Capitalization - Issuance of Stock

Question 1

Issuance of Stock

Answer 1

Issuance of stock occurs when a corporation sells or trades its own stock to raise capital for the corporation. Here

Question 2

Stock Subscriptions

Answer 2

Subscriptions are written by officers to buy stock from a corporation. Pre-incorporation subscriptions are irrevocable for 6 months. Post-incorporation subscriptions are revocable up until acceptance. Acceptance is valid once approved by the board. Here,

Question 3

Stock Subscription - Consideration

Answer 3

The Board determines the value of consideration in good faith. Corporation must receive valid consideration in the form of 1) money, 2) tangible or intangible property, or 3) services already performed. In some states, promissory notes and future services are acceptable. Here,

Question 4

Par Value

Answer 4

Par means the minimum issuance price. Stock sold for less than par is “watered stock” and Directors are liable for the shortfall in value if they knowingly issued below par stock. Here,

Question 5

Treasury Stock

Answer 5

The corporation may repurchase shares from shareholders who voluntarily offer to sell their shares to the corp, however, shareholders cannot force the corp to repurchase their shares. Here,