Tennessee Authority to Issue Additional Shares

• Category: Corporations - Mergers and Acquisitions
• State: Multi-State
• Control #: US-CC-12-1931
• Format: Word; Rich Text

Description

This form may be used by a company's Board of Directors to allow for the purchase of additional stock beyond the original agreement with a second party. The form specifically states the conditions under which the additional purchase will be allowed.

Tennessee Authority to Issue Additional Shares: A Detailed Description In Tennessee, authority to issue additional shares refers to the legal power granted to a corporation within the state to increase its existing number of authorized shares of stock. This authority is primarily governed by the Tennessee Code Annotated, specifically Title 48, which encompasses the state's corporation laws. Under Tennessee law, corporations are required to establish and define their authorized capital structure, including the number of authorized shares of stock. The authorized shares may consist of common stock, preferred stock, or both. However, as business needs evolve or unforeseen circumstances arise, a corporation may seek to increase its authorized share capital through a process governed by the state's authority to issue additional shares. The authority to issue additional shares enables a corporation to expand its equity base, potentially facilitating capital infusion, acquisitions, mergers, stock splits, or other strategic corporate actions. By obtaining approval from its shareholders and adhering to the legal requirements outlined by Tennessee corporation laws, a corporation can increase its authorized shares and subsequently issue them to investors or existing shareholders. It is crucial to note that Tennessee distinguishes between two different types of authority to issue additional shares, namely: 1. Board-Granted Authority: This type of authority is typically delegated to the board of directors through the corporation's bylaws or by specific shareholder approval. With board-granted authority, the board can issue additional shares up to a predetermined limit without seeking further shareholder approval. This offers flexibility to the corporation, often allowing it to respond quickly to business opportunities or challenges. 2. Shareholder-Granted Authority: If a corporation seeks to issue a substantial number of additional shares or exceed the maximum limit set by board-granted authority, shareholder approval is generally required. Shareholder-granted authority necessitates convening a shareholders' meeting, providing the shareholders with relevant information about the proposed issuance, and obtaining their consent through a vote. The specific voting requirements may vary based on the corporation's bylaws and the type of shares being issued. To ensure compliance with Tennessee law, corporations must meticulously follow the prescribed procedures, including filing the appropriate documentation with the Tennessee Secretary of State's office. Failure to adhere to these requirements may result in legal ramifications or the invalidation of the newly issued shares. In summary, Tennessee authority to issue additional shares is a legal provision that allows corporations to expand their equity base by increasing the number of authorized shares of stock. This authority encompasses both board-granted and shareholder-granted capabilities, each with its own distinct process. Understanding the nuances of Tennessee's authority to issue additional shares is crucial for corporations navigating their growth, financing, and strategic decision-making endeavors.