Issuance of Stock Flashcards
Issuance of Stock
Debt Securities
Corp borrows money (bonds) –> person holding bond is a creditor
Issuance of Stock
Equity Securities
Corp sells owernship interests (stock) –> perosn holding stock is an owner of corp, not a creditor.
Issuance of Stock
Authorized Shares v. Issued/Outstanding Stock v. Authorized but Unissued
Authorized shares are in the AOI and are how many shares a corp is able to issue.
Issued/Outstanding stock are the shares that have been sold.
Authorized but unissued are shares that that have been reqacquired by the corporation through repurchase or redemption.
Issuance of Stock
Classifications of Shares
Common Shares - Corp chooses to issue only one type of share, giving each shareholder an equal ownership right.
Classes - Corp may choose to divided shares into classes that give varied ownership rights. This must be done in the Articles of Incorporation.
Issuance of Stock
Issuance
Corp sells its own stock –> Rules apply when teh corp is selling its own stock
Issuance of Stock
Subscriptions
Subscriptions are written offers to buy stock from a corporation. One issuance may be whether such an offer may be revoked.
Issuance of Stock
Preincorporation Subscriptions
Irrevocable for 6 months unless otherwise provided in terms or all subscribers consent.
Issuance of Stock
Postincorporation Subscription
Revocable at any time until accepted by the corporation –> i.e., when the BOD accepts the offer.
Issuance of Stock
Consideration
Form: Any tangible or intangible property or benefit to corp. Includes services already performed for the corp.
Issuance of Stock
Amount of Consideration - Par
Par is the minimum issuance price.
Stock can not be issued by a corporation for less than the stock’s stated par value, and the consideration received for par value stock had to be held in a certain account containing at least teh aggreegate par value of the outstanding par value shares.
Correspondingly, no par means no minimum issuance price. That means the board can have the stock issued for any price it sets.
Issuance of Stock
Watered Stock
Watered stock = stock issued for less than par value
Issuance of Stock
Treasury Stock
Stock the corp issued and then rqcquired. It is considered authorized and corp can then resell it.
Issuance of Stock
Determining Value of Consideration for property and past services
BOD determines value of consideration for proeprty or past services –> BOD’s valuation is conclusive if made in good faith.
Issuance of Stock
Preemptive Rights
Right of existing shareholder to maintain percentage of ownership by buying stock if there is a new issuance of stock FOR MONEY –> cash or check.
Prevent Dilution
Preemptive rights MUST be stated in Articles.
