Corp - Issuance of Stock Flashcards
Are pre-incorporation subscription agreements revocable by the purchaser? Post-incorporation subscription agreement?
Pre-incorporation - No once you agree to purchase they are irrevocable for six months unless the agreement says otherwise or all subscribers agree to let you revoke.
Post-incorporation - Yes, revocable until accepted by corporation.
When do the corporation and the subscriber become obligated under a subscription agreement?
When the board accepts the offer.
What must the corporation receive when it issues stock?
Must receive consideration
Form - “any tangible or intangible benefit to the corporation.”
Amount - In MA - adequate consideration is any amount that the board determines is adequate. [Determination is conclusive regarding validity of issuance.]
Board’s valuation is conclusive regarding adequacy and validity of issuance.
Who can be liable if the corporation fails to any consideration for issuing stock?
Director - if they knowingly authorized the issuance.
The Purchaser - NO DEFENSE, must pay for the issuance.
What is a pre-emptive right and when do they exist?
The right of an existing shareholder to maintain her percentage of ownership by buying stock whenever there is a “new issuance” of stock.
ARTICLES MUST PROVIDE FOR PRE-EMPTIVE RIGHTS.
