Can we turn our unrestricted common stock into restricted common stock?

Question

Currently 4 shareholders in a non-public California c-corp all own unrestricted common shares. To prevent us from selling of all or part of our shares to others, I'd like us to convert our shares to restricted. Is this possible?

Answer 1

Your stock is already restricted from public sale. You have to file papers with the SEC before you can make an initial public offering, and you'll have to convert your entire accounting system over to accrual and current GAAP, introduce restrictive internal controls and have your financials audited before you do. It's quite a transition.

The only way you could impose further restrictions on the other owners is at their agreement. But there's nothing preventing you from getting together and voting on a new capital structure and ownership agreement.

Answer 2

Contact a brokerage house, either on-line or by telephone. They should be able to answer that question.