Issuance of Stock

Question 1

How to establish and increase authorized shares?

Answer 1

Establish: in ARTICLES of incorporation (Maximum number of shares that directors of corp can sell)

Increase: need shareholder approval

Question 2

Issue shares

Answer 2

number of shares from authorized pool that directors have ACTUALLY SOLD

Question 3

Outstanding shares

Answer 3

Shares that were once issued to shareholders and still remain in their possession (NOT reissued to corp)

Question 4

Treasury shares

Answer 4

Shares issued to shareholders that have been REQACQUIRED by corp

Question 5

Which class of shares are voted?

Answer 5

Usually, ONLY OUTSTANDING SHARES

Question 6

Par value stock definition

Answer 6

When stock is issued at par value, a corp must sell shares for at least minimum par value amount

Question 7

Is par value typically used and required?

Answer 7

NOT typically required today

If it is, will likely be set at NOMINAL value

Question 8

Watered stock

Answer 8

Corporation sets par value amount and sells stock for LESS THAN stated amount

Question 9

Who is liable for watered stock?

Answer 9

SHAREHOLDERS who bought it below par value

Question 10

What consideration can be given to corporation?

Answer 10

ANY VALID CONSIDERATION that board of directors deems adequate

Question 11

Who has discretion to determine what consideration is appropriate?

Answer 11

DIRECTORS

Question 12

Stock subscriptions

Answer 12

Ask people to agree in advance to pay for stock BEFORE corp is formed

Question 13

For how long are stock subscriptions irrevocable?

Answer 13

Up to 6 MONTHS before incorporation

Question 14

Preemptive rights

Answer 14

Right to acquire stock to MAINTAIN YOUR PERCENTAGE OWNERSHIP any time new shares are issued

Question 15

Preemptive right default rule

Answer 15

Shareholders do NOT have preemptive rights UNLESS negotiated or included in articles