§ 7-1.2-601 - Right of corporation to acquire, dispose of and cancel its own shares.
SECTION 7-1.2-601
§ 7-1.2-601 Right of corporation toacquire, dispose of and cancel its own shares. – (a) Unless a corporation's articles of incorporation provide otherwise, subjectto subsection (f), a corporation may at any time, by resolution of its board ofdirectors, redeem purchase, take, receive, or otherwise acquire, hold, own,pledge, transfer or dispose of its own shares.
(b) In this section, "redeemable shares" means shares issuedpursuant to § 7-1.2-602(c)(1). When redeemable shares are called forredemption, those shares are not outstanding shares for the purpose of votingor determining the total number of shares entitled to vote on any matter on andafter the date on which written notice of redemption has been sent to holdersthereof and a sum sufficient to redeem such shares has been set aside to paythe redemption price to the holders of the shares upon surrender ofcertificates therefor.
(c) When redeemable shares are redeemed or purchased by thecorporation, the redemption or purchase effects a cancellation of the sharesand a statement of cancellation must be filed pursuant to subsection (e).
(d) When shares of a corporation other than redeemable sharesare purchased, a corporation may, at any time, by resolution of its board ofdirectors, cancel all or any part of the shares of the corporation of any classor series reacquired by it by filing a statement of cancellation as provided insubsection (e).
(e) A statement of cancellation adopted by the board ofdirectors must be delivered to the secretary of state for filing as follows:
(1) The statement of cancellation shall be executed by anauthorized officer of the corporation, and must state:
(i) The name of the corporation.
(ii) The number of shares canceled through redemption orpurchase, itemized by classes and series.
(iii) The aggregate number of issued shares, itemized byclasses and series, after giving effect to the cancellation.
(iv) If the articles of incorporation provide that thecanceled shares are not to be reissued, then the number of shares which thecorporation has authority to issue, itemized by classes and series, aftergiving effect to the cancellation.
(2) An original statement of cancellation must be deliveredto the secretary of state. If the secretary of state finds that the statementof cancellation conforms to law, the secretary of state shall, when all feesand franchise taxes have been paid:
(i) Endorse on the original the word "Filed", and the month,day, and year of the filing.
(ii) File the original in his or her office.
(3) Upon filing of the statement of cancellation, the sharesare restored to the status of authorized but unissued shares unless thearticles of incorporation provide that the shares, when redeemed or purchased,are not to be reissued, in which case the filing of the statement ofcancellation constitutes an amendment to the articles of incorporation andreduces the number of shares of the class canceled which the corporation isauthorized to issue by the number of shares canceled.
(f) No redemption or purchase of shares may be made by acorporation if, after giving it effect:
(1) The corporation would be insolvent; or
(2) The corporation's total assets would be less than the sumof its total liabilities plus (unless the articles of incorporation permitotherwise) the amount that would be needed, if the corporation were to bedissolved at the time of the redemption, to satisfy the preferential rightsupon dissolution of shareholders whose preferential rights are superior tothose redeeming shares (unless such preferential rights are waived by amajority of the shareholders entitled to such preferential rights, voting byclass).
The board of directors may base a determination that aredemption is not prohibited under subsection (f) either on financialstatements prepared on the basis of accounting practices and principles thatare reasonable in the circumstances or on a fair valuation or other method thatis reasonable in the circumstances.
(g) Nothing contained in this section is construed to forbidthe cancellation of shares in any other manner permitted by this chapter.