Under what condition is a Face Foundrie Area Developer exempt from maintaining stop-transfer instructions against the transfer of equity securities?
Face_Foundrie Franchise · 2025 FDDAnswer from 2025 FDD Document
9.3.3 Area Developer shall maintain stop-transfer instructions against the transfer on its records of any equity securities; and each stock certificate or issued securities of Area Developer shall conspicuously include upon its face a statement, in a form satisfactory to Franchisor, which references the transfer restrictions imposed by this Agreement; provided, however, that the requirements of this Section 9.3.3 shall not apply to a publicly held corporation.
8.4 Exception for Ownership in Public Entities.
Sections 8.2 and 8.3 hereof shall not apply to ownership by Area Developer of less than a five percent (5%) beneficial interest in the outstanding equity securities of any publicly held corporation.
As used in this Agreement, the term "publicly held corporation" refers to a corporation which has outstanding securities that have been registered under the federal Securities Exchange Act of 1934.
Source: Item 23 — RECEIPTS (FDD pages 74–257)
What This Means (2025 FDD)
According to Face Foundrie's 2025 Franchise Disclosure Document, an Area Developer is generally required to maintain stop-transfer instructions against the transfer of any equity securities. This means that the Area Developer must prevent the transfer of ownership in the company without the franchisor's consent. Additionally, each stock certificate or issued security must conspicuously include a statement referencing the transfer restrictions imposed by the Area Development Agreement.
However, this requirement does not apply if the Area Developer is a publicly held corporation. A publicly held corporation, as defined in the FDD, is a corporation with outstanding securities registered under the federal Securities Exchange Act of 1934.
For a prospective Face Foundrie Area Developer, this means that if the business is structured as a publicly held corporation, they will not need to maintain stop-transfer instructions or include transfer restriction statements on stock certificates. This exemption simplifies the process of transferring equity and provides more flexibility for publicly traded companies.