Draft the stock transfer restriction agreement

The stock transfer restriction agreement (also called a continuity agreement or shareholder agreement) pre-wires what happens to the professional entity’s equity when the clinician-owner dies, becomes disabled, loses their license, is excluded, or leaves. It is what makes the PC durable across changes in the individual owner, and it is the provision current legislation and enforcement most directly target. This is the document most affected by recent law. Oregon’s SB 951 restricts share-transfer arrangements as part of its MSO control provisions, and California’s Attorney General has attacked friendly-PC stock-transfer and MSA-termination provisions in litigation.¹ Draft against current law in each state you operate in, with counsel, and expect to revisit.

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Prerequisites

• The professional entity formed and shares issued
• The clinician-owner represented by independent counsel
• Healthcare counsel licensed in the state
• At least one identified successor candidate

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The core provisions

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1. Transfer prohibition

The baseline: the owner may not sell, pledge, assign, or otherwise transfer the equity except as the agreement permits. This is what makes everything else operative. Also prohibit involuntary transfers — by operation of law, on divorce, on bankruptcy — to the extent state law allows.

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2. Triggering events

Define precisely. Vague triggers produce disputes at exactly the moment you cannot afford one.

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3. The transfer mechanism

On a trigger, the equity transfers to a successor. Two approaches: If the MSO holds the designation right, you have created a mechanism by which a lay entity selects who owns the professional entity. That is precisely the control indicator recent statutes address. Consider vesting the right in the PC’s board, in a clinical committee, or in a named licensee, and take the drafting to counsel in each state.

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4. Price

Typically nominal, the original purchase price, or a stated small amount. The rationale is that the clinician did not capitalize the enterprise and the PC’s residual value is near zero by design. This is defensible when it reflects reality, and indefensible when the PC has genuine accumulated value the owner is being stripped of. If your PC has real retained earnings, a nominal-price transfer is harder to justify, which is another reason a well-run PC runs near break-even. See Where the profit lives.

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5. Closing mechanics

• Time period from trigger to closing
• Documents each party must deliver
• A power of attorney or an escrowed transfer instrument so the transfer can complete if the owner or their estate does not cooperate

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6. Enforceability against transferees

• A restrictive legend on the stock certificate (PC) or equivalent provision in the operating agreement (PLLC)
• Notation in the stock ledger
• Confirmation that the mechanism actually works under the state’s corporate or LLC act

Without the legend, a transferee can argue they took the shares free of the restriction.

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7. Spousal consent

In community property states, a spouse may have an interest in the shares. A spousal consent executed at the same time addresses it.

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8. Successor obligations

The successor takes the shares subject to the same agreement, and must sign a joinder. Otherwise the restriction dies with the first transfer.

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Steps

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Verify it worked

• Executed for every professional entity
• Triggers defined precisely, disability determination specified
• Successor mechanism specified and constrained
• Price stated with a rationale
• Restrictive legend on certificates; stock ledger noted
• Spousal consent where applicable
• Successor joinder required
• Clinician’s independent counsel reviewed
• Reviewed against current state law within the last 12 months

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Common failure modes

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Sources

1. Or. S.B. 951 (2025), Enrolled bill; DLA Piper, Corporate practice of medicine enforcement: New pressure points (July 2026).
2. Allstate Insurance Co. v. Northfield Medical Center, P.C., 228 N.J. 596, 159 A.3d 412 (2017). Opinion.