14A:7-12. Transfer of shares and restrictions on transfer

(1) The shares of a corporation shall be personal property and shall be transferable in accordance with the provisions of Chapter 8 of the Uniform Commercial Code (N.J.S. 12A:8-101 et seq.), as amended from time to time, except as otherwise provided in this act.

(2) Any reasonable restriction on the transfer or registration of transfer of shares, or other securities having conversion or option rights, may be enforced against the holder of the restricted securities and any successor or transferee of the holder, including any fiduciary entrusted with responsibility for the person or property of the holder. Such restriction shall be valid only if imposed by the certificate of incorporation or by-laws or by the provisions of an employee benefit plan permitted by Chapter 8 of this act, or by a written agreement among any number of shareholders or among such holders and the corporation. No restriction shall be valid with respect to any securities issued prior to the imposition of the restriction unless their holders shall have voted in favor of the imposition of the restriction or are parties to the agreement imposing it. Unless noted conspicuously on the security or contained in the information statement required by subsection 14A:7-11(6), a restriction shall not be valid against a person who becomes the holder of the security without actual knowledge of the restriction.

(3) In particular and without limitation of the generality of the power granted by subsection 14A:7-12(2) to impose restrictions, a restriction on the transfer or registration of transfer of shares, or other securities having conversion or option rights, may be enforced as provided in subsection 14A:7-12(2), if it:

(a) Obligates the holder of the restricted securities to offer to the corporation or to any other holders of securities of the corporation or to any other person or to any combination of the foregoing, a prior opportunity, to be exercised within a reasonable time, to acquire the restricted securities;

(b) Obligates the corporation or any holder of securities of the corporation or any other person or any combination of the foregoing, to purchase the securities which are the subject of an agreement respecting the purchase and sale of the restricted securities;

(c) Requires the corporation or the holders of any class or series of securities of the corporation to consent to any proposed transfer of the restricted securities or to approve the proposed transferee of the restricted securities;

(d) Prohibits the transfer of the restricted securities to designated persons or classes of persons, and such designation is not manifestly unreasonable; or

(e) Exists for the purpose of maintaining the status of the corporation as an electing small business corporation under subchapter S of the United States Internal Revenue Code.

(4) If a restriction on transfer of shares or other securities having conversion or option rights is held not to be authorized by the law of this State, the corporation shall nevertheless have an option for a period of 30 days after the judgment setting aside the restriction becomes final, to acquire the restricted securities at a price to be agreed upon by the parties, or if no agreement is reached as to price, then at their fair value as determined by any court having jurisdiction. In order to determine fair value, the court may appoint an appraiser to receive evidence and report to the court his findings and recommendations as to fair value. The appraiser shall have such powers and shall proceed so far as applicable, in the same manner as an appraiser appointed under section 14A:11-8.

L.1968, c.350; amended 1988,c.94,s.43.