Q&As

How can a shareholder transfer its shares to a non-shareholder, without following the procedure for pre-emption on the transfer of shares?

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Published on LexisPSL on 28/06/2019

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • How can a shareholder transfer its shares to a non-shareholder, without following the procedure for pre-emption on the transfer of shares?

How can a shareholder transfer its shares to a non-shareholder, without following the procedure for pre-emption on the transfer of shares?

A right of pre-emption on the transfer of shares prohibits a shareholder from selling its shares to a non-shareholder without first offering them to the holder of the right of pre-emption. There are no provisions in the Companies Act 2006 (CA 2006) relating to pre-emption rights on transfer and, as such, any pre-emption rights on transfer must be imposed by contract (ie in a company’s articles of association and/or shareholders’ agreement). The law recognises pre-emption clauses as valid restrictions on the right to transfer.

The provisions of the articles of association of the company and/or shareholders’ agreement should be carefully considered, in order to determine whether there are any relevant exemptions to the pre-emption rights. If, having done so, compliance with the pre-emption rights on the transfer of shares is either not possible or impractical with regard to the proposed transfer, there are a number of possibilities:

  1. if the restriction is contained in the company's articles, the shareholders could resolve to amend the articles to remove the relevant restriction or they could resolve to disapply it, either generally

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