§ 6.02. Determination of Terms of Class or Series (a) The number of authorized shares of any class or series, the distinguishing designation thereof and the preferences, limitations and relative rights applicable thereto shall be set forth in the articles of organization or any amendment thereto approved by the shareholders or, if the articles of organization so permit, by the board of directors, provided that the board of directors may not approve an aggregate number of authorized shares of all classes and series which exceeds the total number of authorized shares specified in the articles of organization approved by the shareholders. Any such action with respect to any class or series may be amended or rescinded by the shareholders or, if initially taken by it, by the board of directors at any time prior to, but, except as provided in the next following subsection with respect to unissued shares, not after, the initial issuance of shares of such class or series.
(b) At any time after the initial issuance of shares of any class or series the shareholders or, if the articles of organization so permit, the board of directors may reclassify any unissued shares of the class or series into 1 or more existing or new classes or series.
(c) Before issuing any shares of a class or series, the number, preferences, limitations or relative rights of which have been determined by the board of directors, the corporation must deliver to the secretary of state for filing articles of amendment, which are effective without shareholder action, that set forth:
(4) a statement that the amendment was duly adopted by the board of directors.
(d) If the shareholders or board of directors shall, before the issuance of any shares of any class or series of which the number, preferences, limitations or relative rights are contained in articles of amendment filed with the secretary of state pursuant to subsection (c), amend or rescind any terms applicable to such class or series, or if the shareholders or board of directors shall reclassify any unissued shares of any class or series pursuant to subsection (b), the corporation shall deliver to the secretary of state for filing articles of amendment, which in the case of any amendment effected by the board of directors are effective without shareholder action, reflecting such amendment, recision or reclassification and setting forth the information required by clauses (1) and (4) of subsection (c) and, in the case of an amendment, the text of the amendment or, in the case of a reclassification, the number and existing class or series of the shares to be reclassified and the text of the amendment determining the terms of any new class or classes or series into which the shares are to be reclassified.
§ 6.03. Issued and Outstanding Shares (a) A corporation may issue the number of shares of each class or series authorized by the articles of organization. Shares that are issued are outstanding shares until they are reacquired, redeemed, converted or canceled.
(b) The reacquisition, redemption or conversion of outstanding shares is subject to the limitations of subsection (c) and to section 6.40.
(c) At all times that shares of the corporation are outstanding, 1 or more shares that together have unlimited voting rights and 1 or more shares that together are entitled to receive the net assets of the corporation upon dissolution shall be outstanding.
§ 6.04. Fractional Shares (a) A corporation may:
(1) issue fractions of a share or pay in money or property the value of fractions of a share;
(2) arrange for disposition of fractional shares by the shareholders;
(3) issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share.
(b) Each certificate representing scrip must be conspicuously labeled "scrip" and must contain the information required by subsection (b) of section 6.25.
(c) The holder of a fractional share is entitled to exercise the rights of a shareholder, including the right to vote, to receive dividends, and to participate in the assets of the corporation upon liquidation. The holder of scrip is not entitled to any of these rights unless the scrip provides for them.
(d) The board of directors may authorize the issuance of scrip subject to any condition considered desirable, including:
(1) that the scrip will become void if not exchanged for full shares before a specified date; and
(2) that the shares for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders.
PART B. ISSUANCE OF SHARES
§ 6.20. Subscription for Shares Before Incorporation (a) A subscription for shares entered into before incorporation is irrevocable for 6 months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation or extension. The subscription agreement shall not be binding on the corporation until it is accepted by the board of directors.
(b) The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors shall be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise.
(c) Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement.
(d) If a subscriber defaults in payment of money or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the shares if the debt remains unpaid more than 20 days after the corporation sends written demand for payment to the subscriber. The rescission shall not affect the status of any shares theretofore issued pursuant thereto.
(e) A subscription agreement entered into after incorporation is a contract between the subscriber and the corporation subject to section 6.21.
§ 6.21. Issuance of Shares (a) The powers granted in this section to the board of directors may be reserved to the shareholders, either exclusively or concurrently with the powers of the directors, by the articles of organization.
(b) The board of directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation.
(c) Before the corporation issues shares, the board of directors must determine that the consideration received or to be received for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid, and nonassessable.
(d) The articles of organization may limit the type or specify the minimum amount of consideration for which the shares of any class or series may be issued. A reference in the articles of organization to par value shall not, by itself, be deemed to be a specification of the minimum amount.
(e) Notwithstanding subsection (d), when the corporation receives the consideration for which the board of directors authorized the issuance of shares, the shares issued therefor are fully paid and nonassessable.
(f) The corporation may place in escrow shares issued for a contract for future services or benefits or a promissory note, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against their purchase price, until the services are performed, the note is paid, or the benefits received. If the services are not performed, the note is not paid when due, or the benefits are not received, the shares escrowed or restricted and the distributions credited may be canceled in whole or part.
§ 6.22. Liability of Shareholders (a) A purchaser from a corporation of its own shares is not liable to the corporation or its creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued or specified in the subscription agreement.
