Printing Legends on Share Certificates – Why and How
Sample Share Certificate with Legend from Attorneys Corporation Service, Inc.
Last year, I wrote about the importance of a corporation’s placing appropriate legends on share certificates (Why Do We Need a Corporate Records Book?) and likewise for limited liability company membership certificates (Should My LLC Issue Membership Certificates?). This post provides more details about why legends are required and how to print legends on share certificates. (Although I am using corporation-specific terminology, the considerations are similar for LLCs.)
When including legends on share certificates for clients, one of the most important states that the shares have not been registered under state or federal securities laws. (I have the company that provides the certificates include it when the certificates initially are printed.) The reason: To put the shareholder on notice that, under applicable securities laws, the shares cannot be transferred unless certain circumstances are satisfied. Here is an example:
Should We Issue LLC Membership Certificates?
A friend recently asked whether his limited liability company, which was seeking investors, should issue LLC membership certificates.
The Section reference below has been updated to reflect California’s new LLC law that took effect on January 1, 2014 (see RULLCA Brings New LLC Laws to California in 2014).
Here are the points that I made in my response. (more…)
