§ 4-26-711 — Preemptive rights

(a) The term "preemptive rights", as used in this chapter, shall refer to the right, exercisable under the circumstances hereinafter set out, to purchase the shares or securities of a corporation. (b) The term "voting rights", as used in this section, shall mean the right, not dependent on the happening of an event specified in the articles of incorporation which would affect the voting rights of any class of stock, to vote for the election of one (1) or more directors. (c) (1) Unless otherwise provided in the articles of incorporation, the holders of the shares of any class, other than shares which are limited as to dividends and liquidation rights, in this section referred to as "such holders," shall have the right, during a reasonable time and on reasonable terms to be fixed by the directors, to purchase the shares or securities so offered in proportion to their then-respective holdings at a lawful price substantially no less favorable than the price at which such shares or securities are to be offered to others; upon the offering for sale for cash of: (A) Any shares that are either treasury shares or shares authorized to be issued of the same class as those held by such holders; or (B) Any shares that are either treasury shares or shares authorized to be issued, whether or not of the same class as those held by such holders, having voting rights or dividend rights which would adversely affect the voting rights or dividend rights of such holders; or (C) Any shares that are either treasury shares or shares authorized to be issued, notes, debentures, bonds, or other securities convertible into, or carrying options or warrants to purchase, shares coming within the description set out in subdivision (c)(1)(A) or (c)(1)(B) of this section. (2) However, unless otherwise provided in the articles of incorporation, there shall be no preemptive right to purchase: (A) Shares or other securities which are part of the shares or securities of the corporation authorized in the original articles of incorporation and are issued, sold, or optioned within two (2) years from the date of filing of the articles of incorporation; or (B) Shares or other securities to be issued for considerations other than money; or (C) Shares issued or to be issued to satisfy conversion rights or option rights theretofore lawfully granted by the corporation. (d) (1) The board of directors shall cause to be mailed by first class mail, which need not be registered or certified, to each shareholder of record entitled to purchase shares or securities in accordance with this section, a notice directed to him or her at his or her address as shown on the books of the corporation, setting forth the time within which and the terms and conditions under which the shareholder may purchase the shares or securities and also the apportionment made of the right to purchase among the shareholders entitled to preemptive rights. (2) The notice shall be mailed at least ten (10) days, or such longer period as may be prescribed by the board, prior to the expiration of the period during which the shareholder shall have the right to purchase. (3) All shareholders entitled to preemptive rights to whom notice shall have been mailed as aforesaid shall be deemed conclusively to have been given a reasonable time in which to exercise their preemptive rights; and upon the expiration of the time specified in the notice, the preemptive rights if not exercised shall expire. (e) Shares or securities subject to preemptive rights may be released from the preemptive rights on the vote or written consent of the holders of two-thirds (2/3) of the shares to which such rights attach. However, if shares or securities so released are not sold in one (1) year from the date of the release, the preemptive rights shall be reinstated.

Legislative History

Acts 1965, No. 576, § 27; A.S.A. 1947, § 64-212.