1. Free Legal Help, Legal Forms and Lawyers. TheLaw.com has been providing free legal assistance online since 1995. Our most popular destinations for legal help are below. It only takes a minute to join our legal community!

    Dismiss Notice

Selling unregistered shares with restrictive legend

Discussion in 'Banking, Finance, Investments' started by zaob, Mar 19, 2020.

  1. zaob

    zaob Law Topic Starter New Member

    Messages:
    1
    Likes Received:
    0
    Trophy Points:
    1
    Jurisdiction:
    New Jersey
    Dear person,

    Few months ago my previous workplace company went IPO. I purchased shares from the company in unregistered, private transactions prior to the IPO, via the exercise of stock options. Such shares have not been registered with the U.S. Securities and Exchange Commission, and they bear a restrictive legend that requires removal before the shares can be traded. We were asked to sign a lock up agreement for a period of 10 months which I declined, and I'd like to be able to sell my shares any time soon. My case is likely rather unique among the shareholders. The external brokerage company is supposed to instruct me re the process, and timing (i.e. when those legends can be removed). They will require a legal opinion to remove such legend.

    My question is whether they are allowed to legally decline removal of such legend. Are they allowed to decline the process for any other reason? Basically what are my rights to sell my shares during the company lock up period for which I didn't sign? Also do I have any rights regarding the timing. I've lost already an opportunity to sell my shares at higher price before recent stock market decline because of very slow paper work and email exchanges.

    Please let me know if you think there's a more appropriate place to ask these questions.

    Thank you for your time.
     
  2. zddoodah

    zddoodah Well-Known Member

    Messages:
    3,447
    Likes Received:
    785
    Trophy Points:
    113

    What would be the point of including it if it couldn't be enforced?

    Without any details about the shares or the restriction or any other relevant rules, it's impossible to answer this intelligently.

    How much $$ is potentially at issue here?
     
    zaob likes this.
  3. Tax Counsel

    Tax Counsel Well-Known Member

    Messages:
    647
    Likes Received:
    336
    Trophy Points:
    63

    That depends on the particular restrictions that apply to your stock. Not having read those restrictions and not knowing all the facts that would be relevant to those restrictions I cannot say if you would have the right to sell them today. You may want to see a securities lawyer about that. Also, the details here matter because it may affect the tax treatment should you sell them, particularly if you do so before you have all the restrictions removed.
     
    zaob likes this.

Share This Page