Section 84 of the Companies Act, 2013
Section 84 of the Companies Act, 2013 – Power of Company to Impose Restrictions on Transfer of Securities
This section provides companies the power to place restrictions on the transfer of securities in certain circumstances.
📘 Key Provisions:
Restriction on Transfer:
A company may impose restrictions on the transfer of securities if:
Such restriction is in accordance with the provisions of its articles of association, or
As provided under this Act.
Right to Restrict Not Absolute:
The power to restrict is subject to the provisions of the Act, especially Section 58 (which deals with the refusal of registration and appeal in case of transfer or transmission of securities).
Depository System Exception:
In the case of securities held in dematerialized form, the provisions of the Depositories Act, 1996 and the SEBI regulations apply.
📌 Interpretation:
Private companies often impose restrictions on transfer of shares through their articles, such as requiring board approval before transferring shares.
However, public companies cannot unreasonably restrict the transfer of shares.
🧑⚖️ Example:
A private company’s articles may require that shares must first be offered to existing shareholders before being transferred to outsiders. This is a permissible restriction under Section 84, provided it aligns with the Articles of Association and other provisions of the Act.
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