(Code 1981, §14-2-620, enacted by Ga. L. 1988, p. 1070, § 1.)
Law reviews.- For article discussing guidelines governing share subscription agreements, see 3 Ga. L. Rev. 11 (1968).
COMMENT
Source: Model Act, § 6.20. This replaces former § 14-2-83.
Subsection (a) is substantially identical to former § 14-2-83(a). It provides that preincorporation subscriptions in writing are irrevocable for six months unless the subscription agreement provides that they are revocable or that they are irrevocable for some other period, or unless all the subscribers agree to revocation. In essence, there is an irrevocability agreement among all of the subscribers. The terms of this contract are set forth in subsections (b) and (d).
Subsection (b) is substantially similar to former § 14-2-83(c). Subsection (b) provides that after incorporation the board of directors may determine the payment terms of subscriptions, but that calls must be uniform so far as practicable as to all shares of the same class or series unless the subscriptions provide otherwise. Subsection (d) provides alternative methods of enforcement of preincorporation subscriptions by the corporation.
Subsection (c) is clarifying, and states that shares are fully paid and nonassessable when the consideration called for in the subscription agreement is paid. This represents a major departure from the old legal capital rules of former § 14-2-84(a), which required shares with par value to be issued for consideration not less than the par value of the shares.
Subsection (e) clarifies that post-incorporation subscription agreements are also valid.
Cross-References Consideration for shares, see § 14-2-621. Effective date of notice, see § 14-2-141. "Notice" defined, see § 14-2-141.
JUDICIAL DECISIONS
Editor's notes.
- In light of the similarity of the statutory provisions, decisions under former Code 1993, § 22-504 and former Code Section 14-2-83, which were repealed by Ga. L. 1988, p. 1070, § 1, effective July 1, 1989, are included in the annotations for this Code section.
Stock subscription agreements enforceable only if written.
- An alleged oral promise to pay for stock is unenforceable under former Code 1933, § 22-504 (see now O.C.G.A. § 14-2-620), which requires enforceable stock subscription agreements to be in writing. Super Valu Stores, Inc. v. First Nat'l Bank, 463 F. Supp. 1183 (M.D. Ga. 1979) (decided under former Code 1933, § 22-504).
Cited in Putnam v. Williams, 652 F.2d 497 (5th Cir. 1981).
RESEARCH REFERENCES
Am. Jur. 2d.
- 18A Am. Jur. 2d, Corporations, § 475 et seq.
C.J.S.- 18 C.J.S., Corporations, §§ 249, 250, 252, 279.
ALR.
- Liability of corporation on contracts of promoters, 17 A.L.R. 452; 49 A.L.R. 673; 123 A.L.R. 726.
Binding effect of subscription to stock in corporation to be formed, 61 A.L.R. 1463.
Infant's rights and liabilities on subscription to or purchase of corporate stock, 64 A.L.R. 972.
Liability under trust-fund doctrine of subscribers to stock of corporation the charter of which has been canceled for reasons other than insolvency, 71 A.L.R. 103; 90 A.L.R. 1350.
Necessity and sufficiency of notice of withdrawal of subscription to stock in projected corporation, 71 A.L.R. 1345.
Liability of promoters for fraud or misrepresentation to persons subscribing for shares after formation of corporation, 72 A.L.R. 355.
Fraud: necessity for knowledge of falsity of representation as to value, inducing subscription to or purchase of corporate stock, or other securities, 73 A.L.R. 1120.
Construction, application, and effect of statutes giving corporation a lien on shares of its stockholders for debts due from stockholders to corporation, 80 A.L.R. 1338.
Validity and effect of extrinsic agreement absolving one, in whole or part, from liability on subscription to corporate stock, 81 A.L.R. 198.
Right of action to recover purchase price under sale of corporate stock where title has not passed as affected by provision of Sales Act, 99 A.L.R. 275.
Validity of release, cancellation, or compromise of unpaid subscription for stock by corporation or its representatives, 101 A.L.R. 231.
Disposition of interest or rights in corporation represented by stock the owners of which cannot be found, 101 A.L.R. 670.
Consideration for subscription agreements, 151 A.L.R. 1238.
Enforcement of stock subscription after suit on note of subscriber is barred by statute of limitations, 11 A.L.R.2d 1380.
Applicability of Blue Sky Laws to preincorporation subscriptions, 50 A.L.R.2d 1103.