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Introduction

Investors and founders may agree to restrictions preventing the transfer of shares to buyers deemed not to be aligned with the company’s mission. This provision goes beyond the traditional right of first refusal applicable to transfers, and flatly prohibits transfers to buyers who are not considered mission-aligned. The parties will likely want to agree on what standard the board will use to make this judgment.

Sample stock restriction language

No Stockholder may transfer any shares of the Company’s equity stock to any entity or person that, in the good faith determination of the Board, does not share the Company’s commitment to [describe purpose/ mission] OR [to operate pursuant to standards described in Exhibit X].

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