35-14-627. Restriction on transfer of shares. (1) The articles of incorporation, the bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation or may impose restrictions on, including the alteration or elimination of, the application of 35-14-1434. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction.

(2) A restriction described in subsection (1) is valid and enforceable against a shareholder or a transferee of the shareholder if the restriction is authorized by this section and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by 35-14-626(2). Unless so noted or contained, a restriction is not enforceable against a person without knowledge of the restriction.

(3) A restriction described in subsection (1) is authorized:

(a) to maintain the corporation's status when it is dependent on the number or identity of its shareholders;

(b) to preserve exemptions under federal or state securities law; or

(c) for any other reasonable purpose.

(4) A restriction described in subsection (1) may:

(a) obligate the shareholder first to offer the corporation or other persons, separately, consecutively, or simultaneously, an opportunity to acquire the restricted shares;

(b) obligate the corporation or other persons, separately, consecutively, or simultaneously, to acquire the restricted shares;

(c) require the corporation, the holders of any class or series of its shares, or other persons to approve the transfer of the restricted shares if the requirement is not manifestly unreasonable; or

(d) prohibit the transfer of the restricted shares to designated persons or classes of persons if the prohibition is not manifestly unreasonable.

(5) For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares.

History: En. Sec. 57, Ch. 271, L. 2019.