer of securities to that person. If the Articles provide that in the event of a member becoming insolvent, his securities may be sold only to specified persons at a fixed price, such restriction shall be deemed to be valid until such time as it is proved That such provision has been made for the purpose of causing favoritism.

6. If the amount called for on securities has not been paid by the security holder while the call remains unpaid, the company may, as provided in the Articles, withhold the transfer of the securities until the shareholder pays the outstanding call amount. .

7. Lien If the company has a lien, the company may withhold the transfer of securities until the shareholder pays the dues or other debts.

8. Low Return- If the return shown in the transfer document of securities is less than the actual return paid on the securities, the transfer of securities can be stopped. People do this because showing lower returns attracts less stamp duty.

9. Fee The company may, subject to its articles, determine the securities transfer fee. In such a situation, if the prescribed fee is not deposited for the transfer, then the company can stop the transfer of securities.

10. On the closure of the Register of Members, the company may provide in the Articles that the transfer of shares shall not take place as long as the Register of Members is closed, but only when the Register of Members is closed in accordance with the provisions of the Act. There will be a ban.

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