November 10, 2023

Restricted stock is stock that can’t be sold into the public markets without first being registered with the SEC or satisfying an exemption to registration. SEC Rule 144 is the most well known of these exemptions, and if its requirements are met, then the transfer agent will remove the restricted legend on the stock and the stock can be sold into the public markets.

But what happens when a issuer refuses to permit the transfer agent to remove the restricted legend, even if the stockholder appears to satisfy all the requirements of Rule 144? This happens more often than one might think, especially when dealing with small-cap companies that have an adversarial relationship with the holder of the restricted stock.

In this short video, Schlam Stone & Dolan partner Joshua Wurtzel discusses how holders of restricted stock can deal with a reclacitrant issuer that attempts to hold a stockholder hostage by erroneously refusing to unrestrict its stock.