SKD an employee of Moreh Ltd. met with an accident and died. The accident occurred when SKD was on Company's duty. He held one hundred shares partly paid. Normally the Company has a first and paramount lien on the shares

A company cannot have lien on shares unless provided in the Articles of Association. Therefore provision to this should be in the Articles. As per Regulation 9 of Table F of the First Schedule to the Companies Act, 2013, in which standard Articles of Association of a company limited by shares are given, the company has first and paramount lien on every share (not being a fully paid share), for all monies (whether presently payable or not) called or payable at a fixed time in respect of that share and on all shares (not being fully paid shares) standing registered in the name of a single person, for all monies presently payable by him or his estate to the company. However, in terms of Section 5(2) & (3) of the Companies Act, 2013, the companies are free to add such additional matters in its articles as may be considered necessary for its management or to include entrenchment related provisions in their Articles of Association. The key point is that lien is permissible only on partly paid shares and only if provided in the Articles of Association of the company. The Board of Directors may, however, at any time declare any share to be wholly or in part exempt from the said lien. Hence the decision of the Board of Directors of M/s Moreh Ltd. to relax the provisions of lien in respect of shares held by SKD is in order and valid. Further, the Company's lien can be extended to all dividends payable on such shares if provided for in the Articles of Association.