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| Home > Statutes > Usa Arizona |
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USA Statutes : arizona
Title : Corporations and Associations
Chapter : SHARES AND DISTRIBUTIONS
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10-601 Authorized shares
A. The articles of incorporation shall prescribe the classes of shares and the
number of shares of each class that the corporation is authorized to issue. If more than
one class of shares is authorized, the articles of incorporation shall prescribe a
distinguishing designation for each class, and before the issuance of shares of a class,
the preferences, limitations and relative rights of that class shall be described in the
articles of incorporation. All shares of a class shall have preferences, limitations and
relative rights identical to those other shares of the same class except to the extent
otherwise permitted by section 10-602.
B. The articles of incorporation shall authorize both of the following:
1. One or more classes of shares that together have unlimited voting rights.
2. One or more classes of shares, which may be the same class or classes as those
with voting rights, that together are entitled to receive the net assets of the
corporation on dissolution.
C. The articles of incorporation may authorize one or more classes of shares that:
1. Have special, conditional or limited voting rights or no right to vote, except
to the extent prohibited by chapters 1 through 17 of this title.
2. Are redeemable or convertible as specified in the articles of incorporation
either:
(a) At the option of the corporation, the shareholder or another person or on the
occurrence of a designated event.
(b) For cash, indebtedness, securities or other property.
(c) In a designated amount or in an amount determined in accordance with a
designated formula or by reference to extrinsic data or events.
3. Entitle the holders to distributions calculated in any manner, including
dividends that may be cumulative, noncumulative or partially cumulative.
4. Have preference over any other class of shares with respect to distributions,
including dividends and distributions on the dissolution of the corporation.
D. The description of the designations, preferences, limitations and relative
rights of share classes in subsection C of this section is not exhaustive.
10-602 Terms of class or series determined by board of directors
A. If the articles of incorporation so provide, the board of directors may
determine, in whole or in part, the preferences, limitations and relative rights, within
the limits set forth in section 10-601, of either:
1. Any class of shares before the issuance of any shares of that class.
2. One or more series within a class before the issuance of any shares of that
series.
B. Each series of a class shall be given a distinguishing designation.
C. Unless otherwise expressly permitted by chapters 1 through 17 of this title, all
shares of a series shall have preferences, limitations and relative rights identical to
those of other shares of the same series and, except to the extent otherwise provided in
the description of the series, with those of other series of the same class.
D. Before issuing any shares of a class or series created under this section, the
corporation shall deliver to the commission for filing a statement entitled "statement
pursuant to section 10-602", which constitutes an amendment to the articles of
incorporation and which is effective as provided in section 10-123 and without
shareholder action, that sets forth all of the following:
1. The name of the corporation.
2. The text of the resolution determining the terms of the class or series of
shares.
3. The date it was adopted.
4. A statement that the resolution was duly adopted by the board of directors.
10-603 Issued and outstanding shares
A. A corporation may issue the number of shares of each class or series authorized
by the articles of incorporation. Shares that are issued are outstanding shares until
they are reacquired, redeemed, converted or canceled.
B. The reacquisition, redemption or conversion of outstanding shares is subject to
the limitations of subsection C of this section and to section 10-640.
C. At all times that shares of the corporation are outstanding, one or more shares
that together have unlimited voting rights and one or more shares that together are
entitled to receive the net assets of the corporation on dissolution must be outstanding.
10-604 Fractional shares
A. A corporation may:
1. Issue certificates representing fractions of a share or pay in money the fair
value of fractions of a share as determined by the board of directors.
2. Arrange for the disposition of fractional shares by those entitled to the
fractional shares.
3. Issue scrip in registered or bearer form that is executed by the corporation,
which execution may be by facsimile signature, and that entitles the holder to receive a
full share on surrendering enough scrip to equal a full share.
B. Each certificate representing scrip must be conspicuously labeled "scrip" and
must contain the information required by section 10-625, subsection B.
C. A certificate representing fractions of a share entitles the holder to exercise
the rights of a shareholder, including the right to vote, to receive dividends and to
participate in the assets of the corporation on liquidation. The holder of scrip is not
entitled to exercise any rights of a shareholder unless otherwise provided for in the
scrip.
D. The board of directors may authorize the issuance of scrip subject to any
conditions that the board of directors deems advisable. The conditions may, but are not
required to, include any of the following:
1. That the scrip will become void if not exchanged for full shares before a
specified date.
2. That the shares for which the scrip is exchangeable may be sold by the
corporation and the proceeds may be paid or distributed to the holders of the scrip.
