Which statement is true regarding transfer restrictions?

Which statement is true regarding transfer restrictions?

• A. They cannot restrict transfers at all
• B. They may restrict only with court approval
• C. They may restrict via CI/bylaws/agreements
• D. They may restrict with no limitations

Answer: (C)

Transfer restrictions on corporate shares are permissible and commonly created through governance documents and contracts. They can be included in the certificate of incorporation (the charter), in the bylaws, or in a shareholders’ agreement. These mechanisms let the company control who can own stock, require board or shareholder consent for transfers, or impose rights of first refusal and other restrictions to keep ownership within a desired group. Because these restrictions can be properly adopted by the corporation's governing documents or mutual agreements, they don’t require court approval in every case, and they are not unlimited or forbidden. That’s why restricting via the charter, bylaws, or a shareholders’ agreement is the correct concept.

Transfer restrictions on corporate shares are permissible and commonly created through governance documents and contracts. They can be included in the certificate of incorporation (the charter), in the bylaws, or in a shareholders’ agreement. These mechanisms let the company control who can own stock, require board or shareholder consent for transfers, or impose rights of first refusal and other restrictions to keep ownership within a desired group. Because these restrictions can be properly adopted by the corporation's governing documents or mutual agreements, they don’t require court approval in every case, and they are not unlimited or forbidden. That’s why restricting via the charter, bylaws, or a shareholders’ agreement is the correct concept.