It depends on the Companies Act, the company’s Articles and any unanimous shareholder agreement. A shareholder does not automatically have an unrestricted right to sell private-company shares to any third party.
What should be checked?
Before a sale, review:
- restrictions in the Articles of Association;
- rights of first refusal or pre-emption;
- unanimous shareholder agreements;
- lock-in restrictions;
- founder-share restrictions;
- regulatory approval requirements.
The Companies Act recognizes transferability of shares but allows company-specific and statutory restrictions. Private companies in particular are designed around restricted rather than public transfer of securities.
Practical point
A transfer made without following applicable restrictions can lead to refusal to register the new shareholder or a dispute among shareholders.