(b) Unless otherwise provided in the articles of organization, a shareholder of a corporation shall not be personally liable for the acts or debts of the corporation except that he may become personally liable by reason of his own acts or conduct.
§ 6.23. Share Dividends (a) Unless the articles of organization provide otherwise, shares may be issued pro rata and without consideration to the corporation's shareholders or to the shareholders of 1 or more classes or series. An issuance of shares under this subsection is a share dividend.
(b) Shares of 1 class or series shall not be issued as a share dividend in respect of shares of another class or series unless: (1) authorized by the articles of organization; (2) the holders of a majority of the outstanding shares of the class or series to be issued approve the issue; or (3) there are no outstanding shares of the class or series to be issued. In addition, shares of a class or series having preference over another class or series with respect to distributions, including dividends and distributions upon the dissolution of the corporation, shall not be issued as a share dividend in respect of shares of such other class or series if there are at the time any outstanding shares of any third class or series as to which the shares then to be issued have a right with respect to a distribution which is prior, superior or substantially equal unless: (1) authorized by the articles of organization; or (2) the holders of a majority of the outstanding shares of such third class or series approve the issue.
(c) If the board of directors does not fix the record date for determining shareholders entitled to a share dividend, it is the date the board of directors authorized the share dividend.
§ 6.24. Share Options (a) A corporation may issue rights, options or warrants for the purchase of shares or other securities of the corporation. The board of directors shall determine the terms upon which the rights, options, or warrants are issued and the terms, including the consideration, for which the shares or other securities are to be issued.
(b) The terms and conditions of such rights, options or warrants, including those outstanding on the effective date of the chapter, may include without limitation, restrictions or conditions that:
(1) preclude or limit the exercise, transfer or receipt of the rights, options or warrants by any person owning or offering to acquire a specified number or percentage of the outstanding shares or other securities of the corporation or by any transferee of any person, or that preclude or limit the exercise, transfer or receipt based on such other factors, including the nature or identity of such persons, as the directors determine to be reasonable and in the best interests of the corporation, or
(2) invalidate or void such rights, options or warrants held by any such person or persons or any such transferee or transferees.
§ 6.25. Form and Content of Certificates (a) Shares may but need not be represented by certificates. Unless this chapter or another statute expressly provides otherwise, the rights and obligations of shareholders are identical whether or not their shares are represented by certificates.
(b) At a minimum each share certificate shall state on its face:
(1) the name of the issuing corporation and that it is organized under the laws of the commonwealth;
(2) the name of the person to whom issued; and
(3) the number and class of shares and the designation of the series, if any, the certificate represents.
(c) If the issuing corporation is authorized to issue different classes of shares or different series within a class then the variations in rights, preferences and limitations applicable to each class and series, and the authority of the board of directors to determine variations for any future class or series, must be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge.
(d) Each share certificate shall be signed either manually or in facsimile by 2 officers designated in the by-laws or by the board of directors and may bear the corporate seal or its facsimile.
(e) If the person who signed, either manually or in facsimile, a share certificate no longer holds office when the certificate is issued, the certificate shall be nevertheless valid.
§ 6.26. Shares Without Certificates (a) Unless the articles of organization or bylaws provide otherwise, the board of directors of a corporation may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. The authorization shall not affect shares already represented by certificates until they are surrendered to the corporation.
(b) Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates by subsections (b) and (c) of section 6.25, and, if applicable, section 6.27.
§ 6.27. Restriction on Transfer of Shares and Other Securities (a) The articles of organization, bylaws, an agreement among shareholders or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction shall not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction, or unless the restriction is set forth in an amendment to the articles of organization or bylaws approved by the holders of that percentage of each voting group of the outstanding shares required for the approval of an amendment of the articles of organization containing the restriction.
(b) A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this section and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by subsection (b) of section 6.26. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction.
(c) A restriction on the transfer or registration of transfer of shares is authorized:
(1) to maintain the corporation's status when it is dependent on the number or identity of its shareholders;
(2) to preserve exemptions under federal or state securities law;
(3) for any other reasonable purpose.
(d) A restriction on the transfer or registration of transfer of shares may, without limitation:
(1) obligate the shareholder first to offer the corporation or other persons, separately, consecutively, or simultaneously, an opportunity to acquire the restricted shares;
(2) obligate the corporation or other persons, separately, consecutively, or simultaneously, to acquire the restricted shares;
(3) require the corporation, the holders of any class of its shares, or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable;
(4) prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable.
(e) For purposes of this section, “shares” includes a security convertible into or carrying a right to subscribe for or acquire shares.
PART C. SUBSEQUENT ACQUISITION OF SHARES BY SHAREHOLDERS AND CORPORATION
§ 6.30. Shareholders' Preemptive Rights (a) The shareholders of a corporation shall not have a preemptive right to acquire the corporation's unissued shares except to the extent the articles of organization or any contract to which the corporation is a party so provides.
(b) For purposes of this section, "shares" include a security convertible into or carrying a right to subscribe for or acquire shares.
