§ 10A-2A-6.30 — Stockholders’ Preemptive Rights

Alabama § 10A-2A-6.30

• Jurisdiction: Alabama
• Title 10A: Alabama Business and Nonprofit Entities Code
• Ch. 2A: Alabama Business Corporation Law
• Art. 6: Stock and Distributions
• Div. C: Subsequent Acquisition of Stock by Stockholders and Corporation

Text

(a) The stockholders of a corporation do not have a preemptive right to acquire the corporation’s unissued stock except to the extent the certificate of incorporation so provides.
(b) A statement included in the certificate of incorporation that “the corporation elects to have preemptive rights” (or words of similar effect) means that the following principles apply except to the extent the certificate of incorporation expressly provides otherwise:
(1) The stockholders 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 stock upon the decision of the board of directors to issue them.
(2) A preemptive right may be waived by a stockholder. 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:
(i) stock issued as compensation to directors, officers, employees, or agents of the corporation, its subsidiaries, or affiliates;
(ii) stock issued to satisfy conversion or option rights created to provide compensation to directors, officers, employees, or agents of the corporation, its subsidiaries, or affiliates;
(iii) stock authorized in the certificate of incorporation that is issued within six months from the effective date of incorporation; or
(iv) stock sold otherwise than for cash.
(4) Holders of stock of any class or series without voting power but with preferential rights to distributions have no preemptive rights with respect to stock of any class or series.
(5) Holders of stock of any class or series with voting power but without preferential rights to distributions have no preemptive rights with respect to stock of any class or series with preferential rights to distributions unless the stock with preferential rights is convertible into or carry a right to subscribe for or acquire the stock without preferential rights.
(6) Stock subject to preemptive rights that is not acquired by stockholders may be issued to any person for a period of one year after being offered to stockholders 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 stockholders’ preemptive rights.
(c) For purposes of this section, “stock” includes a security convertible into or carrying a right to subscribe for or acquire stock.

Legislative History

(Act 2019-94, §1.)