If you intend to buy shares from an existing shareholder in a
private company, you need to be aware of the restrictions on the
transfer of those shares in the company's Memorandum of
Incorporation ("MOI").
In terms of section 8 of the Companies Act, 2008
("the Act"), the MOI of a private
company must contain provisions restricting the transferability of
its shares. The type of restriction is not prescribed.
Under the Companies Act, 1973, the restriction typically gave
the directors the power to refuse to register the transfer of
shares without giving reasons for the refusal. The current
standard short-form MOI issued by the Companies and Intellectual
Property Commission with which many companies are incorporated,
provides amongst other things that an issued share must not be
transferred to any person other than the company, an existing
shareholder of the company or a third party approved by the company
before the transfer is effected.
