Issuance of Stock Flashcards
Issuance of stock occurs only when…
a corporation sells its own stock. Not when stockholders trade between each other.
What consideration must the corporation receive when it issues stock?
Par value: minimum issuance price.
The price which at a minimum the corporation must receive in return for issuance of its own shares of stock.
Corporation can always receive ____ than par value, but not ____.
more; less
e.g. corporation x sells 1,000 shares for $5 each. Must receive at least $5,000 for the issuance of stock.
Does the consideration paid need to be money?
No. Any valid consideration, including property, can be received if the board values the consideration to be worth at least par value.
What does no par mean?
“no mimimum issuance price.”
Any valid consideration can be received, if deemed adequate by the board.
“At least any consideration, if deemed adequate by the board.”
No par stock (is/is not) valid in Virginia.
is
What is treasury stock?
Stock that was previously issued and has been re-acquired by the corporation. It can then be re-sold.
Is treasury stock deemed to be par value or no par stock?
no par stock.
What are the consequences of issuing par value stock for less than par value?
- Directors are liable personally for the authorizing it
- called illegal issuance
- directors must pay difference between par value and value sold
- Corporations can also collect the difference between par value and value sold from the buyer as well.
- Cannot sue both and double recover. Must sue either the buyers or directors.
What are preemptive rights?
The right of an existing shareholder to maintain her percentage of ownership by buying stock up to that percentage when there is a new issuance of stock for cash.
In VA, preemptive rights do not exist, unless…
they are granted in the articles. SO, if not in articles, no preemptive rights.
Remember this for exam.
