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Court Of Chancery Explains Stock Restriction Law

Henry v. Phixios Holdings Inc., C.A. No. 12504-VCMR (July 10, 2017)

This is the rare decision explaining when restrictions on stock transfers (permitted by Section 202 of the DGCL) can be enforced. While the statute seems clear enough, the real lesson from this decision is that it might be difficult to show a stockholder had advanced knowledge of restrictions that are not on the stock certificate when no other written notice exists. Without such advanced knowledge or later assent by the stockholder, the restrictions are not enforceable.

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