Tag: Transfer Restrictions

Court of Chancery Holds that Stockholder Was Not Bound by Stock Transfer Restrictions that Were Not Noted on Stock Certificates, Because Stockholder Did Not Have Actual Knowledge of Such Restrictions When He Acquired the Stock and Did Not Affirmatively Assent to Such Restrictions Thereafter

By Eric E. Freedman and H. Corinne Smith

In Henry v. Phixios Holdings, Inc., C.A. No. 12504-VCMR (Del. Ch. July 10, 2017), the Court of Chancery, interpreting Section 202 of the Delaware General Corporation Law,  found that a stockholder had not forfeited his shares by engaging in activities prohibited by stock transfer restrictions contained in a company stockholder agreement, because the restrictions were not printed on the stock certificate and the stockholder did not have actual knowledge of the restrictions at the time that he acquired the stock, and did not agree to the restrictions thereafter. The Court of Chancery therefore rejected the company’s assertions that the individual was a former stockholder rather than a current stockholder, and ordered the company to produce books and records requested by the individual in his capacity as a stockholder.

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