Corporate Stock-Transfer Restriction and Certificate-Legend Requirements in West Virginia
At a glance
| Governing law, security, holder, and scope | W. Va. Code §§ 31D-6-626 to -627 and 46-1-202, 46-8-204; ordinary domestic corporation; transfer/registration restrictions; holder, transferee, person, and registered owner; shares include convertible and subscription/acquisition-right securities |
|---|---|
| Authorized instrument, actor, and adoption | Articles, bylaws, agreement among shareholders, or agreement between shareholders and corporation; no separate adoption actor or filing step stated beyond earlier-share party/vote gate (§ 31D-6-627(a)) |
| Existing shares, holder consent, and effect | Earlier-issued share unaffected unless holder is restriction-agreement party or voted for restriction; no separate knowledge, other-consent, amendment, or renewed-assent route stated (§ 31D-6-627(a)) |
| Offer, purchase, consent, and prohibited-transferee terms | First offer; corporation/other-person acquisition obligation; corporation, class holders, or another person may approve if not manifestly unreasonable; designated-person/class prohibition if not manifestly unreasonable. No separate/consecutive/simultaneous sequencing text (§ 31D-6-627(d)) |
| Ownership cap, automatic transfer, tax, and regulatory routes | Shareholder-number/identity status and federal/state securities-exemption purposes authorized; no separate ownership cap, mandatory/automatic transfer, tax-attribute, or general regulatory-compliance route stated (§ 31D-6-627(c)) |
| Reasonableness, manifest unreasonableness, and public policy | Other purpose must be reasonable; approval requirement and designated-person/class prohibition must not be manifestly unreasonable (§ 31D-6-627(c)-(d)) |
| Certificate legend, uncertificated notice, and actual knowledge | Restriction's existence conspicuously on certificate or in § 31D-6-626(b) written statement sent within reasonable time; UCC separately requires certificate notation or registered-owner notification unless person has actual knowledge (§§ 46-1-202, 46-8-204) |
| Transferee, successor, fiduciary, and stated legal effect | Authorized, noticed restriction valid and enforceable against holder or holder's transferee; missing notice yields nonenforcement/ineffectiveness against person without actual knowledge. No separate successor/fiduciary class, void-transfer rule, or damages remedy stated |
| UCC, securities, public-company, valuation, and fiduciary boundaries | W. Va. Code § 46-8-204 independently governs issuer-restriction notice; preserving federal/state securities exemptions is authorized. Registration legends, public-company defenses, valuation, funding, fiduciary duties, and contract or litigation remedies remain outside scope |
Requirements one by one
Authorized records and earlier-issued shares
W. Va. Code § 31D-6-627(a) 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. The instrument and security must fit the statutory authorization, and earlier-issued shares remain subject to the separate party-or-vote gate.
Permitted purposes and forms
Section 31D-6-627(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 listed 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. Approval and designated-person terms must not be manifestly unreasonable (W. Va. Code § 31D-6-627(d)). Unlike many Model Act versions, the West Virginia text does not state that its offer and acquisition routes may operate separately, consecutively, or simultaneously.
The surveyed provision does not separately prescribe an ownership percentage cap, mandatory or automatic transfer, tax-attribute or general regulatory- compliance route, purchase price, valuation formula, funding method, or remedy.
Corporate and UCC notice rules align
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 written information statement for uncertificated shares. Without that notice, § 31D-6-627(b) says it is not enforceable against a person without knowledge.
W. Va. Code § 46-1-202 defines “knowledge” as actual knowledge. Section 46-8-204 likewise makes an issuer-imposed restriction ineffective against a person without actual knowledge unless a certificated security conspicuously notes the restriction or the registered owner of an uncertificated security was notified.
Unless the articles or bylaws provide otherwise, § 31D-6-626 lets the board authorize some or all classes or series without certificates. Existing certificates remain 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 later-person notice are separate gates. Party status or a favorable vote determines whether an after-adopted restriction affects an earlier-issued share. Certificate or registered-owner notice, and actual knowledge, determine effectiveness against a later person.
Do not add sequencing language that West Virginia omitted. The statute authorizes the listed offer and acquisition duties, but does not say they may operate separately, consecutively, or simultaneously. Those mechanics must come from the actual restriction and other applicable law.
The corporate notice is not a universal securities legend. Preserving a federal or state securities-law exemption is an authorized purpose. Restricted- securities notices, intermediary systems, transfer-agent procedure, and other UCC Article 8 rules remain separate.
Common questions
May a West Virginia restriction appear in the bylaws?
Yes. W. Va. Code § 31D-6-627(a) expressly names the bylaws, along with the articles and the two shareholder-agreement routes. The earlier-share party-or- vote rule still applies.
May West Virginia require the corporation to buy restricted shares?
Yes. Section 31D-6-627(d)(2) permits a restriction obligating the corporation or other people to acquire the shares. It does not set the trigger, price, valuation method, funding, sequencing, or remedy.
Does the statute reach convertible securities?
Yes. Section 31D-6-627(e) includes a security convertible into or carrying a right to subscribe for or acquire shares.
Can West Virginia shares be issued without certificates?
Yes, when the articles or bylaws do not provide otherwise. Section 31D-6-626 preserves existing certificates until surrender and requires the written information statement after an uncertificated issuance or transfer.
Statutes and sources
- W. Va. Code § 31D-6-627(a)-(b) — authorized records, earlier-share assent, certificate or information-statement notice, knowledge, and holder/transferee enforcement. Official West Virginia Code text, accessed August 26, 2026.
- W. Va. Code § 31D-6-627(c)-(e) — authorized purposes, enumerated forms, manifest-unreasonableness limits, and covered convertible or subscription- right securities. Official West Virginia Code text, accessed August 26, 2026.
- W. Va. Code § 31D-6-626 — board authorization of uncertificated shares, surrender of existing certificates, and the written information statement. Official West Virginia Code text, accessed August 26, 2026.
- W. Va. Code §§ 46-1-202 and 46-8-204 — actual knowledge and the UCC effectiveness rule for issuer-imposed restrictions on certificated and uncertificated securities. Official West Virginia Code § 46-8-204, accessed August 26, 2026.
Source links
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