Effect of issuer's restriction on transfer

84-8-204. Effect of issuer's restriction on transfer. A restriction on transfer of a security imposed by the issuer, even if otherwise lawful, is ineffective against a person without knowledge of the restriction unless: (a) The security is certificated and the restriction is noted conspicuously on the security certificate; or (b) the security is uncertificated and the registered owner has been notified of the restriction. History: L. 1996, ch. 202, § 47; July 1. KANSAS COMMENT, 1996 This section is derived from the former 84-8-204 which has been redrafted to include provisions for restrictions on uncertificated securities. The section is identical to the Official Text except that Kansas has designated subsections with lower case letters rather than arabic numbers. Under this section, an issuer may impose restrictions on the transferability of certificated securities only if the restriction is noted conspicuously on the security. Any restriction on transfer must be lawful, and this section does not alter the prevailing law recognizing free alienability as an inherent attribute of securities and invalidating unreasonable restraints on alienation. As to when a restriction is "conspicuous," see 84-1-201(10). Even a nonconspicuous restriction is valid against a person with "actual knowledge" of it. Under the Code's definitions, the term "knowledge" means "actual knowledge." See 84-1-201(25)(c). The word "actual," apparently was added for emphasis. This is the only place in the entire Code other than the definition where the phrase "actual knowledge" appears. Restrictions on the transfer of uncertificated securities are effective if the person has knowledge of it, as provided in the introductory clause of the section, or if the registered owner has been notified of it, as provided in subsection (2), which of course, will give the registered owner knowledge of it. This section deals only with restrictions imposed by the issuer, and restrictions imposed by statute, such as the federal securities laws, are not affected. See DeWitt v. American Stock Transfer Co., 433 F. Supp. 994 (S.D.N.Y. 1977). Revisor's Note: Former section 84-8-204 was repealed by L. 1996, ch. 202, § 91 and the number reassigned to the current text.