What statement must be conspicuously endorsed on each stock certificate of the transferee entity when transferring a Management Recruiters franchise?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
Each stock certificate must conspicuously state, in a form satisfactory to MRI, that it is held subject to all restrictions on assignments imposed by this Agreement; provided, however, that the requirements of this Section do not apply to the transfer of equity securities of a publicly held corporation.
For purposes of this Agreement, a publicly held corporation is a corporation registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or a corporation subject to the requirements of Section 15(d) of such Act.
Source: Item 23 — RECEIPTS (FDD pages 67–327)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, when transferring a franchise to another entity, each stock certificate of the new entity must conspicuously state that it is subject to all restrictions on assignments imposed by the Franchise Agreement. This statement must be in a form satisfactory to MRI.
This requirement ensures that any subsequent transfer or assignment of the stock is also subject to the same restrictions as the original franchise agreement. This protects Management Recruiters' interests by maintaining control over who can operate a franchise under their brand.
However, this requirement does not apply to the transfer of equity securities of a publicly held corporation, which is defined as a corporation registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or a corporation subject to the requirements of Section 15(d) of such Act. This exception acknowledges the different regulatory environment for publicly traded companies.