Corporate Stock-Transfer Restriction and Certificate-Legend Requirements in North Dakota

At a glance

Requirements one by one

Authorized written routes and earlier securities

N.D.C.C. § 10-19.1-70 permits a restriction in the articles, bylaws, a shareholder resolution, or an agreement or other written action by a number of shareholders or holders of other securities or among them and the corporation. An earlier-issued security is not bound unless its holder is a party to the agreement or voted for the restriction.

The provision reaches securities and transfer or registration of transfer. It does not separately authorize an ownership-amount restriction, and its text does not enumerate particular offer, purchase, consent, or prohibited- transferee forms.

Overall validity and reference legend

The written restriction must be not manifestly unreasonable under the circumstances. With the required notice, it is valid and specifically enforceable against the holder or a successor or transferee, including a pledgee or legal representative (N.D.C.C. § 10-19.1-70(2)).

The certificate need not reproduce the full restriction. Section 10-19.1-70 says the notation is conspicuous and effective when the certificate states that the restriction exists and refers to a separate record creating or describing it. For uncertificated shares, the information is sent through the § 10-19.1-66(6) route.

Without certificate or uncertificated-share notice, the restriction is ineffective against a person without knowledge. North Dakota's UCC defines “knowledge” as actual knowledge in § 41-01-10(2), and § 41-08-20 independently uses the conspicuous-certificate or registered-owner-notification rule for an issuer-imposed restriction.

Shareholder-control-agreement overlay

N.D.C.C. § 10-19.1-83 provides a separate control-agreement route. The agreement may address corporate affairs, liquidation and dissolution, or shareholder and subscriber relations and may include outsiders as parties. To use the statute's specific-enforcement route, every shareholder and subscriber at the agreement's initial effective date signs it. The agreement may itself allow nonunanimous amendment.

The agreement binds only its parties and other people with knowledge. A signed original must be filed with the corporation, while the existence and location of a copy must be conspicuously noted on each certificate and included in the uncertificated-share information. Shareholders, beneficial owners, and people with a security interest may demand a corporation-paid copy in writing.

When the agreement transfers authority and responsibility away from a person, § 10-19.1-83(4) relieves that person of the corresponding legal liability and places it on the person or people receiving the authority and responsibility. The section also says its procedure is not exclusive of otherwise valid agreements.

What trips people up

North Dakota uses an overall test, not a form menu. The statute requires a written restriction that is not manifestly unreasonable under the circumstances. It does not separately validate first offers, purchase duties, consent rights, ownership caps, automatic transfers, or tax purposes by name.

A reference legend can be enough. The certificate may state that a restriction exists and point to a separate record creating or describing it; the full restriction need not appear on the certificate.

The control agreement has its own knowledge rule. It binds its parties and other people with knowledge, rather than using the general restriction's holder-successor-transferee formula. Its authority shift can also move legal liability.

Common questions

May a North Dakota restriction be adopted by shareholder resolution?

Yes. Section 10-19.1-70(1) expressly names a resolution adopted by the shareholders, along with the articles, bylaws, and written agreement or action routes.

Does the statute list a right of first refusal?

No. Section 10-19.1-70 supplies a broad written-restriction rule and an overall not-manifestly-unreasonable test, but it does not enumerate offer, purchase, consent, or prohibited-transferee forms.

May the control agreement use nonunanimous amendment?

Yes. All then-shareholders and subscribers must sign when the agreement first becomes effective, but § 10-19.1-83(2) permits the agreement to provide for nonunanimous amendment.

Can North Dakota shares be uncertificated?

Yes, unless the articles or bylaws prohibit it. Section 10-19.1-66(6) preserves existing certificates until surrender and requires information to the new shareholder within a reasonable time after an uncertificated issuance or transfer, subject to its public-company electronic-system provision.

Statutes and sources

• N.D.C.C. § 10-19.1-70 — authorized written routes, earlier-security assent, overall validity test, certificate and uncertificated notice, reference legend, knowledge, and holder/successor/transferee effect. Official North Dakota Century Code text, accessed August 26, 2026.
• N.D.C.C. § 10-19.1-66(6) — uncertificated-share authorization, surrender, information, public-company electronic-system provision, and holder equivalence. Official North Dakota Century Code text, accessed August 26, 2026.
• N.D.C.C. § 10-19.1-83(1)-(3) — control-agreement scope, initial unanimity, nonunanimous-amendment option, parties and knowledge, filing, certificate and uncertificated notice, and copy demand. Official North Dakota Century Code text, accessed August 26, 2026.
• N.D.C.C. § 10-19.1-83(4)-(6) — authority-and-liability shift, nonvoter protection, and nonexclusive agreement route. Official North Dakota Century Code text, accessed August 26, 2026.
• N.D.C.C. § 41-01-10(2) — UCC actual knowledge. Official North Dakota Century Code text, accessed August 26, 2026.
• N.D.C.C. § 41-08-20 — UCC effectiveness rule for issuer-imposed restrictions on certificated and uncertificated securities. Official North Dakota Century Code text, accessed August 26, 2026.