§ 506 — Bonds and security interests

New York § 506

• Jurisdiction: New York
• Law NPC: Not-for-Profit Corporation
• Art. 5: Corporate Finance

Text

§ 506. Bonds and security interests.\n (a) No corporation shall issue bonds except for money or other\nproperty, tangible or intangible, or labor or services actually received\nby or performed for the corporation or for its benefit or in its\nformation or reorganization, or a combination thereof. In the absence of\nfraud in the transaction, the judgment of the board as to the value of\nthe consideration received by the corporation shall be conclusive.\n (b) A corporation may pay reasonable interest on its bonds, may issue\nits bonds at a reasonable discount and may pay a reasonable premium for\nthe redemption thereof prior to maturity, but the holders of its bonds\nshall not be entitled at any time to receive any part of the income or\nprofit of the corporation nor at maturity to receive more than the\nprincipal sum thereof plus interest due and accrued thereon. In the\nabsence of fraud in the transaction, the judgment of the board as to the\nreasonableness of any such interest, discount or premium shall be\nconclusive. However, with respect to bonds not a part of a public\noffering, notwithstanding the terms of the instrument, no member of a\ncorporation shall be entitled to receive, directly or indirectly, as a\nholder or beneficiary of such bond, prior to maturity or redemption,\nmore than simple interest thereon at a rate equal to the higher of (1)\nthe maximum interest authorized pursuant to section 5-501 of the general\nobligations law or (2) one percent over the prime rate of interest\ngenerally prevailing on the interest due date in the Federal Reserve\nDistrict of New York, nor at maturity or redemption, more than the\nprincipal sum thereof plus any interest, not exceeding the maximum\ninterest herein specified, due and accrued thereon.\n (c) A corporation may, in its certificate of incorporation or by-laws,\nconfer upon the holders of any bonds issued or to be issued by the\ncorporation, rights to inspect the corporate books and records and, upon\ndefault of interest or principal, to vote in the election of directors.\nThe certificate of incorporation or the by-laws may apportion the number\nof votes that may be cast with respect to bonds on the basis of the\namount of bonds held.\n (d) The board may authorize any mortgage or pledge of, or the creation\nof a security interest in, all or any part of the corporation's personal\nproperty, or any interest therein. Unless the certificate of\nincorporation provides otherwise, no vote or consent of the members\nshall be required to approve such action by the board.\n