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.


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.

  1. Stock Certificate

    A stock certificate is a physical piece of paper representing ...
  2. Transfer Procedures

    The procedure by which ownership of a stock moves from one party ...
  3. Transfer

    A change in ownership of an asset, or a movement of funds and/or ...
  4. Restricted Asset

    Money or other items of value received by or promised to an organization, ...
  5. Trust Certificate

    A bond or debt investment, usually in a public corporation, that ...
  6. Periodic Payment Plan Certificate

    A certificate representing ownership interest in a periodic payment ...
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  1. What are unregistered securities or stocks?

    Before securities, like stocks, bonds and notes, can be offered for sale to the public, they first must be registered with ... Read Answer >>
  2. I lost my share certificate. Do I still own the stock?

    Regardless of whether a shareholder loses his or her stock certificate, that person still owns the shares. However, in order ... Read Answer >>
  3. How do you get a hard copy of a stock certificate?

    Before online brokers and personally-directed accounts, holding a physical stock certificate was a necessity, as this was ... Read Answer >>
  4. I hold stock certificates in a company that just had a stock split. What happens ...

    The short answer is that a stock split will have little effect on the holder of stock certificates. In most cases when an ... Read Answer >>
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