What is the typical restriction on transferring shares? What are the scenarios that a shareholder transfers their shares?
A Shareholders Agreement may include a prohibition for shareholders on selling or transferring any of the shares owned or held by them unless they are transferred in accordance with the Agreement.
The Agreement may stipulate that the shares can only be transferred to a third party if they are first offered to the other shareholders at the same price that the third party wishes to pay (Right of First Refusal) or if a certain level of consent is received.
There may be some additional scenarios under which a shareholder could transfer their shares without approval:
- If the transfer is made to a Canadian Corporation whose voting shares are owned entirely by the transferring shareholder;
- If the transfer is made to a trust that is controlled by the transferring shareholder;
- If the transfer is made to a person approved by the Board of Directors;
- If the transfer is made as part of a takeover bid;
- If the shareholder is declared inactive and other stakeholders have the right to purchase his or her shares.