§ 504 — Consideration and payment for shares

New York § 504

• Jurisdiction: New York
• Law BSC: Business Corporation
• Art. 5: Corporate Finance

Text

§ 504. Consideration and payment for shares.\n (a) Consideration for the issue of shares shall consist of money or\nother property, tangible or intangible; labor or services actually\nreceived by or performed for the corporation or for its benefit or in\nits formation or reorganization; a binding obligation to pay the\npurchase price or the subscription price in cash or other property; a\nbinding obligation to perform services having an agreed value; or a\ncombination thereof. In the absence of fraud in the transaction, the\njudgment of the board or shareholders, as the case may be, as to the\nvalue of the consideration received for shares shall be conclusive.\n (c) Shares with par value may be issued for such consideration, not\nless than the par value thereof, as is fixed from time to time by the\nboard.\n (d) Shares without par value may be issued for such consideration as\nis fixed from time to time by the board unless the certificate of\nincorporation reserves to the shareholders the right to fix the\nconsideration. If such right is reserved as to any shares, a vote of\nthe shareholders shall either fix the consideration to be received for\nthe shares or authorize the board to fix such consideration.\n (e) Treasury shares may be disposed of by a corporation on such terms\nand conditions as are fixed from time to time by the board.\n (f) Upon distribution of authorized but unissued shares to\nshareholders, that part of the surplus of a corporation which is\nconcurrently transferred to stated capital shall be the consideration\nfor the issue of such shares.\n (g) In the event of a conversion of bonds or shares into shares, or in\nthe event of an exchange of bonds or shares for shares, with or without\npar value, the consideration for the shares so issued in exchange or\nconversion shall be the sum of (1) either the principal sum of, and\naccrued interest on, the bonds so exchanged or converted, or the stated\ncapital then represented by the shares so exchanged or converted, plus\n(2) any additional consideration paid to the corporation for the new\nshares, plus (3) any stated capital not theretofore allocated to any\ndesignated class or series which is thereupon allocated to the new\nshares, plus (4) any surplus thereupon transferred to stated capital and\nallocated to the new shares.\n (h) Certificates for shares may not be issued until the amount of the\nconsideration therefor determined to be stated capital pursuant to\nsection 506 (Determination of stated capital) has been paid in the form\nof cash, services rendered, personal or real property or a combination\nthereof and consideration for the balance (if any) complying with\nparagraph (a) of this section has been provided, except as provided in\nparagraphs (e) and (f) of section 505 (Rights and options to purchase\nshares; issue of rights and options to directors, officers and\nemployees).\n (i) When the consideration for shares has been provided in compliance\nwith paragraph (h) of this section, the subscriber shall be entitled to\nall the rights and privileges of a holder of such shares and to a\ncertificate representing his shares, and such shares shall be fully paid\nand nonassessable.\n (j) Notwithstanding that such shares may be fully paid and\nnonassessable, the corporation may place in escrow shares issued for a\nbinding obligation to pay cash or other property or to perform future\nservices, or make other arrangements to restrict the transfer of the\nshares, and may credit distributions in respect of the shares against\nthe obligation, until the obligation is performed. If the obligation is\nnot performed in whole or in part, the corporation may pursue such\nremedies as are provided in the instrument evidencing the obligation or\na related agreement or under law.\n