Colorado Statement or Legend on Stock Certificate - Notice of Restriction on Transfer - Stock not Registered - Intrastate Exemption

State:
Multi-State
Control #:
US-1057BG
Format:
Word; 
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Description

A Legend is a statement on a stock certificate noting restrictions on the transfer of the stock, often due to SEC requirements for unregistered securities. The Securities Act of 1933 regulates the initial sale of securities to the public. Some securities are exempt from coverage of the Act. Certain stock issue transactions are also exempt (i.e., exempt from registration with the Securities and Exchange Commission). The most common exempt transaction that close corporations take advantage of is the intrastate offering. To qualify for this exemption, both the investors and the issuer must all be residents of the same state. The issuer must also meet the following requirements: • 80% of its assets must be located in the state; • 80% of its income must be earned from operations within the state; and • 80% of the proceeds from the sale must be used on operations within the state. Also, for nine months after the issuance, the stock can only be sold to state residents.

How to fill out Statement Or Legend On Stock Certificate - Notice Of Restriction On Transfer - Stock Not Registered - Intrastate Exemption?

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FAQ

The Securities Act of 1933 protects investors from misleading advertising and requires securities to be registered with the SEC. Intrastate companies are exempt from SEC registration, if regulations are followed.

Only a transfer agent can remove a restrictive legend. But the transfer agent won't remove the legend unless you've obtained the consent of the issuer?usually in the form of an opinion letter from the issuer's counsel?that the restrictive legend can be removed.

The process of removing the restrictive legend from a stock certificate is done only to facilitate a public resale, and in no way alleviates an investor from complying with all aspects of Rule 144 at all times.

Once vested, restricted shares are assigned a fair market value. Restricted shares may also be restricted by a double-trigger provision. That means that an employee's shares become unrestricted if the company is acquired by another and the employee is fired in the restructuring that follows.

In order to have the legend on a stock certificate removed, investors should contact the company's shareholder relations department to find out the details of the removal process. Following that, the company will send a confirmation authorizing its transfer agent to remove the legend.

The purpose of the restrictive legend or notation is to protect the issuing company from loosing its private placement exemption for the initial sale of the securities and to notify the investor that the restricted securities cannot be resold into the public securities market without satisfying certain requirements.

Only a transfer agent can complete the task of removing a restrictive stock legend. The transfer agent will require an opinion letter from the issuer's counsel or from his or her own lawyer plus 144 papers completed by a broker?stating that the restricted legend can be removed.

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Colorado Statement or Legend on Stock Certificate - Notice of Restriction on Transfer - Stock not Registered - Intrastate Exemption