Corporate Stock-Transfer Restriction and Certificate-Legend Requirements in Indiana
At a glance
| Governing law, security, holder, and scope | Ind. Code §§ 23-1-26-7 to -8; ordinary domestic corporation; class/series transfer or registration restrictions; holder and transferee; shares include convertible securities and securities carrying subscription/acquisition rights |
|---|---|
| Authorized instrument, actor, and adoption | Articles, bylaws, agreement among shareholders, or agreement between shareholders and corporation; no separate adoption actor or filing step stated beyond earlier-share party/vote gate (§ 23-1-26-8(a)) |
| Existing shares, holder consent, and effect | Earlier-issued share unaffected unless holder is restriction-agreement party or voted for restriction; no separate amendment or renewed-assent rule stated (§ 23-1-26-8(a)) |
| Offer, purchase, consent, and prohibited-transferee terms | Nonexclusive list: first offer; corporation/other-person acquisition obligation; corporation, class holders, or another person may approve if not manifestly unreasonable; designated-person/class prohibition if not manifestly unreasonable (§ 23-1-26-8(d)) |
| Ownership cap, automatic transfer, tax, and regulatory routes | Shareholder-number/identity status and federal/state securities-exemption purposes authorized; no separate ownership cap, automatic-transfer, tax-attribute, or general regulatory-compliance form stated (§ 23-1-26-8(c)) |
| Reasonableness, manifest unreasonableness, and public policy | Other purpose must be reasonable; approval requirement and designated-person/class prohibition must not be manifestly unreasonable; form list is expressly nonexclusive (§ 23-1-26-8(c)-(d)) |
| Certificate legend, uncertificated notice, and actual knowledge | Restriction's existence conspicuously on certificate front/back or in § 23-1-26-7(b) written statement sent within reasonable time; omission protects person without knowledge (§ 23-1-26-8(b)) |
| Transferee, successor, fiduciary, and stated legal effect | Authorized, noticed restriction valid and enforceable against holder or holder's transferee; missing notice yields nonenforcement against person without knowledge. No separate successor/fiduciary class, void-transfer rule, or damages remedy stated (§ 23-1-26-8(b)) |
| UCC, securities, public-company, valuation, and fiduciary boundaries | Preserving federal/state securities-law exemptions is authorized; restricted-securities legends, UCC Article 8, public-company defenses, valuation, funding, fiduciary duties, and contract or litigation remedies remain outside the surveyed corporate rule |
Requirements one by one
Authorized records and earlier-issued shares
Ind. Code § 23-1-26-8(a) permits a restriction in the articles of incorporation, the bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation. It may address a class or series. A share issued before adoption is unaffected unless its holder is a party to the restriction agreement or voted for the restriction.
For this section, “shares” also includes a security convertible into or carrying a right to subscribe for or acquire shares (§ 23-1-26-8(e)).
Permitted purposes and forms
Section 23-1-26-8(c) authorizes restrictions used to maintain a corporate status dependent on shareholder number or identity, preserve a federal or state securities-law exemption, or serve another reasonable purpose.
The nonexclusive list includes a first offer to the corporation or other people; an obligation for the corporation or other people to acquire the shares; approval by the corporation, holders of a class, or another person; and a prohibition involving designated people or classes. The offer and acquisition routes may operate separately, consecutively, or simultaneously. Approval and designated-person terms must not be manifestly unreasonable (§ 23-1-26-8(d)).
The surveyed provision does not separately write an ownership percentage cap, automatic-transfer mechanism, tax-attribute restriction, purchase price, valuation formula, or funding rule.
Certificate and uncertificated-share notice
An authorized restriction is valid and enforceable against the holder or the holder's transferee when its existence is noted conspicuously on the front or back of the certificate or included in the information statement for uncertificated shares. Without that notice, it is not enforceable against a person without knowledge (§ 23-1-26-8(b)).
Section 23-1-26-7(a) lets the board authorize uncertificated shares unless the articles or bylaws provide otherwise. Existing certificated shares remain in that form until surrendered. Within a reasonable time after issuing or transferring an uncertificated share, the corporation must send a written statement containing the applicable restriction information (§ 23-1-26-7(b)).
What trips people up
Earlier-share assent and transferee notice are separate gates. Party status or a favorable vote determines whether an after-adopted restriction affects an earlier-issued share. Certificate or information-statement notice, and the person's knowledge, determine enforcement against a later holder (§ 23-1-26-8(a)-(b)).
The form list is expressly nonexclusive. Section 23-1-26-8(d) says a restriction may use the listed forms “among other things.” That wording does not erase the reasonable-purpose rule or decide whether a bespoke term is enforceable.
A securities-exemption purpose does not replace a securities legend. The statute authorizes the purpose, but federal and state restricted-securities notices, UCC Article 8, intermediary systems, and transfer-agent procedure remain separate.
Common questions
May an Indiana restriction appear in the bylaws?
Yes. Section 23-1-26-8(a) expressly names the bylaws, along with the articles and the two shareholder-agreement routes. The earlier-share party-or-vote rule still applies.
May Indiana require the corporation to buy restricted shares?
Yes. Section 23-1-26-8(d)(2) permits a restriction obligating the corporation or other people, separately, consecutively, or simultaneously, to acquire the shares. It does not set the price, valuation method, funding, or remedy.
Does the statute reach convertible securities?
Yes. Section 23-1-26-8(e) includes a security convertible into or carrying a right to subscribe for or acquire shares.
Can Indiana shares be issued without certificates?
Yes. Section 23-1-26-7 permits board authorization unless the articles or bylaws provide otherwise, requires surrender before the change affects existing certificated shares, and requires the written information statement after an uncertificated issue or transfer.
Statutes and sources
- Ind. Code § 23-1-26-8(a)-(b) — authorized records, class or series scope, earlier-share assent, certificate or information-statement notice, knowledge, and holder/transferee enforcement. Official 2026 Indiana Code chapter PDF, accessed August 26, 2026.
- Ind. Code § 23-1-26-8(c)-(e) — authorized purposes, nonexclusive forms, manifest-unreasonableness limits, and covered convertible or subscription- right securities. Official 2026 Indiana Code chapter PDF, accessed August 26, 2026.
- Ind. Code § 23-1-26-7(a)-(b) — board authorization of uncertificated shares, surrender of existing certificates, and the written information statement. Official 2026 Indiana Code chapter PDF, accessed August 26, 2026.
Source links
Every statute quoted above, linked, with the date we checked it.
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