How to Amend Articles of Incorporation to Restrict Stock

By David Carnes

Restricted stock is a type of corporate stock that is characterized by restrictions on the owner’s ability to transfer it to another party. It is often offered by corporations to their employees as part of their benefits package, although its use is not limited to this purpose. Before a corporation is legally entitled to issue a new type of stock, however, it must amend its Articles of Incorporation. Amending the Articles of Incorporation requires prior authorization and compliance with appropriate procedures.

Restricted stock is a type of corporate stock that is characterized by restrictions on the owner’s ability to transfer it to another party. It is often offered by corporations to their employees as part of their benefits package, although its use is not limited to this purpose. Before a corporation is legally entitled to issue a new type of stock, however, it must amend its Articles of Incorporation. Amending the Articles of Incorporation requires prior authorization and compliance with appropriate procedures.

Step 1

Obtain the form required by your state to amend the Articles of Incorporation. These forms are often fill-in-the blank.

Ready to incorporate your business? Get Started Now

Step 2

Complete the form by filling in necessary identification information and drafting an amendment to the company’s Articles of Incorporation creating restricted stock. Required information is likely to include the number of shares authorized, their par value (normally a nominal amount such as one dollar), and a description of the specific restrictions of the stock. If you intend to use restricted stock as compensation, for example, you might restrict the transfer of the stock until the employee has completed a certain number of years of service or until the company reaches certain financial targets. Leave the form unsigned for the moment.

Step 3

Examine company bylaws concerning voting requirements. Even if state law allows a resolution to amend Articles of Incorporation to pass with a simple majority vote, company bylaws may require a supermajority of 2/3 or 3/4. The bylaws may also require shareholder approval.

Step 4

Call a Board of Directors meeting and introduce a resolution to amend the Articles of Incorporation consistent with the draft amendment. Have each director to review the amendment form.

Step 5

Vote on the resolution to amend the company’s Articles of Incorporation in a manner consistent with the amendment form.

Step 6

Draft a written corporate resolution authorizing amendment of the Articles of Incorporation and have each director who voted in favor of the resolution sign it, along with the Chairman of the Board. This resolution functions as a written record of the Board of Directors' vote. File the resolution in the corporate records.

Step 7

Sign the amendment form if you are authorized to do so. Otherwise, have an authorized company representative sign it.

Step 8

File the amendment with the state government office that accepted the company’s original Articles of Incorporation. You may have to pay a filing fee. You will receive a stamped copy of the amendment as evidence of your filing.

Step 9

Attach the state-stamped amendment to the company’s original Articles of Incorporation and keep them together in the company records. These two documents together are legal evidence of the corporation’s amended Articles of Incorporation.

Ready to incorporate your business? Get Started Now
How to Amend and Restate a Certificate of Incorporation in Delaware

References

Related articles

How to Amend a Constitution & Bylaws of a Corporation

Corporations are independent legal business entities that operate subject to a series of rules. While corporations do not have a constitution, they have articles of incorporation and bylaws. These sets of rules define how the corporation is to be run and the different roles of the shareholders, directors and corporate officers. However, business circumstances may change, requiring a corporation’s rules to be amended.

How to Change Articles of Incorporation

Articles of incorporation is the official document that forms a corporation. The articles are usually filed in the office of the secretary of state where the corporation is formed. This document establishes the corporation’s official name and generally recites the purpose for which it is being formed, its duration, number of shares of stock allocated, as well as the names of the initial board of directors and registered agent, and the incorporator’s names and addresses. When the name of the corporation is changed, its registered agent replaced or other pertinent revisions occur, an amendment is filed with the secretary of state to reflect those changes.

Procedure for Changing Bylaws

Whether your company is for-profit or a nonprofit, chances are there will come a time when you will want to amend its bylaws, the internal guidelines and procedures that govern its operation. Following the proper amendment procedures is essential to adopting and later enforcing changes to this important corporate document.

LLCs, Corporations, Patents, Attorney Help

Related articles

How to Remove an Officer From Articles of Incorporation

A corporation is organized under state law by filing articles of incorporation that specifically conform to the state's ...

How to Maintain Corporation Records in Florida

Once the Florida Secretary of State accepts your articles of incorporation, your corporation is officially created. A ...

How to Amend a Corporation

Ideally, businesses should be set up so they don’t change very often since changing a business’s structure ...

How to Change the Nature of Business for a Corporation

A corporation is an independent legal entity that is formed under state law and managed by a board of directors. ...

Browse by category