The Puerto Rico Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares is a specific type of certification used in Puerto Rico to indicate that a stock certificate is subject to certain restrictions on its transferability. These restrictions are outlined in a separate document, often referred to as a transfer restriction agreement, which accompanies the stock certificate. The purpose of this legend is to ensure that the terms and conditions regarding the transfer of shares are clearly stated and understood by all parties involved. The legend serves as a visible reminder to both current and potential shareholders that there are limitations on the ability to sell, transfer, or otherwise dispose of the shares. The Puerto Rico Legend serves as a legal safeguard, protecting the interests of the company and its shareholders. It can serve various purposes, such as preventing the shares from being transferred without the consent of certain parties, restricting the transfer of shares to specific individuals or entities, or requiring the shares to be offered for sale to existing shareholders before being sold to outside parties. Different variations of the Puerto Rico Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares may exist depending on the specific restrictions outlined in the accompanying document. Some common types include: 1. "Restrictive Transfer Agreement" Legend: This legend signifies that the transfer of shares is subject to a separate agreement that imposes specific limitations on its transferability. These limitations may include restrictions on transferring shares to competitors or requiring shareholder approval for any transfer. 2. "Right of First Refusal" Legend: This legend indicates that existing shareholders have the right to purchase the shares before they can be sold to third parties. It provides shareholders with the opportunity to maintain control over the ownership structure of the company. 3. "Lock-Up" Legend: This legend signifies that the shares are subject to a predetermined lock-up period, during which the shares cannot be transferred. Lock-up periods are commonly implemented during initial public offerings (IPOs) to prevent early investors and insiders from flooding the market with shares immediately after the offering. 4. "Voting Rights Agreement" Legend: This legend states that the stock certificate is subject to a separate agreement that outlines specific voting rights and limitations associated with the shares. These agreements may include provisions restricting voting rights for certain shareholders or requiring super majority approval for certain actions. It is important to note that the specific language and content of the Puerto Rico Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares may vary depending on the company and the nature of the transfer restrictions. The legend's purpose is to transparently communicate the existence of the separate document while highlighting the specific limitations on the transferability of the shares.
Puerto Rico Legend on Stock Certificate with Reference to Separate Document Restricting Transfer of Shares
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FAQ
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.
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.
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.
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.
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.
