Issuance of Stock (FP #2) Flashcards
What’s it called when corporation borrows money or raises stock?
Issuing a security
What is a debt security/bond?
Issuance by corporation when it borrows money from creditor
Debt obligations may be payable to __________ or ________.
Bond holder (bearer/coupon bond)
OR
owner registered on corporate records (registered bond)
What types of shares can corporation have?
1) authorized
2) issued and outstanding
3) authorized but unissued/treasury
What are equity securities?
Stock
What are authorized shares?
shares described in AofInc
What are issued and outstanding shares?
shares that’ve been sold
What are authorized but unissued shares (also called treasury shares)?
shares reacquired by corporation via repurchase or redemption
What are common shares?
shares that give holder equal ownership right
What is a share option?
right to purchase shares in future under terms predetermined by Board
What is an issuance of stock?
when corporation sells its stock
What are subscriptions?
written offers to but stock from a corporation
Per MBCA, pre-incorporation subscriptions are irrevocable for _____ UNLESS _____ or _____.
6 months unless otherwise provided in terms of subscription agreement or unless all subscribers consent to revocation
When is payment due for a pre-incorporation subscription?
Upon demand by Board
Post-incorporation subscriptions are revocable until _____.
Accepted by the corporation
What consideration required for corporation when stock issued?
Any tangible OR intangible property OR benefit to the corporation
What does “no par” mean?
No minimum issuance price
What is par value?
Minimum issuance price (traditional view)
What is watered stock?
Par value stock issued for less than par value
What is the MBCA approach to stock now?
Board determines value (i.e., whatever consideration they deem appropriate)
When is Board’s stock valuation conclusive?
When made in good faith
What is a preemptive right?
Right of existing shareholder of common stock to maintain ownership % whenever new issuance of stock for $ (money)
Preemptive rights must be ____.
Stated in Articles of Incorporation
Limitations on preemptive rights?
Shareholders usually have no preemptive rights if shares issued:
1) for non-cash consideration
2) within 6 mos. after incorporation
OR
3) without voting rights but having a distribution preference
