New York Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares

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Multi-State
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US-1058BG
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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). This Legend restricts the transfer of stock in accordance with the Articles of Incorporation or the Corporation's Bylaws or a Shareholder's Buy Sell Agreement.

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FAQ

In general, restricted securities are acquired in a nonpublic transaction (private placement). Such securities are unregistered, can only be resold under certain conditions and usually bear a legend to that effect.

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.

Restricted stock refers to unregistered shares of ownership in a corporation that are issued to corporate affiliates, such as executives and directors. Restricted stock is non-transferable and must be traded in compliance with special Securities and Exchange Commission (SEC) regulations.

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.

A company whose shares are restricted in transfer is called a privately held company. Restriction on transfer of shares means that shares cannot be transferred without the approval of the board of directors or the general meeting of shareholders.

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.

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New York Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares