Issuing Shares
One of the major ways in which publicly traded corporations raise capital is by issuing shares on the stock exchange. The value of shares also acts as a barometer for the presumed value of the company. But when is it appropriate or necessary to issue stock?
Stock
A share of stock is a piece of ownership in a company. A publicly traded corporation is actually owned collectively by all the people who hold shares in that company. While a CEO and a board may run the day-to-day operations of the company and even make decisions for the investors, they are ultimately employed by the investors, whose votes – should they choose to exercise them – determine the fate of the company.
Naturally, the more shares of the company that are issued, the less each individual share holds of the company’s overall value. A share of stock in a company with 3,000 shares controls more than a share of stock in a company with 3,000,000 shares.
There are two major types of stock: common stock and preferred stock. Common stock confers voting rights, while preferred stock does not. However, preferred stock sees a specified percentage of dividends paid before dividends are paid to common stockholders.
Issuing
The amount of shares a company is allowed to issue is dependent on the company’s articles of incorporation. However, there is no stipulation as to how many shareholders there must be, so a company with 3,000 shares can have only two shareholders with 1,500 shares each.
Stock issued by a small corporation can be closely controlled. The company can determine who gets stock, what the stock costs, and how much of the company each shareholder will control. A Stock Subscription Agreement is drafted to detail the price per share and the number of shares purchased.
Contact Us
If your company or Texas LLC is considering issuing shares or you are interested in knowing more in-depth information about the issuing of shares, contact Texas Legal Entities at 512-472-2431.
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