Transfer restriction

What is a transfer restriction?

A transfer restriction is a condition written into the articles of association that controls or limits how shares in a limited company may be transferred. Restrictions let existing owners keep control over who becomes a new shareholder.

Common restrictions

The most common are a pre-emption clause, a right of first refusal and a consent clause. A pre-emption clause, for example, gives existing owners the right to buy back shares that have changed hands. Such restrictions must be noted in the share ledger and affect how a transfer of shares is carried out.