The Washington Legend on a stock certificate refers to a specific provision or notice that restricts the transfer of the stock due to a stock redemption agreement. This agreement mandates that before transferring the stock, the current stockholder must make an offer to the corporation and then to other stockholders. This restriction is often included on stock certificates to ensure that the corporation and existing shareholders have the opportunity to purchase the shares before they are sold to an outside party. It serves as a protective measure for the corporation and shareholders, giving them the right to maintain control over the ownership and management of the company. There are different variations or types of the Washington Legend on Stock Certificates Giving Notice of Restriction on Transfer due to Stock Redemption Agreement. These may include: 1. Standard Washington Legend: This type of legend outlines the basic requirement of making an offer to the corporation and other stockholders before transferring the stock. It is the most common form. 2. Modified Washington Legend: In some cases, the stock redemption agreement may specify additional conditions or modifications to the transfer restrictions. The modified legend would include these modifications explicitly. 3. Partial Redemption Washington Legend: This legend variation indicates that only a portion of the stock is subject to redemption and transfer restrictions. If a shareholder holds multiple shares, only a specific number or percentage is affected. 4. Exemption Washington Legend: An exemption legend is utilized when certain stockholder groups, such as company insiders or specific accredited investors, are exempted from the transfer restrictions imposed by the stock redemption agreement. These legends would highlight the exempted status. It's important to note that the exact wording and format of the Washington Legend might vary depending on the specific stock redemption agreement and the legal requirements of the state of Washington. Therefore, it is always advisable to consult with legal professionals or experts familiar with corporate law to ensure compliance with the applicable regulations.
Washington Legend on Stock Certificate Giving Notice of Restriction on Transfer due to Stock Redemption Agreement Requiring First an Offer to the Corporation and then an Offer to other Stockholders
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FAQ
Restrictive legends are stamped or printed on the certificate or instrument, face or reverse, of restricted securities and usually begin with ?These securities are not registered . . . . ? Restricted securities that are not represented by a certificate (generally referred to as ?book entry?) will have a notation of ...
Selling unregistered shares is typically considered a felony, but there are exceptions to this rule. SEC Rule 144 lays out the conditions under which unregistered shares may be sold: They must be held for a prescribed period. There must be adequate public information about the security's historical performance.
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 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.
Another common type of buy-sell agreement is the ?stock redemption? agreement. This is an agreement between shareholders in a company that states when a shareholder leaves the business, whether it be due to retirement, disability, death, or other reason, the departing members shares will be bought by the company.
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.
When a corporation purchases the stock of a departing shareholder, it's called a ?redemption.? When the other stockholders purchase the stock, it's called a cross-purchase. Typically, the redemption versus cross-purchase decision doesn't impact the ultimate control results.
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.
