stock transfer agent

Irrevocable Transfer Agent Instruction Letters: Critical Questions

Irrevocable Transfer Agent Instruction Letters: Critical Questions

Critical questions issuers should ask before agreeing to a convertible promissory note and irrevocable transfer agent letter.

Short on funding options from more traditional sources, many microcaps resort to convertible notes. In such transactions, the noteholder offers desperately needed capital in exchange for a Convertible Promissory Note. Accepting the funds, the issuer satisfies its immediate cash flow demands and survives to fight another day. But then it comes time to pay the piper.

Typically, once the note has “aged” in accordance with Rule 144, the debt can be converted into common stock at a steep discount and immediately sold in the marketplace (assuming all requirements of a Rule 144 resale has been met). The aggressive sale generally causes the stock price of the thinly traded microcap to drop, and each subsequent conversion request is computed at a lower stock price resulting in the issuance of more and more shares.

The stock price plummets, the float explodes, and the debt becomes harder and harder to pay off. It is the ultimate Death Spiral. It harms real investors. And yet, it is the only way some microcaps can obtain critical funding.

Some noteholders take advantage of a struggling issuer’s need for immediate funding….

Peace in the Storm: Reflections on Disaster Recovery

Peace in the Storm: Reflections on Disaster Recovery

Reflections on Disaster Recovery and Hurricane Irma written in September 2017.

First and foremost, we all must have a disaster recovery and business continuity plan. I might skip this statement as too obvious to bother writing, except the surreal reality is, not all agents are prepared. We intercepted a call, two days before Irma was to hit, from a Florida-based transfer agent without a plan. News of mandatory evacuations in your town is not the time to start thinking about this. If you do not have a disaster recovery plan, you must create it now.

Theoretically, a disaster recovery plan should contemplate all possible problems and prevent those problems from disrupting the business. But the truth is every disaster is defined as such because of the tremendous number of factors and outcomes that we can’t predict, control or prevent, and no particular list of tips on disaster recovery will ever be sufficient to encompass all that requires our attention. What’s more, there are as many disaster recovery plans as there are businesses in the world. No one-size-fits all solution will ever exist. The “unknowns” and “uncontrollables” far outweigh the “best practices.” Hence the potential for ulcer-inducing stress when a disaster actually strikes. But I’ve found a singular mantra of wisdom applies universally to all companies that can bring peace as we embrace uncertainty: communicate, clarify, practice, and know your limits.

This is the most of what we can do as business leaders. We must be proactive to…

Leveraging Legends to Enforce Investor Lockups

Leveraging Legends to Enforce Investor Lockups

How one simple step can protect your stock and save you thousands in legal fees.

Issuers of securities will sometimes require an investor to agree to a “lock up” or “leak out” provision that restricts or limits the public resale of shares for a certain period of time. This is very common among insiders and control persons, but can also be required of a non-affiliate investor. These special  restrictions serve many functions, chief among which is to prevent downward pressure on the stock caused by large shareholders attempting to sell their holdings at once, or to stabilize the stock price after an IPO or large liquidation event.

However, a signed lock-up agreement might not be enough. If the legend is not clearly printed on the share certificate or share statement, it might not be enforceable.

While issuers have long assumed that a signed lock-up agreement is sufficient to prove the current investor has actual knowledge of a restriction, this is still not enough to ensure a lock-up will be enforced. A key reason is that brokers and clearing firms will ultimately….

A Space that Speaks

A Space that Speaks

ClearTrust has moved! 

The importance and prominence of a disciplined work ethic is so deeply ingrained in this culture that it is expected families will employ at least one helper to care for family and home while both parents work full time jobs. A strong work force is critical to sustain this small-but-mighty country’s economy, and every worker matters. The life of a Singaporean is to be educated well, and then to work.

My Singaporean friend recently lamented to me, “I honestly don’t think work can be fulfilling.”

This is a deeply saddening statement when one considers how central and consuming work is to Singaporean life...