articles of a private limited company allowing free transfer of shares by members to their wives and children who are non members.
is this article valid under company law or is it compulsary that shares cannot be freely transfered to non members even if article allows such free transfer to a specified class who are not members-in this case to the wives and children of the members?
But in Pvt Ltd company there must be restrictions in Articles regarding Free Transferablity of shares.
Mr. P.C Agrawalji Please clarify the answer.
Section 82 provides that shares are transferable in the manner provided by the articles of the company. Section 111A(2) provides that shares of a company are freely transferable. Section 111(13) gives power to a private company under its articles to enforce restrictions against the right to transfer the shares of such company.
Definition of a private company given in Section 3(1)(iii) also provides that it restricts the right to transfer its shares, if any. Hence if the articles provide that the shares can be transferred to wives and children of existing members only (and not to anybody else), it is a restriction on free transferability of shares. Hence so long as number of members is within the maximum limit of 50, such provision in the articles should be acceptable.
Thanks
CAclubindia
