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ILN Today Post

Legal Validity of Restrictions on Transfer of Shares of Public Companies

In terms of Sections 2(68) and 2(71) of the Companies Act, 2013 (“CA13”), a public company is defined as a company which inter alia, does not restrict the right to transfer its shares. These provisions of the CA13 have already been notified and have come into force in supersession of the corresponding provisions of the Companies Act, 1956.

Further, as stipulated under Section 58(2) of the CA13, the shares of a public company are freely transferrable. However, the proviso to Section 58(2) further states that “any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract”.

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