Restrictive legends on stock certificates
A legend is a sentence on the certificate that the statute says must be conspicuous, or a summary of rights the statute says you may put on the back. Generic forms collect legends the statute never mentions.
Two different jobs get called legends
Companies use "legend" for two statutory jobs. One job is to disclose rights of a class so a holder can see them or can demand them free. DGCL 8 Del. C. § 151(f), N.C. Gen. Stat. § 55-6-25(c), RCW 23B.06.250, C.R.S. § 7-106-206(2), and A.R.S. § 10-625(B) are face or class sections in that family. The other job is to warn that the shares cannot freely move. Those are the restrictive legends. Mixing them produces a back page that quotes a securities exemption the company does not have and forgets the buy-sell the company does have.
This page separates them. If you only have one class and no transfer limit, you may not need either legend. If you have two classes, you need the class statement or the free-copy sentence. If you have a buy-sell, you need the restriction note in the form the state enforces.
When a restriction actually binds
| Statute | What has to be on the certificate or statement | If it is missing |
|---|---|---|
| Tex. Bus. Orgs. Code § 3.202(d)-(e) | A conspicuous note of the restriction, and the company must be able to provide the document | The entity may not enforce the restriction |
| N.C. Gen. Stat. § 55-6-27(b) | A conspicuous note, and the restriction must be authorized and not unconscionable | Enforceable only against a person with actual written notice |
| RCW 23B.06.270 | Conspicuous note, or the uncertificated information statement | Not enforceable against a person without knowledge |
| A.R.S. § 10-627(B) | Conspicuous note on the front or back, or the information statement | Not enforceable against a person without knowledge |
| Va. Code § 13.1-649(B) | Conspicuous note or the information statement | Not enforceable against a person without knowledge |
| C.R.S. § 7-106-208(1) | Conspicuous note, with a separate rule for holders who already knew, voted, or consented | A person without knowledge is not bound by an unnoted restriction |
| MCL 450.1472 | Conspicuous note on the face or back, or the information statement. Covers bonds as well as shares | Ineffective except against a person with actual knowledge |
| N.J.S.A. 14A:7-12 | Conspicuous note on the security or the information statement | Not valid against a new holder without actual knowledge |
| Cal. Corp. Code § 418(a)-(b) | The fact of the restriction, conspicuous, plus assessable or unpaid shares when those apply | Not enforceable against a transferee without actual knowledge |
Texas is the strict enforcement sentence. The others mostly say the buyer who lacks knowledge takes free of an unnoted restriction. Texas says the entity may not enforce. That is a reason to keep the agreement, not only the legend. The Texas page is Texas stock certificate requirements.
Trap: a legend that cites a restriction you cannot produce. Tex. Bus. Orgs. Code § 3.202(d)-(e) will not enforce it. N.C. Gen. Stat. § 55-6-27(b) adds that the restriction must not be unconscionable under the circumstances. Print the note and keep the document.
The multi-class legend is not a restriction
DGCL 8 Del. C. § 151(f) lets a Delaware corporation set the rights out or summarize them on the face or back, or state that it will furnish them without charge on request. N.C. Gen. Stat. § 55-6-25(c) is the conspicuous free-on-written-request version. N.J.S.A. 14A:7-11(2) wants a full statement of designations, relative rights, preferences, and limitations, or a promise to furnish that statement without charge. These sentences do not say the shares cannot be sold. They say the buyer can find out what the shares are. Putting them under a heading that says "restriction" confuses the next reader.
A Class 2 printed set, $56.00 for 20, is the catalog face with room for a second class and a back panel. A Class 1 set, also $56.00, is the one-class certificate. The Eagle two-class set is $56.00 if you want that border. The legend is the words you add. The product is the paper.
