Question

When can the Board of Directors refuse the transfer of shares?

Answer 1

Refusal to Transfer of Shares:

1. If a company refuses to register the transfer of shares, it shall send a notice of refusal to the transferor and the transferee or to the person giving intimation of such transfer within thirty days from the date on which the instrument of transfer was delivered to the company.
2. The notice should contain a valid reason for such refusal. The Board of Directors has the authority to refuse registration of transfer of shares. A member may appeal to the NCLT against the refusal by the Board within a period of thirty days from the date of receipt of the refusal notice.
3. If no notice is received, the member can appeal within 60 days in case of a Private Company and within 90 days in case of a Public Company.
4. It is important to note that the Board may refuse the transfer in the following cases:
   - Where the member transfers the shares to his/her representative(s).
   - When the provisions for transfer of shares as given in the Articles of Association is not fulfilled by the member.
   When the instrument of transfer is not as per the rules prescribed under the Companies Act.
   - When the Instrument is not accompanied by the Share Certificate.
   - When the company has a lien on the shares to be transferred.