Stocks

Question 1

Are pre-incorporation stock subscriptions binding?

Answer 1

Stock subscriptions are generally irrevocable for six months unless otherwise specified in the subscription agreement.

Question 2

What is required of stock subscriptions?

Answer 2

They must be uniform as to all members of the stock class or series.

Question 3

Can a subscriber or shareholder transfer stock shares?

Answer 3

Stock shares are negotiable instruments and can be transfers by endorsement of the stock certificate.

Transfer can be restrained only if conspicuously noted on the stock certificate.

ROFRs for the corporation or other shareholders are permissible.

Question 4

What rights do shareholders have when new shares are being issued?

Answer 4

Many states require preemptive rights, especially for close corporations, which entitle shareholders purchase pro rate shares of any new stock issued in order to avoid dilution. Under the RMBCA, no preemptive rights exist unless specified in the articles of incorporation.

Question 5

What are authorized shares?

Answer 5

The number of shares permitted in the articles of incorporation.

Question 6

What are outstanding shares?

Answer 6

Outstanding shares are issued by the corporation to shareholders and not redeemed by the corporation.

Question 7

What are redeemed shares?

Answer 7

Redeemed shares are shares repurchased by the corporation and held in the treasury for reuse or cancelled permanently.