§ 12:221 — Capital, surplus, allocation thereto, and increases and reductions thereof

§221. Capital, surplus, allocation thereto, and increases and reductions thereof
A. Upon initial issuance of par-value shares, that part of the
consideration received therefor which is equal to the par value thereof, plus
such additional part of such consideration as the board of directors or the
members may fix, shall be allocated to stated capital, and the remainder shall
be allocated to capital surplus. Upon initial issuance of shares without par
value, the consideration received therefor shall be allocated to stated capital,
except to the extent of such part of the consideration as may be allocated to
capital surplus by the board of directors or the members. If such shares
without par value have a preferential right to participate in the corporation's
assets in event of liquidation, only the excess of the consideration over the
aggregate amount payable to the holders thereof upon liquidation may be
allocated to capital surplus.
B. The board of directors may at any time transfer any amount from
earned surplus or capital surplus to stated capital in respect of any issued
shares or otherwise.
C. The board may at any time transfer from stated capital to capital
surplus any amount of net assets in excess of (1) the aggregate par value of the
issued shares having no preferential right to participate in the corporation's
assets in event of liquidation, plus (2) the greater of the aggregate par value of,
or the aggregate amount payable in liquidation on, any issued shares which
have a preferential right to participate in the assets in event of liquidation;
provided that only the members may transfer from stated capital any amount
allocated by them to stated capital.
D. Upon cancellation of shares, stated capital shall be reduced by an
amount equal to (1) the aggregate par value of such shares having par value,
and the aggregate allocated value of such shares without par value, plus (2) to
the extent of the price paid on purchase or redemption of such par-value shares
in excess of the par value thereof, any excess of the allocated value over the
par value thereof.
E. If there is no earned surplus, the board of directors may apply capital
surplus to the reduction or elimination of any deficit resulting from losses.
F. The board of directors may create and abolish reserves out of earned
surplus for any proper purposes. Earned surplus so reserved shall not be
available for purchase or redemption of shares, or transfer to capital surplus or
stated capital.
G. Stated capital, capital surplus and earned surplus shall respectively
be reduced by amounts applied therefrom to purchase or redemption of shares,
and by amounts transferred therefrom.
H. Following a merger into, or creation by consolidation of, a
corporation, such corporation's earned surplus shall not exceed the sum of the
earned surpluses of the merging or consolidating corporations, business
corporations and foreign corporations, as reduced by any distributions or
transfers therefrom in connection with the merger or consolidation.
I. Upon disposition of treasury shares acquired in whole or in part by
application of earned surplus, the amount so applied may be restored to earned
surplus to the extent of the consideration received upon such disposition.

Legislative History

Acts 1968, No. 105, §1.