California's longer conspicuous list
Cal. Corp. Code § 418(a)-(b) does not stop at transfer restrictions. When they apply, the certificate also states that shares are assessable or not fully paid, that they are subject to a voting agreement or a voting restriction, that they are redeemable, and that they are convertible, including the conversion period. The transfer-restriction statement and the assessable or unpaid statement have to be conspicuous. If they are missing, the restriction and the assessment liability have the enforcement limits the subdivision describes.
Cal. Corp. Code § 418(c)-(d) is its own legend, and it is quoted in substance by the statute. A close corporation certificate states, conspicuously, on its face, that the corporation is a close corporation, that the number of holders of record of all classes cannot exceed a number not in excess of 35, and that an attempted voluntary inter vivos transfer which would violate that requirement is void. It also points to the articles, bylaws, and agreements on file with the secretary. Do not shorten this to "transfer restricted" and expect the void-transfer sentence to apply. The void-transfer rule in that subdivision depends on the certificate containing the legend.
Trap: using a securities-law legend as a substitute for the close-corporation legend. Cal. Corp. Code § 418(c)-(d) tells you the words that have to be conspicuous on the face. A different legend does not supply them.
Front, back, or the statement
Most of the restriction statutes say "front or back" and "conspicuous." California's close-corporation legend is specifically on the face. Multi-class summaries are also front or back, with a conspicuous free-copy sentence as the alternative. Uncertificated shares move the same information into the written statement. If you later issue a certificate for shares that had been uncertificated, copy the statement onto the paper. The holder who surrenders nothing and receives a clean certificate is the person the enforcement sections worry about.
Related reading: how to transfer shares, California, and North Carolina.
Printed Standard Certificates Class 2 - Set of 20
$56.00
Two-class corporation set
Order this set →
Printed Standard Certificates Class 1 - Set of 20
$56.00
Single-class corporation set
Order this set →Paper with room for the sentence
Order Class 2 at $56.00 when the certificate needs a second class or a real back panel. Order Class 1 at $56.00 when the only extra sentence is a short restriction on a single class. The print utility at $0.99 lets you lay the legend out yourself. It does not choose the right statute. The Eagle two-class set is $56.00.
20 PRINTED EAGLE 2 CLASS CERTIFICATES
$56.00
Eagle border, two classes
Order this set →
Mark's Corpex Certificate Print Utility
$0.99
Print your own certificate file
Order this set →Questions
Does every stock certificate need a restrictive legend?
No. The statutes require the legend when there is a restriction you want to enforce, or when the shares have class rights that must be disclosed. A single class with no transfer limit may need neither.
What happens if the restriction is not on the certificate?
In Texas, Tex. Bus. Orgs. Code § 3.202(d)-(e) says the entity may not enforce it if the document was not provided, and the note must be conspicuous. In North Carolina, N.C. Gen. Stat. § 55-6-27(b) limits enforcement to a person with actual written notice. Other states in the table use knowledge.
Is a multi-class summary a restrictive legend?
No. DGCL 8 Del. C. § 151(f) and N.C. Gen. Stat. § 55-6-25(c) are disclosure of rights or a promise to furnish them free. They are not a ban on transfer.
What legend does a California close corporation use?
Cal. Corp. Code § 418(c)-(d) requires a conspicuous face legend that the corporation is a close corporation, that holders of record cannot exceed a number not in excess of 35, and that a voluntary transfer which would break that cap is void.
Do uncertificated shares escape the legend?
No. The information moves into the written statement. N.C. Gen. Stat. § 55-6-26 and RCW 23B.06.260 require that statement within a reasonable time after issue or transfer.
Which printed set has room for a back legend?
Printed Standard Certificates Class 2 and the Eagle two-class set are each $56.00 for 20. A short restriction on one class can go on the Class 1 set, also $56.00.
Statutes last checked November 3, 2026. Official text: Cal. Corp. Code § 418(a)-(b); N.C. Gen. Stat. § 55-6-27(b); Tex. Bus. Orgs. Code § 3.202(d)-(e); DGCL 8 Del. C. § 151(f).