In general, you can only prevent shares being sold to other investors if the company's articles of association (see question 11) or any shareholders' agreement (see question 12) give you that right. This can happen in three ways:
- 'Pre-emption' rights may apply in the articles of association. In other words, if the company issues new shares, they must be offered to existing shareholders first, in proportion with their shareholdings. Pre-emption rights like this can only be overruled by a special resolution - which requires the approval of 75 per cent (by voting rights) of the shareholders who vote.
- The articles of association may also include restrictions on the transfer of existing shares. The articles might, for example, give the directors the right to refuse to register the transfer of shares to another investor.
- A shareholders' agreement might include restrictions on the sale or transfer of shares. For example, the agreement might require any shareholder who wishes to sell shares to offer them first to existing shareholders.
