Issuance of Stock

Question 1

Subscription

Answer 1

A subscription is an offer to buy a corporation’s stock in exchange for valid consideration (in the form of cash, promissory notes, services or future services). If the subscription is preincorporation, it is irrevocable for six months.

If the subscription is post incorporation, it is revocable until accepted by the board.

Question 2

Par value

Answer 2

Par value is the minimum issuance price of stock. Stock will be “watered” if the stock is issued for less than its par value, in which case the corporation may recover from the directors if they knowingly authorized the watered stock issuance, or the purchaser.

Question 3

Preemptive Rights

Answer 3

A preemptive right is the right to maintain a percentage of ownership when there is new issuance of the stock for money [there is no preemptive right for stock issued for consideration other than cash, within six months after incorporation, or without voting rights but having a distribution preference. This right is stated in the articles of incorporation (or not).