It is possible to stipulate in the articles of association that the consent of the company is required prior to the acquisition of a share. In case a consent clause is included in the company’s articles of association, the transferee of the shares may not use his voting rights before he/she has received the company’s consent for the acquisition of the shares. By means of the consent clause the company may prevent unwanted owners from exercising power in the company.
Through a consent clause it is only possible to limit transfers (e.g. trade, exchange and gift). It does not cover transfer of title on the basis of inheritance or testament. Moreover, a consent clause may not apply to a share acquired in a compulsory auction or from a bankrupt’s estate.
The articles of association may limit the scope of application of a consent clause to concern only certain series of shares or certain parties, such as competitors. The consent clause shall be noted on the share certificate. The absence of the statement does not have an effect on the validity of the consent clause, but may result in liability for damages on the part of the board of directors.
A matter concerning consent is brought up on the transferee’s initiative when he/she reports the acquisition to the board of directors and requests for consent thereto. Consent may also be sought prior to the actual acquisition or other transfer of the shares. The granting or refusal of the consent shall be notified to the petitioner in writing within two months from the receipt of the application by the company or else the consent is summoned to be granted. The board of directors shall decide upon the consent unless the articles of association assign such decision power to the managing director or the general meeting of shareholders. The question of giving the consent shall be decided in the same manner for all shares transferred through the same acquisition unless otherwise stipulated in the articles of association.
After granting the consent, the transferee of the shares shall be registered as a new shareholder upon his/her request. Before granting the consent the transferee does not possess any rights based on the share other than the right to payment when distributing assets and pre-emptive rights in case of issuance of shares.
In practice a consent clause is considerably more exceptional than a redemption clause. A consent clause may complement the protection offered by the redemption clause, for e.g. when parties entitled to redemption cannot afford to redeem the shares, but the company and/or shareholders still want to be able to prevent unwanted new shareholders.