Restrictions on transfer of shares after listing

An essential part of the listing process for any company is the amendment of its articles of association. Special challenges arise where an issuer company’s articles are riddled with clauses restricting the free transferability of shares.

This column discusses amendments to the articles of a company, consistent with the requirements of the Bombay Stock Exchange and the National Stock Exchange of India, and the much-debated issue of free transferability of shares under the Companies Act, 1956.

The debate

The question of whether a public limited company is permitted to restrict the transfer of its shares is subject to much debate. Case law on this topic also raises the question of whether restrictions on transferability need to be inserted in the articles of a company to secure their enforceability.

Ridhi Desai is an associate at Khaitan & Co. Khaitan & Co is a full-service law firm with offices in Mumbai, Delhi, Bangalore and Kolkata. Views expressed in the article are those of the author and do not necessarily reflect the views of the firm.