Title: Understanding Minnesota's Proposal to Amend Certificate: Reducing Par Value, Increasing Authorized Common Stock, and Reverse Stock Split with Exhibit Introduction: Minnesota corporations may propose amendments to their certificates, aiming to make changes in various aspects of their stock structure. One common type of proposal includes the reduction of par value, increase in authorized common stock, and reverse stock split. This article will provide a detailed description of what this proposal entails, its significance, and the key steps involved, supported by relevant keywords. Additionally, we will explore different variations and considerations associated with such proposals. I. Definition: The proposal to amend certificate in Minnesota involves alterations to a corporation's legal document specifying the rights, obligations, and characteristics of its stock. Specifically, this proposal centers around reducing the par value, increasing the authorized common stock, and implementing a reverse stock split. II. Reducing Par Value: 1. Par Value: Par value refers to the nominal or face value assigned to each share of a corporation's stock. It represents the minimum price at which shares can be issued and can have implications for accounting, tax, and legal purposes. 2. Reasons for Reduction: Companies may propose reducing par value to increase flexibility in pricing shares, eliminate legal complexities associated with valuations, enhance marketability, or facilitate simultaneous stock splits and reverse stock splits. III. Increasing Authorized Common Stock: 1. Authorized Common Stock: This refers to the total number of shares a corporation is permitted to issue as equity capital to its shareholders. 2. Significance of Increasing Authorized Common Stock: Proposing an increase in authorized common stock allows corporations to issue additional shares in the future without needing separate shareholder approval for each issuance. This flexibility can support potential capital raises, acquisitions, stock-based compensations, or stock splits. IV. Reverse Stock Split: 1. Definition: A reverse stock split involves combining multiple shares of a company's existing stock into a single share. For example, a reverse stock split of 1-for-10 would consolidate ten existing shares into one new share. 2. Purpose and Benefits: Corporations often propose reverse stock splits to boost their stock price, increase market perception, align with certain exchange or listing requirements, attract institutional investors, or provide a favorable basis for subsequent transactions or offerings. V. Key Steps in the Proposal Process: 1. Resolution and Shareholder Consent: Corporations initiate the proposal by passing a board resolution and subsequently seeking shareholder consent, typically through the submission of proxy materials. 2. Drafting and Filing Amended Certificate: The corporation's legal team prepares the amended certificate, incorporating the proposed changes, and files it with the Minnesota Secretary of State. 3. Exhibit Inclusion: When filing the amended certificate, corporations may be required to provide supporting exhibits or additional documentation explaining the rationale behind the proposed changes, potential impacts, and compliance with relevant laws and regulations. VI. Variations and Considerations: 1. Optional vs. Mandatory Proposals: While some changes, like reducing par value, may be optional, others, such as increasing authorized common stock or reverse stock splits, may require shareholder approval based on the corporation's existing governing documents or state laws. 2. Compliance and Reporting: Corporations must ensure compliance with Minnesota's corporate laws, their articles of incorporation, certificate of incorporation, or bylaws while executing these proposals. 3. Other Amendment Types: Besides reducing par value, increasing authorized common stock, and reverse stock splits, corporations may propose various other amendments, such as changing directors, modifying stock classes, altering voting rights, or amending share transfer provisions. Conclusion: The Minnesota proposal to amend a corporation's certificate by reducing par value, increasing authorized common stock, and implementing a reverse stock split represents a strategic initiative to adapt to changing market conditions, enhance financial flexibility, and meet regulatory requirements. Understanding the detailed process, variations, and considerations surrounding such proposals is crucial for shareholders, potential investors, and legal advisors involved in corporate decision-making.
Minnesota Proposal to amend certificate to reduce par value, increase authorized common stock and reverse stock split with Exhibit
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FAQ
A reverse stock split consolidates the number of existing shares of stock held by shareholders into fewer shares. A reverse stock split does not directly impact a company's value (only its stock price). It can signal a company in distress since it raises the value of otherwise low-priced shares.
For example, in a one-for-ten () reverse split, shareholders receive one share of the company's new stock for every 10 shares that they owned. Each new share would be worth ten times that of the shares before the split.
The number of outstanding shares of Common Stock will be decreased as a result of a Reverse Stock Split, but the number of authorized shares of Common Stock will not be so decreased.
Reverse Stock Splits. The plan calls for the corporation to redeem all fractional shares for cash, forcing the minority shareholders to sell their fractional shares back to the corporation.
(EXPR) has announced a 1-for-20 reverse stock split. As a result of the reverse stock split, each EXPR Common Share will be converted into the right to receive 0.05 (New) Express, Inc. Common Shares.
Will the reverse stock split change the par value of the share? Yes, the par value of each share will be increased proportionally to the exchange ratio, i.e. it will be multiplied by 20.