MO Corps: Issuance of Stock Flashcards
When Corporation sells own stock–requires
Consideration
Preemptive Rights
Consideration – what must the corporation receive when it issues stock?
Par value
acquiring property with par value stock
No par
Treasury stock
Par Value
means minimum issuance price
C. Corp is selling 10K shares of $3 par stock. It must receive at least?
at least $30K
Acquiring property with par value stock– Can C Corp issue 5,000 shares of $3 par stock to acquire Green AcreS?
Yes, any valid consideration can be received if Board values it in good faith at being at least par value. So yes, if GA worth $15K
No Par
NO minimum issuance price– Therefore any valid consideration can be received if deemed adequate by board.
Treasury stock
stock that was previously issued and had been reacquired by the corporation. IT can then be re-sold. It is deemed to be No par stock.
C Corp is selling $3 par treasury stock. It must receive at least:
any valid consideration deemed adequate by the board
Consequences of issuing par stock for less than par value
Directors are liable for authorizing the below par issuance
SH liable for the full consideration – par value at least
* at election of corp
Preemptive Rights
right of an existing SH to maintain her percentage of ownership by buying stock whenever there is a new issuance of stock for cash.
S owns 1000 shares of C corp. There are 5,000 shares outstanding (S owns 20%). C corp is planning to issue an additional 3,000 shares for cash. IF S has preemptive rights then S has the right to
Maintain her existing 20% ownership interest by buying up to 20% of those newly issued 3000 shares for cash – which would mean 600 shares (20% of 3000).
What if the articles of incorporation are silent or the bar exam question does not indicate whether the articles of S Corp price for preemptive rights?
Do not exist unless expressly granted in articles.
