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

At a glance

Requirements one by one

Authorized records and earlier-issued shares

RCW 23B.06.270(1) permits a restriction in the articles of incorporation, the 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 (RCW 23B.06.270(5)). The actual instrument must fit that statutory wording.

Permitted purposes and forms

RCW 23B.06.270(3) 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 (RCW 23B.06.270(4)).

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 (RCW 23B.06.270(2)).

RCW 23B.06.260(1) lets the board approve 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 deliver a written statement containing the applicable restriction information (RCW 23B.06.260(2)).

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 (RCW 23B.06.270(1)-(2)).

Status and exemption authority do not themselves create a transfer mechanism. RCW 23B.06.270(3) authorizes those purposes, but the actual restriction must supply its ownership, trigger, acquisition, and transaction terms within the statute's limits.

The corporate notice is not a universal securities legend. Preserving a federal or state securities-law exemption is an authorized purpose. Federal and state restricted-securities notices, UCC Article 8, intermediary systems, and transfer-agent procedure remain separate.

Common questions

May a Washington restriction appear in the bylaws?

Yes. RCW 23B.06.270(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 Washington require the corporation to buy restricted shares?

Yes. RCW 23B.06.270(4)(b) 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. RCW 23B.06.270(5) includes a security convertible into or carrying a right to subscribe for or acquire shares.

Can Washington shares be issued without certificates?

Yes. RCW 23B.06.260 permits board approval 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 issuance or transfer.

Statutes and sources

• RCW 23B.06.270(1)-(2) — authorized records, earlier-share assent, conspicuous certificate or information-statement notice, knowledge, and holder/transferee enforcement. Official Washington Legislature text, accessed August 26, 2026.
• RCW 23B.06.270(3)-(5) — authorized purposes, enumerated forms, manifest-unreasonableness limits, and covered convertible or subscription- right securities. Official Washington Legislature text, accessed August 26, 2026.
• RCW 23B.06.260(1)-(2) — board approval of uncertificated shares, surrender of existing certificates, and the written information statement. Official Washington Legislature text, accessed August 26, 2026.