§ 6.31. Corporation's Acquisition of Its Own Shares (a) A corporation may acquire its own shares and shares so acquired constitute authorized but unissued shares.
(b) If the articles of organization prohibit the reissue of acquired shares, the number of authorized shares is reduced by the number of shares acquired.
PART D. DISTRIBUTIONS
§ 6.40. Distributions to Shareholders (a) A board of directors may authorize and the corporation may make distributions to its shareholders subject to restriction by the articles of organization and the limitations in subsections (c) and (h).
(b) If the board of directors does not fix the record date for determining shareholders entitled to a distribution, other than one involving a purchase, redemption or other acquisition of the corporation's shares, it is the date the board of directors authorizes the distribution.
(c) No distribution may be made by a corporation which is a going concern if, after giving it effect,
(1) the corporation would not be able to pay its existing and reasonably foreseeable debts, liabilities and obligations, whether or not liquidated, matured, asserted or contingent, as they become due in the usual course of business; or
(2) the corporation's total assets would be less than the sum of its total liabilities plus, unless the articles of organization permit otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
(d) The board of directors may base a determination that a distribution is not prohibited under subsection (c) either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
(e) Except as provided in subsection (g), the effect of a distribution made in accordance with subsection (c) is measured:
(1) in the case of distribution by purchase, redemption, or other acquisition of the corporation's shares, as of the earlier of (i) the date money or other property is transferred or debt incurred by the corporation, or (ii) the date the shareholder ceases to be a shareholder with respect to the acquired shares;
(2) in the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
(3) in all other cases, as of (i) the date the distribution is authorized if the payment occurs within 120 days after the date of authorization or (ii) the date the payment is made if it occurs more than 120 days after the date of authorization.
(f) A corporation's indebtedness to a shareholder incurred by reason of a distribution made in accordance with subsection (c) is at parity with the corporation's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.
(g) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (c) if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made.
(h) No distribution in liquidation may be made by a corporation unless adequate provision has been made, after giving effect to the provisions of PART 14, to satisfy:
(1) the corporation's existing and reasonably foreseeable debts, liabilities and obligations, whether or not liquidated, matured, asserted or contingent, as they thereafter arise; and
(2) the preferential liquidation rights of shares whose preferential rights are superior to such rights of the shares which would receive the distribution.
A distribution in liquidation means a distribution made by a corporation in dissolution under PART 14, or a distribution, or 1 of a series of related distributions, of all or substantially all of the corporation's assets.
§ 6.41. Liability for Improper Distributions. (a) A director who votes for or assents to a distribution, including a distribution in liquidation as described in subsection (h) of section 6.40, made in violation of this chapter or the articles of organization, is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating this chapter or the articles of organization, if it is established that he did not perform his duties in compliance with section 8.30. In any proceeding under this section, a director has all of the defenses ordinarily available to a director.
(b) A director who pays the corporation on account of liability for an improper distribution under subsection (a) is entitled to:
(1) contribution from every other director who could be held liable under subsection (a) for the distribution;
(2) reimbursement from each shareholder who received the distribution knowing it was improper, for the amount that exceeded what could properly have been distributed to him; and
(3) reimbursement from each shareholder who received the distribution without knowing it was improper, to the extent determined appropriate in the circumstances by a court.
(c) Each shareholder who receives a distribution, including one in liquidation, knowing it was made in violation of this chapter or the articles of organization, shall be personally liable to the corporation for the amount of the distribution he received in excess of what could have been distributed to him without violating this chapter or the articles of organization.
(d) If a distribution in liquidation in violation of this chapter is made before 3 years after the effective date of the corporation's dissolution under PART 14, shareholders who receive the distribution without knowing it is improper are personally liable to the corporation on account of any claim against the corporation existing at the end of the 3-year period, to the extent of each shareholder's respective pro rata share of the claim, with pro ration to be determined by reference to the respective amounts distributed to shareholders in excess of what could properly have been distributed to them.
(e) Any shareholder's total liability for all claims under this section on account of distributions in liquidation may not exceed the total amount of assets distributed to the shareholder in liquidation.
(f) A proceeding by or on behalf of the corporation under this section is barred unless it is commenced by:
(1) in the case of a distribution not in liquidation, 2 years after the date on which the effect of the challenged distribution was measured under subsection (e) or (g) of section 6.40;
(2) in the case of a distribution in liquidation by a corporation in dissolution under PART 14, the later of the time specified in the preceding clause (1) and 6 months after the end of the 3-year period referred to in subsection (d); or
(3) in the case of a distribution in liquidation by a corporation not in dissolution, as described in the second clause in the last sentence of subsection (h) of section 6.40, three years after the date on which the effect of the challenged distribution was measured under subsection (e) or (g) of section 6.40.
(g) A proceeding under subsection (b) against a director for contribution or against a shareholder for reimbursement is barred unless it is commenced by the later of (1) two years after the date on which the effect of the challenged distribution was measured under subsection (e) or (g) of section 6.40, and (2) 6 months after payment to the corporation on account of liability under subsection (a) of this section by the party seeking contribution or reimbursement.