1. Restrictions in Articles of Association

• The AoA governs the transfer of shares and may include conditions such as:
  
  • Right of first refusal to existing shareholders
    
  • Board approval before transfer to outsiders
    
  • Pre-emption rights or lock-in periods
    

2. Right of First Refusal

• Before selling to an outsider, the shareholder must offer the shares to existing shareholders
  
• If current shareholders decline, the shares can be offered to an outsider
  
• This protects the ownership structure and prevents unwanted external entry
  

3. Procedure for Transfer to Outsider

• Execute a share transfer deed (Form SH-4) signed by both transferor and transferee
  
• Pay stamp duty as per applicable rates
  
• Submit the deed and original share certificate to the company
  
• The board of directors reviews and approves the transfer
  

4. Updating Records

• After approval, the company updates the Register of Members
  
• A new share certificate is issued in the name of the outsider (transferee)
  
• The company is not required to notify the Registrar of Companies for each transfer
  

5. Limitations and Denials

• The board may deny the transfer if it violates any clause in the AoA
  
• The decision must be documented with valid reasons
  
• Disputes, if any, can be escalated to the National Company Law Tribunal (NCLT)