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

At a glance

Requirements one by one

Authorized records and earlier-issued instruments

Mich. Comp. Laws § 450.1472(1) permits a restriction in the articles of incorporation, the bylaws, an agreement among any number of holders, or an agreement among the holders and the corporation. Unlike many state versions, Michigan expressly reaches both bonds and shares.

The same subsection does not bind an instrument issued before the restriction was adopted unless its holder is a party to an agreement or voted for the restriction. The surveyed provisions state no separate amendment or renewed-assent rule, so the actual instrument, agreement, vote, and adoption history remain necessary.

Permitted forms and the S-corporation purpose

Section 450.1473 lists a prior opportunity to acquire the instrument, a corporation or third-person purchase obligation, corporation or class-holder consent to a transfer, approval of the proposed transferee, and a prohibition involving designated people or classes. For the last form, the designation must not be contrary to public policy (§ 450.1473(a)-(d)).

Michigan also expressly permits a restriction used to maintain S-corporation status. The surveyed section does not separately state an ownership percentage cap, automatic transfer, another tax-attribute route, or a general securities- exemption or regulatory-compliance purpose (§ 450.1473(e)).

The statute does not supply a purchase price, valuation method, trigger, funding mechanism, or remedy for any permitted form. It also does not use the Model Act's manifest-unreasonableness wording for a consent restriction.

Instrument and uncertificated-share notice

A permitted written restriction may be enforced when it is conspicuously noted on the face or back of the instrument or on the information statement required for uncertificated shares. If that notation is missing, the restriction is ineffective except against a person with actual knowledge (§ 450.1472(2)).

Section 450.1336 lets the board authorize uncertificated shares unless the articles or bylaws provide otherwise. Existing certificated shares remain certificated until their certificates are surrendered, and the corporation must send the shareholder the required written statement within a reasonable time after issuance or transfer (§ 450.1336(1)-(2)).

Holder, successor, transferee, and fiduciary effect

With the required notation, Section 450.1472(2) permits enforcement against the holder, a successor or transferee, and a personal representative, administrator, trustee, guardian, or other fiduciary entrusted with responsibility for the holder or the holder's estate. The provision states enforcement or ineffectiveness; it does not provide a damages measure, injunction standard, valuation formula, or fiduciary-liability rule.

What trips people up

Michigan covers bonds as well as shares. Sections 450.1472 and 450.1473 repeatedly refer to both instruments. Section 450.1336's uncertificated route, however, is written for shares, so the form and notice record must be matched to the actual security.

Earlier-instrument assent and later-holder notice are separate. Party status or a favorable vote addresses a bond or share issued before adoption. Conspicuous instrument or information-statement notation, subject to actual knowledge, addresses enforcement against later people (§ 450.1472(1)-(2)).

The S-corporation clause is a purpose rule, not a complete tax or ownership mechanism. Section 450.1473(e) authorizes the purpose but does not write the ownership qualifications, transfer trigger, purchase price, tax analysis, or automatic-transfer terms.

Common questions

May a Michigan restriction appear in the bylaws?

Yes. Section 450.1472(1) expressly names the bylaws, along with the articles and the two holder-agreement routes. The earlier-instrument assent rule still applies to bonds or shares issued before adoption.

May Michigan require the corporation to buy restricted instruments?

Yes. Section 450.1473(b) permits a restriction obligating the corporation, a bond or share holder, another person, or a combination of them to purchase the covered instruments. The statute does not set price, valuation, funding, or remedy terms.

Does missing notation always defeat the restriction?

No. Section 450.1472(2) says an otherwise permitted restriction lacking the required conspicuous notation is ineffective except against a person with actual knowledge of it.

Can Michigan shares be issued without certificates?

Yes. Section 450.1336(1) permits board authorization unless the articles or bylaws provide otherwise. Existing certificates must be surrendered before the authorization affects those shares.

Statutes and sources

• Mich. Comp. Laws § 450.1472(1)-(2) — authorized instruments, earlier-issued bonds or shares, conspicuous notation, actual knowledge, and holder, successor, transferee, and fiduciary effect. Official Michigan Legislature text, accessed August 26, 2026.
• Mich. Comp. Laws § 450.1473(a)-(e) — offer, purchase, consent, transferee-approval, designated-person, public-policy, and S-corporation routes. Official Michigan Legislature text, accessed August 26, 2026.
• Mich. Comp. Laws § 450.1336(1)-(2) — board authorization of uncertificated shares, certificate surrender, and the shareholder information statement. Official Michigan Legislature text, accessed August 26, 2026.