DEFINITION of 'Legend'
A statement on a stock certificate noting restrictions on the transfer of the stock, often due to SEC requirements for unregistered securities. A legend may or may not be legally required on the certificate itself, depending on state laws. Restrictions on the sale or transfer of share ownership are common among privately held corporations.
BREAKING DOWN 'Legend'
The most common legend on private stock certificates contains language informing the holder of the restrictions on the sale or transfer of unregistered securities. SEC Rule 144 outlines the exemptions that allow one to sell unregistered securities. There may also be further restrictions on the sale of stock in private companies where shareholders have agreed to a shareholder buy-sell agreement. Often, these agreements are put in place to control who becomes a shareholder in the company.