Question

Free transferability of shares is mandatory in a:

• A. Listed Company
• B. Company Ltd by shares
• C. Public Ltd. Company
• D. Foreign Company

Hint:

Public companies enjoy free transferability of shares under Section 58(2) of the Companies Act, 2013 — a key distinction from private companies.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
The concept of free transferability of shares is an essential characteristic of a Public Limited Company. It ensures that shareholders can freely buy or sell their shares without seeking prior approval from the company or other shareholders. This promotes liquidity and investor confidence in the stock market.
Step 2: Legal Reference:
Under Section 58(2) of the Companies Act, 2013, the shares of a public company are freely transferable. The company cannot restrict the transfer of shares unless it violates certain legal requirements such as compliance with SEBI regulations or procedural issues.
Step 3: Analysis of Options:
- (A) Listed Company: While listed companies must follow SEBI rules, the core legal provision of free transferability applies to all public companies, listed or unlisted.
- (B) Company Ltd by shares: This is a general category and may include both private and public companies.
- (C) Public Ltd. Company: Correct. The law specifically grants free transferability of shares to public limited companies.
- (D) Foreign Company: Governed by different legal frameworks and not subject to the same clause under Indian law.
Step 4: Final Conclusion:
The correct answer is (C) Public Ltd. Company, as it enjoys the statutory right to free transferability of shares under the Companies Act.