Issuance of Stock

Question 1

Issuance

Answer 1

An issuance is when a corporation sells its own stock.

Question 2

Subscription

When are subscriptions revocable?

Answer 2

A subscription is an offer to buy stock. A subscription is irrevocable . . .

• For 6 months if it is a ​pre-incorporation subscriptions;
• Until it is accepted by the corporation.

Question 3

What consideration must a corporation recieve when it issues stock?

Answer 3

Anything tangible or intangible of benefit to the corporation.

Question 4

Par

Answer 4

Par means that a minimum issuance price applies to the stock.

Question 5

Treasure Stock

Answer 5

Treasury stock is stock that the corporation issued and later repurchased. The board may re-issue treasury stock at any issuance price.

Also called authorized but unissued stock

Question 6

Watered Stock

(Who is liable?)

Answer 6

Watered stock is par stock sold below its par value. The directors and the purchaser are liable to the shareholders for the “water.”

Question 7

Preemptive Right

Answer 7

A preemptive right exists only if created by the articles of incorporation. It entitles an existing shareholder to maintain her percentage share of ownership by buying stock whenever there is an issuance of stock for money.

⇒ If the issuance is for anything other than money, such as real property, then the preemptive right doesn’t apply.