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Refusal to transfer without reason

03 November 2015

Articles of a public limited company empower the board of directors to refuse registration of transfer of shares without assigning any reason. is it valid?

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CMA Sivapriya (-) (238 Points)
Replied 16 November 2015

Section 9 of the Companies Act specifically provides that any provision contained in the Memorandum or Articles of Association of a company shall be void to the extent to which it is repugnant to the provisions of the Companies Act. It was held by the Company Law Board in the case of Kinetic Engg. Ltd. v. Sadhna Gadia , that if any provision of the articles or the memorandum is contrary to any provisions in the Companies Act or any other law, it will be invalid in toto. Accordingly, any existing provision in the articles of a public company empowering its Board to refuse registration of transfer of shares on any grounds, whatsoever, shall be void.