New Mexico Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares
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How to fill out Legend On Stock Certificate With Reference To Separate Document Restricting Transfer Of Shares?
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FAQ
A restricted security must bear a legend giving notice of the restrictions. That legend which must be removed after the restrictions are lifted. A security with a legend cannot be transferred or sold and must be removed before any transaction.
Removing a restricted stock legend is a matter solely in the discretion of the issuer of the securities. State law, not federal law, covers disputes about the removal of legends. Thus, the SEC will not take action in any decision or dispute about removing a restrictive 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.
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.
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.
Rule 144 is a set of regulations that outline the conditions in which the sale of unregistered or restricted stock shares can be sold. Typically, criteria must be met before a sale is allowed, including a minimum period in which the stock should be held, which can be up to one year.
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.
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.