10-620 Subscription for shares
A. A subscription for shares entered into before incorporation is irrevocable by
the subscriber for a period of six months from the date of the subscription agreement,
unless the subscription agreement provides a longer or shorter period or all of the
subscribers agree to revocation.
B. The board of directors may determine the payment terms of subscriptions for
shares, unless the subscription agreement specifies them. Any call made by the board of
directors for payment on subscriptions shall be uniform as far as practicable as to all
shares of the same class or series, unless the subscription agreement specifies
otherwise.
C. Shares issued pursuant to subscriptions entered into before incorporation shall
be fully paid and nonassessable when the corporation receives the consideration specified
in the subscription agreement.
D. If a subscriber defaults in the payment of money or property when due under a
subscription agreement, the corporation may collect the amount due in the same manner as
any other debt. The subscription agreement may prescribe other penalties for failure to
pay installments or calls that may become due, except that no penalty working a
rescission or forfeiture of a subscription or of the amounts paid on a subscription may
be declared as against any subscriber unless the subscriber fails to cure the default
within twenty days after the corporation sends written notice of the default to the
subscriber at his last known address. Subject to the foregoing, the board of directors
may release, settle or compromise, on such terms and conditions as it deems appropriate,
any subscription for shares or any dispute or action arising out of a subscription for
shares, unless the subscription agreement provides otherwise.
E. A subscription for shares, whether entered into before or after incorporation,
is not enforceable unless it is in writing and signed by the party to be charged or his
agent.
10-621 Issuance of shares
A. The powers granted in this section to the board of directors may be reserved to
the shareholders by the articles of incorporation.
B. The board of directors may authorize shares to be issued for consideration
consisting of any tangible or intangible property or benefit to the corporation including
cash, services performed or other securities of the corporation, except that neither
promissory notes nor future services constitute valid consideration.
C. Before the corporation issues shares, the board of directors must determine that
the consideration received or to be received for shares to be issued is adequate. That
determination by the board of directors is conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares are validly
issued, fully paid and nonassessable.
D. When the corporation receives the consideration for which the board of directors
authorized the issuance of shares, the shares issued for the consideration are fully paid
and nonassessable.
10-622 Liability of subscribers and shareholders
A. A purchaser from a corporation of its own shares is not liable to the
corporation or its creditors with respect to the shares except to pay the full
consideration for which the shares were authorized to be issued pursuant to section
10-621 or specified in the subscription agreement pursuant to section 10-620.
B. A shareholder of a corporation is not personally liable for the acts or debts of
the corporation.
10-623 Share dividends
A. Unless the articles of incorporation provide otherwise, shares may be issued pro
rata without consideration to the corporation's shareholders or to the shareholders of
one or more classes or series. An issuance of shares under this subsection is a share
dividend.
B. Shares of one class or series may not be issued as a share dividend in respect
of shares of another class or series unless one of the following occurs:
1. The articles of incorporation so authorize.
2. A majority of the votes entitled to be cast by the class or series to be issued
approves the issue.
3. There are no outstanding shares of the class or series to be issued.
C. If the board of directors does not fix the record date for determining
shareholders entitled to a share dividend, it is the date the board of directors
authorizes the share dividend.
10-624 Share rights, options and warrants
A. Subject to any provisions set forth in its articles of incorporation, a
corporation may issue rights, options or warrants for the purchase of shares of the
corporation. These rights, options or warrants shall be evidenced in writing, and the
board of directors shall determine the terms on which the rights, options or warrants are
issued and their form and content. The consideration to be received for any shares on
the exercise of these rights, options or warrants is governed by section 10-621.
B. The articles of incorporation may provide that the issuance of rights, options
or warrants to directors, officers or employees of the corporation or any affiliate of
the directors, officers or employees shall be approved by the shareholders.
C. The rights, options or warrants may include provisions that adjust the terms of
the rights, options or warrants if there is an acquisition of shares, reorganization,
merger, consolidation, sale of assets or other occurrence.
10-625 Form and content of certificates
A. Shares may but need not be represented by certificates. Unless chapters 1
through 17 of this title or another statute expressly provides otherwise, the rights and
obligations of shareholders are identical whether or not their shares are represented by
certificates. A certificate shall not be issued for any share until such share is fully
paid.
B. At a minimum each share certificate shall state on its face all of the
following:
1. The name of the issuing corporation and that it is organized under the laws of
this state.
2. The name of the person to whom issued.
3. The number and class of shares and the designation of the series, if any, the
certificate represents.
