16-10a-630. Shareholders' preemptive rights.
(1) Subject to the provisions of Subsection 16-10a-1704(3), the shareholders of a
corporation do not have a preemptive right to acquire the corporation's unissued shares except to
the extent the articles of incorporation so provide.
(2) A statement included in the articles of incorporation that "the corporation elects to
have preemptive rights," or words of similar import, means that the following principles apply
except to the extent the articles of incorporation expressly provide otherwise:
(a) Upon the decision of the board of directors to issue shares, the shareholders of the
corporation have a preemptive right, subject to any uniform terms and conditions prescribed by
the board of directors, to provide a fair and reasonable opportunity to exercise the right, to
acquire a number of the shares proposed to be issued in an amount proportional to their
percentage ownership of the corporation's outstanding shares.
(b) A shareholder may waive a preemptive right. A waiver evidenced by a writing is
irrevocable even though it is not supported by consideration.
(c) There is no preemptive right with respect to:
(i) shares issued as compensation for services to directors, officers, agents, or employees
of the corporation, its subsidiaries, or affiliates;
(ii) shares issued to satisfy conversion or option rights created to provide compensation
for services to directors, officers, agents, or employees of the corporation, its subsidiaries, or
affiliates;
(iii) shares issued within six months from the effective date of incorporation; or
(iv) shares sold otherwise than for cash.
(d) Holders of shares of any class without general voting rights but with preferential
rights to distributions have no preemptive rights with respect to shares of any other class.
(e) Holders of shares of any class with general voting rights but without preferential
rights to distributions have no preemptive rights with respect to shares of any class without
general voting rights but with preferential rights to distributions unless the shares without general
voting rights but with preferential rights are convertible into or carry a right to subscribe for or
acquire shares with general voting rights or without preferential rights.
(f) Shares subject to preemptive rights that are not acquired by shareholders may be
issued to any person for a period of one year after being offered to shareholders pursuant to the
preemptive rights, at a consideration set by the board of directors that is not lower than the
consideration set for the exercise of preemptive rights. An offer at a lower consideration or after
the expiration of the one year period is subject to the shareholders' preemptive rights.
(3) For purposes of this section, "shares" includes a security convertible into or carrying a
right to subscribe for or acquire shares.
Enacted by Chapter 277, 1992 General Session
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Last revised: Thursday, May 28, 2009