FLK1 · Multiple-choice practice
FLK1 Business Law — Question 21
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XYZ Ltd is a private limited company with multiple shareholders. The company’s articles of association state that any transfer of shares requires the approval of the existing shareholders. Jack, a shareholder of XYZ Ltd, wishes to transfer his shares to a third party without obtaining the approval of the existing shareholders. Which of the following statements best describes the situation?
Answer and explanation
Correct answer: C. Jack cannot transfer his shares without the approval of the existing shareholders as per the company’s articles of association.
The situation described in the question pertains to the transfer of shares in XYZ Ltd. As per the company’s articles of association, any transfer of shares requires the approval of the existing shareholders. This provision is common in private limited companies where the shareholders often have pre-emptive rights or restrictions on the transfer of shares. In this case, Jack, as a shareholder, cannot transfer his shares to a third party without obtaining the approval of the existing shareholders. The articles of association serve as a contractual agreement among the shareholders and the company, and they define the rights and restrictions associated with the company’s shares. It is important for shareholders to adhere to the provisions outlined in the articles of association to ensure compliance with the company’s internal rules and regulations.
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