When a company goes public, it sells shares of its stock to investors. These shares are represented by certificates that have certain restrictions on them. For example, the certificates may be subject to a lock-up period, meaning that the holder is not allowed to sell them for a certain period.
There are various ways to remove these restrictions. Let’s see how.
Table of Contents
Removing a Stock Legend
When stock certificates are issued, they are accompanied by certain legends. These legends are small print that informs the certificate holder about certain information concerning the shares they hold. We may also call these legends “attribution restrictions” or “terms of issuance.”
The legend may contain information such as how many shares you own and if any special conditions apply. So, if you have a stock certificate with a legend on it, you should start by removing a stock legend so that you can do whatever needs to be done with them. In some cases, this might just mean scratching off the restriction. In other cases, the certificate may contain a sticker that has been placed across it, which reads “Restricted Stock Legend” – in this case, the sticker should be removed from the stock certificate.
You can remove a restrictive legend by using legal measures of certificate cancellation. You will have to contact a stock transfer agent or a lawyer to help you cancel the certificate and issue a new one without the legend.
Holding on to It
This way, the restrictions placed on the stocks do not affect their value and, as such, will automatically expire after a certain period. However, this does not mean that we should be complacent and forget about our shares, leaving them unsold. We should always monitor the market and aim to sell as soon as possible.
Stock splits make the value of our shares more affordable for us, which might make it easier to find buyers for them. A certain amount will split the number of shares we own, and their price per share will go down. This process is usually done when the company feels like the value of its shares is too high for it to be bought by individual investors.
Reissuing the New Certificate
If the stock certificate has been lost or damaged, it can be reissued. This process involves starting a new stock certificate for this particular share and canceling the old one. The person who requests to have this done should sign a letter of request under oath, including statements about how the original was destroyed or lost.
The issuer will then issue a new certificate to the account holder that will replace the original.
Stock Certificates and Arbitration
The stock transfer agent will normally not remove restrictions placed on your shares. When you buy and sell stocks, you sign an agreement with the stock transfer agent, which specifies how they can help you transfer your shares. These agreements usually prohibit the transfer agent from taking any action to remove restrictions on shares.
For instance, you will not be allowed to unilaterally cancel your stock certificates through the stock transfer agent. You should hire a lawyer so that their services can be used to assist in removing all or some of these restrictions before you sell off your shares.
However, there are some exceptions to this rule. For instance, when you are in an arbitration case or when the stock certificate contains a class action waiver clause you do not agree on, it might be possible to have the restrictions lifted.
If federal authorities seized your shares due to suspected wrongdoing, then they can also remove any restriction on them so that you can sell them off.
In addition, the transfer agent can be ordered by a court of law to remove some or all restrictions from a stock certificate. This usually happens when the issuer goes bankrupt and is in financial difficulty. In this case, courts will issue a removal order to recover as much money for creditors as possible.
If you do not wish to hold your stock certificates any longer and would like to sell them so that you can earn some money from them, the process of transferring them is fairly simple. However, there are some things to keep in mind before deciding to sell.
First, if you have held them for a certain amount of time before selling, you will have to pay capital gains tax on the price they were sold. Other elements need to be taken into account, like brokerage fees.
Secondly, if you are selling to a broker, ensure that the stock certificates are in good physical condition before handing them over. This is because brokers will not take responsibility for damaged or missing certificate numbers if they were already physically damaged before being traded.
Finding a Buyer
If you do not want to sell your stock certificates, you can find buyers on the internet. Many websites specialize in matching people who wish to buy shares with those who wish to sell them. This is a great way of finding people interested in buying shares and realizing their value, even with restrictions.
You can also try advertising them in the newspaper, but this method is not very popular because it does not negotiate between buyers and sellers. Furthermore, you will have to go through the hassle of finding a newspaper with the right circulation numbers to reach your target market.
Buying Back the Stock
If you are interested in buying back your stock, consider some things. First, make sure that the restriction has been removed by talking to an attorney or checking with the transfer agent. You can also try calling the company themselves if they still exist because sometimes they will buy back their own stock at market value.
If there is still a restriction on the stock and you do not want it anymore, hire a lawyer to take care of the process.
Transferring stock certificates can be a bit complicated, but with the right knowledge, it can be done smoothly. Make sure to take all the necessary precautions before selling or transferring your shares, and remember that there are many ways to remove restrictions from a stock certificate.
Featured Photo by Yan Krukov from Pexels