Issuance of stock Flashcards
What is an issuance and what does it do?
when a CORP sells its OWN stock
raises capital for corporation
What is a subscription?
a written offer to BUY stock from corp
If S signs a subscription offering to buy shares of a corp not yet formed, can S revoke?
no, subscription is irrevocable for 6 months
Are post-incorporation subscriptions revocable?
YES, until accepted
At what point are the corporation and the subscriber obligated under a subscription agreement?
when the board of directors ACCEPTS the offer
What must the corp receive when it issues stock?
consideration
Form of consideration:
what is permitted in every state
for what forms of consideration is there a split (some states say OK and some prohibit, making it unpaid stock and treated as water)
permitted:
1) money (cash or check)
2) tangible or intangible property
3) services already performed for the corp
disputed
1) promissory notes
2) future services
Amount of consideration: what does “par” mean?
minimum issuance price
Amount of consideration: what does “no par” mean?
no minimum issuance price
board of directors sets a price
What is treasury stock?
stock the company issued then reacquired
it is considered authorized by unissued and the corp can then resell it
board of directors sets any issuance price it wants
Consideration: if corp issues stock in exchange for property or past services, who determines the value of the property or services? and is the valuation conclusive?
the board
conclusive if made in good faith
watered stock: corp issues shares of par stock to XC for less than par value… who is liable?
directors if knowingly authorized issuance
X (guy who bought stock); charged with notice of par value; there is no defense
not person X transfers stock to if did not know about water
What is a pre-emptive right?
the right of an existing SHAREHOLER to maintain her percentage of ownership by buying stock whenever there is a new issuance of stock FOR MONEY
Preemptive rights: does “new issuance” include treasury stock?
split- some states yes, some states no
Preemptive rights: if the articles of incorporation are silent, do we have preemptive rights?
split- some yes, some no
