The third reason is restriction of the transfer of share. According to section 42(2) CA 2016, a private company shall restrict transfer of its share. Under the Companies Act (CA) 2016, the restriction to transfer share imposed on private companies depends if there is a constitution adopted or not. If there is no Constitution, Companies Act of 2016 will be governing, in which is prescribed under Section 105(1) of CA 2016, it states that subject to other written laws, any shareholders may transfer all or any of his shares in the company by a duly executed and stamped instrument of transfer and shall lodge the transfer without the company. Regarding the registration of transfer, according to section 106(1), the company must register the transfer within 30 days from the receipt of the instrument of transfer under subsection 105(1) unless this Act or the constitution of company express permits the directors to refuse or delay registration for reasons stated.

If there is a constitution adopted by the Company to state the rule that the transfer of share shall not be restricted, it may modify the said provision pertaining to the transfer of shares by providing different rules in the constitution. Therefore, depending on the interest of the parties in the company, this may allow the company shareholder to have authority to freely transfer or sell shares. Once adopted, under section 33(1), the constitution binds the company and the members as if the constitution has been signed and sealed by each member and contains covenants on the part of each member to observe the provisions of the constitution. Therefore, if any members of the company act beyond the constitution then he or she would face legal consequences. This is the reason why private companies choose to adopt a company's constitution. With that being said, I would advise Jessica to adopt a constitution, she will be able to set up the company's constitution, which shall restrict the transfer of shares so that it would bind the members of the company to comply with the constitution, otherwise facing a lawsuit.

This is my answer about private limited company restriction of transfer shares without a constitution and has a constitution.

Under Companies Act 2016

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