Issuance of Stock Flashcards
When does issuance of stock occur?
When a corporation issues its own stock to raise capital
When investors by stock what do they become?
Holders of equity security (not debt security like bonds or unsecured loan or debenture)
What is a subscription?
a signed offer to buy stock from the corporation.
Can a subscription pre incorporation be revoked?
You cannot revoke offer to buy for 3 months
Can a subscription post incorporation be revoked?
You can revoke until the corporation accepts. after this time you have an obligation to pay.
What happens if a subscriber defaults on payment?
1) if paid less than half and fails to pay rest within 30 days of demand, corporation can keep money and cancel shares
2) If paid half or more and fails to pay rest within 30 days of written demand, corporation must try sell stock to someone else for cash
3) Where someone new pays over and above what the defaulter paid they are entitled to this extra less the corporations expenses of selling.
What are the five permitted forms of consideration for an issuance?
1) Money, cash or checks
2) Tangible or intangible property
3) Services already performed for corporations
4) Binding obligation to pay money or property in future
5) Binding obligation to perform future services having agreed value
What does par no par mean?
Par means minimum issuance/sale price and no par means there is not minimum issuance price set by the board.
Again, what is treasury stock?
Stock issued by the corporation that has been reacquired by the corporation.
Can a corporation use property to acquire par value stock?
Yes but value has to reflect it.
What if stock is purchased for less than par value?
A corporation can buy it below par value but will be liable for the ‘water’. If insolvent can sue for the value of the water.
What are pre-emptive rights?
Right of an existing shareholder to maintain her percentage of ownership by buying stock whenever there is an issuance of common stock for money
What if the certificate doesn’t talk about pre-emptive rights?
You cannot get them, the rights are express
Are there pre-emptive rights attaching to sale of treasury stock and sale of shares authorized by the original certificate and sold w/in two years of incorporation?
Not unless the certificate expressly says.
