Corporate Stock-Transfer Restriction and Certificate-Legend Requirements in Kentucky

At a glance

Requirements one by one

Authorized records and earlier-issued shares

KRS 271B.6-270(1) permits a restriction in the articles of incorporation, bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation. 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” includes a security convertible into or carrying a right to subscribe for or acquire shares (KRS 271B.6-270(5)). The actual record must fit the statutory authorization and the earlier-share party-or-vote gate.

Kentucky adds compensation and mandatory-transfer routes

KRS 271B.6-270(3) authorizes the usual status, securities-exemption, and other- reasonable-purpose routes. It also expressly authorizes a restriction connected with shares issued to officers, directors, employees, or independent contractors, including equity-based compensation under the Internal Revenue Code.

The form list includes first offers, corporation or other-person acquire-or- transfer obligations, approval terms, and designated-person or designated-class prohibitions. Kentucky separately permits an obligation for the shareholder to transfer shares to the corporation or another person at an agreed price, a valuation-formula price, or an amount equal to the original consideration (KRS 271B.6-270(4)).

Approval and designated-person terms must not be manifestly unreasonable. The statute's express price forms authorize those structures but do not resolve a disputed valuation, fiduciary process, funding obligation, or remedy.

Actual knowledge or formal notice can support enforcement

An authorized restriction is enforceable against a holder or transferee when that person has actual knowledge, or when the restriction's existence is noted conspicuously on the certificate or included in the uncertificated-share information statement. Without notice or knowledge, the restriction is not enforceable against the person (KRS 271B.6-270(2)).

KRS 271B.6-260 lets the board authorize uncertificated shares unless the articles or bylaws provide otherwise. Existing certificates remain effective until surrender. Within a reasonable time after an uncertificated issue or transfer, the corporation sends the shareholder the applicable certificate and restriction information.

What trips people up

Earlier-share assent and transferee knowledge are separate questions. Party status or a favorable vote determines whether an after-adopted restriction affects an earlier-issued share. Actual knowledge or formal notice determines enforcement against a holder or transferee (KRS 271B.6-270(1)-(2)).

Kentucky's compensation purpose is express but limited. It covers shares issued to the listed service providers, including equity-based compensation. It does not turn every employment or independent-contractor covenant into a corporate transfer restriction.

The public-benefit legend is a different notice. KRS 271B.6-260(3) requires a public benefit corporation's certificate to state that status. That does not replace the restriction notice required by KRS 271B.6-270, and public benefit corporations are outside this ordinary-corporation survey.

Common questions

May a Kentucky restriction appear in the bylaws?

Yes. KRS 271B.6-270(1) expressly names the bylaws, along with the articles and the two shareholder-agreement routes. The earlier-share party-or-vote rule still applies.

May a restriction require a transfer at the original purchase price?

Yes. KRS 271B.6-270(4)(c) expressly includes a mandatory transfer for an amount equal to the original consideration, as well as agreed and formula prices. The statute does not decide every enforceability, valuation, fiduciary, or remedy issue arising from that term.

Does actual knowledge cure missing certificate notice?

For the person who actually knows, KRS 271B.6-270(2) states an affirmative knowledge route to enforcement. The corporation should still maintain the certificate and uncertificated-share notices required for other holders and transferees.

Can Kentucky shares be uncertificated?

Yes. KRS 271B.6-260 permits board authorization unless the articles or bylaws provide otherwise, preserves existing certificates until surrender, and requires the written information statement after issuance or transfer.

Statutes and sources

• KRS 271B.6-270(1)-(2) — authorized records, earlier-share assent, actual knowledge, conspicuous certificate or information-statement notice, and holder/transferee enforcement. Official Kentucky LRC text, accessed August 26, 2026.
• KRS 271B.6-270(3)-(5) — status, exemption, compensation, and reasonable- purpose routes; enumerated forms; mandatory transfer pricing; manifest- unreasonableness limits; and covered convertible or subscription-right securities. Official Kentucky LRC text, accessed August 26, 2026.
• KRS 271B.6-260(1)-(3) — board authorization of uncertificated shares, surrender, written information statement, and the separate public-benefit certificate legend. Official Kentucky LRC text, accessed August 26, 2026.