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

At a glance

Requirements one by one

Authorized records and earlier-issued shares

Tenn. Code Ann. § 48-16-208(a) permits a restriction in the charter, 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” also includes a security convertible into or carrying a right to subscribe for or acquire shares (§ 48-16-208(e)). The actual instrument must fit that statutory wording.

Permitted purposes and forms

Section 48-16-208(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 permitted forms are 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 (§ 48-16-208(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 (§ 48-16-208(b)).

Section 48-16-207(a) lets the board authorize uncertificated shares unless the charter or bylaws provide otherwise. Existing certificated shares remain in that form until surrendered. Within a reasonable time after issuing or transferring an uncertificated restricted share, the corporation must send the shareholder a written statement containing the applicable restriction information (§ 48-16-207(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 (§ 48-16-208(a)-(b)).

The public-reporting exception does not excuse restriction notice. Section 48-16-207(b) excuses the written statement for an Exchange Act § 13 reporting issuer only when the shares are not subject to a Section 48-16-208 transfer restriction. A restricted uncertificated share remains outside that exception.

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 a Tennessee restriction appear in the bylaws?

Yes. Section 48-16-208(a) expressly names the bylaws, along with the charter and the two shareholder-agreement routes. The earlier-share party-or-vote rule still applies.

May Tennessee require the corporation to buy restricted shares?

Yes. Section 48-16-208(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 48-16-208(e) includes a security convertible into or carrying a right to subscribe for or acquire shares.

Can Tennessee shares be issued without certificates?

Yes. Section 48-16-207 permits board authorization unless the charter or bylaws provide otherwise, requires surrender before the change affects existing certificated shares, and generally requires the written information statement after an uncertificated issue or transfer.

Statutes and sources

• Tenn. Code Ann. § 48-16-208(a)-(b) — authorized records, earlier-share assent, conspicuous certificate or information-statement notice, knowledge, and holder/transferee enforcement. Tennessee Code Commission authorized Title 48 text, accessed August 26, 2026.
• Tenn. Code Ann. § 48-16-208(c)-(e) — authorized purposes, enumerated forms, manifest-unreasonableness limits, and covered convertible or subscription-right securities. Tennessee Code Commission authorized Title 48 text, accessed August 26, 2026.
• Tenn. Code Ann. § 48-16-207(a)-(b) — board authorization of uncertificated shares, surrender of existing certificates, written information statement, and the public-reporting-company exception. Tennessee Code Commission authorized Title 48 text, accessed August 26, 2026.