C. If the issuing corporation is authorized to issue different classes of shares or
different series within a class, the designations, relative rights, preferences and
limitations applicable to each class and the variations in rights, preferences and
limitations determined for each series, and the authority of the board of directors to
determine variations for future series, shall be summarized on the front or back of each
certificate. Alternatively, each certificate may state conspicuously on its front or
back that the corporation will furnish this information to the shareholder on request in
writing and without charge.
D. Each share certificate:
1. Shall be signed either manually or in facsimile by one or more officers
designated in the bylaws or by the board of directors.
2. May bear the corporate seal or its facsimile.
E. If the person who signed either manually or in facsimile a share certificate no
longer holds office when the certificate is issued, the certificate is nevertheless
valid.
10-626 Shares without certificates
A. Unless the articles of incorporation or bylaws provide otherwise, the board of
directors of a corporation may authorize the issuance of some or all of the shares of any
or all of its classes or series without certificates. Notwithstanding such authorization
by the board of directors, every holder of uncertificated shares is entitled to receive a
certificate that complies with the requirements in section 10-625 and, if applicable,
section 10-627, on request to the corporation. The authorization does not affect shares
already represented by certificates until these certificates are surrendered to the
corporation.
B. Within a reasonable time after the issuance or transfer of shares without
certificates, the corporation shall send the shareholder a written statement of the
information required on certificates by section 10-625, subsections B and C, and, if
applicable, section 10-627.
10-627 Restriction on transfer of shares and other securities; definition
A. The articles of incorporation, the bylaws, an agreement among shareholders or an
agreement between shareholders and the corporation may impose restrictions on the
transfer or registration of transfer of shares of the corporation. A restriction does
not affect shares issued before the restriction was adopted unless the holders of the
shares are parties to the restriction agreement or voted in favor of the restriction.
B. A restriction on the transfer or registration of transfer of shares is valid and
enforceable against the holder or a transferee of the holder if the restriction is
authorized by this section and if its existence is noted conspicuously on the front or
back of the certificate or is contained in the information statement required by section
10-626, subsection B. Unless so noted, a restriction is not enforceable against a person
without knowledge of the restriction.
C. A restriction on the transfer or registration of transfer of shares is
authorized:
1. To maintain the corporation's status if it is dependent on the number or
identity of its shareholders.
2. To preserve exemptions under federal or state securities law.
3. For any other reasonable purpose.
D. A restriction on the transfer or registration of transfer of shares may:
1. Obligate the shareholder first to offer the corporation or other persons
separately, consecutively or simultaneously an opportunity to acquire the restricted
shares.
2. Obligate or permit the corporation or other persons separately, consecutively or
simultaneously to acquire the restricted shares.
3. Require the corporation, the holders of any class of its shares or another
person to approve the transfer of the restricted shares, if the requirement is not
manifestly unreasonable.
4. Prohibit the transfer of the restricted shares to designated persons or classes
of persons, if the prohibition is not manifestly unreasonable.
5. Impose any other restriction on transfer or registration that is not manifestly
unreasonable.
E. For purposes of this section, "shares" includes a security convertible into or
carrying a right to subscribe for or acquire shares.
10-628 Expense of issue
A corporation may pay the expenses of selling or underwriting its shares and of
organizing or reorganizing the corporation from the consideration received for shares.
10-629 Adjustment of terms of rights, options and warrants; conditions to exercise of rights, options and warrants
Rights, options and warrants may include provisions that adjust the terms of the
rights, options and warrants on the occurrence of one or more events, including
acquisition of shares, reorganization, merger, consolidation or sale of assets. Rights,
options and warrants may include conditions regarding the exercise of the rights, options
and warrants, including conditions that prevent the holder of a specified percentage of
the outstanding shares of the corporation, including subsequent transferees of the
holder, from exercising those rights, options and warrants.
10-630 Shareholders' preemptive rights; definition
A. The shareholders of a corporation do not have any preemptive right to acquire
the corporation's unissued shares except to the extent the articles of incorporation so
provide.
B. A statement included in the articles of incorporation that "the corporation
elects to have preemptive rights" or words of similar import means that the following
principles apply except to the extent the articles of incorporation expressly provide
otherwise:
1. The shareholders of the corporation have a preemptive right, granted on uniform
terms and conditions prescribed by the board of directors, to provide a fair and
reasonable opportunity to exercise the right to acquire proportional amounts of the
corporation's unissued shares on the decision of the board of directors to issue them.
