What is restricted stock and how is it used in my startup? So when a company wants to issue stock, wants to sell stock and either has to file the registration statement and register that stock pursuant to the Securities Act of 1933 or find an exemption, and when the company uses the exemption, it issues restricted stock, which basically means that the stock cannot be tradable until certain exemptions are met. And it usually will have a restricted legend on the back of that certificate that says that.
So, when a company sells stock to investors, if it's not an IPO, but it's not pursuant to a registration statement, it's restricted stock, which means that those investors can later sell that stock in the open market, provided that the stock is later registered or there's an exemption for registration.
0 Comments