I have already mentioned that it is more common to have included in the by-law than in a shareholders` pact the pre-emption scheme for the transfer of shares. The reason is that the statutes are a public document and that a potential purchaser of shares of a company would be considered an opinion on the content of the company`s statutes, as submitted to the company`s registrar, whether or not it actually verified them. Therefore, when a person buys shares in a company whose by-law contains a right of sale, that purchaser should seek proof that the procedures provided by the pre-emption statutes have been respected or that the pre-emption rights have been waived with the agreement of the required majority. If, in such circumstances, the potential purchaser acquires shares without obtaining such evidence and if the pre-purchase procedure had not been followed, the purchaser cannot acquire ownership of the action in question, as he would not be a “good-faith buyer for value”. However, if pre-emption procedures are defined in a shareholders` pact, a third-party buyer would not notice such pre-emption rights, as long as they are not included in a public document and would not be affected by the non-compliance with these pre-emption procedures. A company`s by-law included a clause giving directors the power to refuse permission for a proposed transfer of shares to the company. At a board meeting, directors were reported to transfer shares to a third party. No deferral form was submitted for board approval and no formal decision was made to approve the deferrals, but none of the directors objected. All directors appeared to have treated the transfers as “settled cases” and it was agreed that they had unanimously approved and approved the transfers, subject to the submission of transfer forms to the company.
Shortly after the meeting, one of the directors (including a shareholder) claimed to have come across old documents. They reminded him that many years earlier, the shareholders had agreed that the shares of the company would not be transferred to a new owner, unless they were first offered to other shareholders – that is, the shares of the company were raised when the “pre-emption rights” were transferred.