2. A shareholder may waive his preemptive right. A waiver evidenced by a writing
is irrevocable even though it is not supported by consideration.
3. There is no preemptive right with respect to:
(a) Shares issued as compensation to directors, officers, agents or employees of
the corporation, its subsidiaries or its affiliates.
(b) Shares issued to satisfy conversion or option rights created to provide
compensation to directors, officers, agents or employees of the corporation, its
subsidiaries or its affiliates.
(c) Shares authorized in articles of incorporation that are issued within six
months from the effective date of incorporation.
(d) Shares issued in transactions for which shareholder approval is required by
chapters 1 through 17 of this title.
4. Holders of shares of any class without general voting rights but with
preferential rights to distributions or assets have no preemptive rights with respect to
shares of any class.
5. Holders of shares of any class with general voting rights but without
preferential rights to distributions or assets have no preemptive rights with respect to
shares of any class with preferential rights to distributions or assets unless the shares
with preferential rights are convertible into or carry a right to subscribe for or
acquire shares without preferential rights.
6. Shares that are subject to preemptive rights and that are not acquired by
shareholders may be issued to any person for a period of one year after being offered to
shareholders at a consideration set by the board of directors that is not lower than the
consideration set for the exercise of preemptive rights. An offer at a lower
consideration or after the expiration of one year is subject to the shareholders'
preemptive rights.
C. For purposes of this section, "shares" includes a security convertible into or
carrying a right to subscribe for or acquire shares.
10-631 Corporation's acquisition of its own shares
A. A corporation may acquire its own shares, and shares so acquired constitute
authorized but unissued shares.
B. If the articles of incorporation prohibit the reissue of acquired shares, the
number of authorized shares is reduced by the number of shares acquired, effective on
amendment of the articles of incorporation.
C. The board of directors may adopt a statement that is entitled "statement
pursuant to section 10-631", that constitutes an amendment to the articles of
incorporation, that is effective as provided in section 10-123 and that is effective
without shareholder action. The statement must set forth all of the following:
1. The name of the corporation.
2. The reduction in the number of authorized shares, itemized by class and series.
3. The total number of authorized shares, itemized by class and series, remaining
after reduction of the shares.
10-640 Distribution to shareholders
A. A board of directors may authorize and the corporation may make distributions to
its shareholders subject to restriction by the articles of incorporation and the
limitation in subsection C.
B. If the board of directors does not fix the record date for determining
shareholders entitled to a distribution, other than one involving any purchase,
redemption or other acquisition of the corporation's shares, it is the date the board of
directors authorizes the distribution.
C. A distribution shall not be made if, after giving it effect, either:
1. The corporation would not be able to pay its debts as they become due in the
usual course of business.
2. The corporation's total assets would be less than the sum of its total
liabilities plus, unless the articles of incorporation permit otherwise, the amount that
would be needed, if the corporation were to be dissolved at the time of the distribution,
to satisfy the preferential rights on dissolution of shareholders whose preferential
rights are superior to those receiving the distribution.
D. The board of directors may base a determination that a distribution is not
prohibited under subsection C either on financial statements prepared on the basis of
accounting practices and principles that are reasonable in the circumstances, which in
the absence of special circumstances shall be generally accepted accounting principles or
applicable regulatory accounting principles, or on a fair valuation or other method that
is reasonable in the circumstances.
E. Except as provided in subsection G, the effect of a distribution under
subsection C is measured:
1. In the case of distribution by purchase, redemption or other acquisition of the
corporation's shares, as of the earlier of either:
(a) The date money or other property is transferred or debt is incurred by the
corporation.
(b) The date the shareholder ceases to be a shareholder with respect to the
acquired shares.
2. In the case of any other distribution of indebtedness, as of the date the
indebtedness is distributed.
3. In all other cases, as of either:
(a) The date the distribution is authorized if the payment occurs within one
hundred twenty days after the date of authorization.
(b) The date the payment is made if it occurs more than one hundred twenty days
after the date of authorization.
F. A corporation's indebtedness to a shareholder incurred by reason of a
distribution made in accordance with this section is at parity with the corporation's
indebtedness to its general, unsecured creditors except to the extent subordinated by
agreement.
G. Indebtedness of a corporation, including indebtedness issued as a distribution,
is not considered a liability for purposes of determinations under subsection C if its
terms provide that payments of principal and interest are made only if and to the extent
that payment of a distribution to shareholders could then be made under this section. If
the indebtedness is issued as a distribution, each payment of principal or interest is
treated as a distribution, the effect of which is measured on the date the payment is
actually made.
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