Directors of company title buildings often interview purchasers who are looking to buy shares in the company. These interviews usually take place after the vendor has exchanged contracts with the purchaser, but before the sale has been completed.

We are often asked whether directors of a company title building can refuse to register a transfer of shares on the basis of something that was said at the interview.

When is refusal justified?

Refusing to register a transfer of shares is risky decision, particularly after a purchaser has paid a deposit to a vendor. A company title building would only be justified in taking the risks associated with such a refusal if the incoming purchaser clearly demonstrates that he or she is unwilling or unable to comply with the constitution.

For example, the company would be justified in refusing to register a transfer to someone who said at the meeting that they would refuse to comply with a condition in the constitution or the house rules that prohibited leasing.

When is refusal not justified?

The company should be careful not to refuse to register a transfer of shares for any unlawfully discriminatory reason. A company that refused to transfer shares to someone because of their mental illness, criminal record, or family responsibilities may breach Commonwealth or State anti-discrimination and human rights legislation.

Are interviews still useful?

In our experience, interviews are more often used by companies as a means of educating incoming shareholders about the governance of the building, the expectations of the directors, and the regulations they will be required to comply with. We think that interviews are still worth having for this purpose.

Get in touch

Please get in touch on (02) 9199 8597 or at andrew.andreyev@jfmlaw.com.au with our experienced company title lawyers to learn more about how your company title building can better regulate tenants or for a free copy of our Understanding Company Title handbook.