Other legends: Overview, definition, and example
What are other legends?
"Other legends" is a term commonly used in legal and financial contexts, especially in relation to securities, stock certificates, and legal documents. A "legend" refers to a statement or notice that is placed on a document or certificate to provide certain restrictions, conditions, or important legal information. "Other legends" refers to additional statements or notations that are required or voluntarily included to address specific legal, regulatory, or contractual conditions that apply to the document or asset. These can include warnings, instructions, or disclosures that are not covered by standard legends but are important for compliance or transparency.
Why are other legends important?
Other legends are important because they ensure that all necessary legal or contractual information is communicated clearly to the parties involved. They can serve to inform or remind individuals of certain restrictions, conditions, or risks associated with an asset, such as the inability to transfer shares under certain circumstances or the need for additional approval. For example, in securities law, legends on stock certificates or digital records might inform buyers that the shares are restricted and cannot be sold without proper registration or exemption. Other legends can also highlight the rights and responsibilities of parties in a contract, preventing misunderstandings or legal disputes.
Understanding other legends through an example
Imagine a company issuing restricted stock to its employees as part of a compensation package. The stock certificates might bear a standard legend indicating that the stock cannot be sold without registration or exemption under securities laws. In addition to this standard legend, the company might include other legends on the certificates, such as a reminder of specific conditions for transfer or the rights of the company to repurchase the stock under certain circumstances.
In another example, a contract between two parties might include a legend stating that certain terms or clauses are confidential and cannot be disclosed without prior consent. The "other legend" would provide additional guidance, such as limitations on how the information should be handled, or special instructions on how disputes will be resolved.
Example of an other legends clause
Here’s how an "other legends" clause might appear in a securities agreement or document:
“In addition to the standard legends, the Securities are subject to the following additional legends: (i) ‘The Securities are subject to restrictions on transferability as set forth in the Securities Purchase Agreement,’ and (ii) ‘The holder of the Securities must obtain approval from the Company’s Board of Directors before transferring or selling the Securities to any third party.’ These additional legends are placed on the Securities to comply with applicable laws and agreements.”
Conclusion
"Other legends" are additional statements or notices placed on legal documents, certificates, or securities to provide important legal or regulatory information. These legends help to communicate restrictions, conditions, or special instructions that may not be addressed by standard legends, ensuring compliance and transparency in transactions. Whether in securities, contracts, or other legal documents, the use of other legends protects all parties by clearly outlining key conditions and obligations. Understanding and adhering to these legends is essential for avoiding legal issues and ensuring smooth compliance with applicable laws or agreements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.