No Par Value Shares
What is Par Value?
A business corporation must sell shares of stock in order to capitalize the corporation, that is, provide the corporation with its own capital, separate from the money of its owners. This separation provides part of the support for shielding the shareholders from personal liability for the debts and obligations of the corporation.
Shares of stock sold by the corporation represent proportionate ownership interests held by shareholders in the corporation. "Par value" is a dollar value assigned to shares of stock which is the minimum amount for which each share may be sold. There is no minimum or maximum value that must be assigned. Shares may also have "no par value," which means that the Board of Directors will assign a value to the stock below which the shares cannot be issued.
There is no minimum number of shares that must be authorized in the articles of incorporation. One or more shares may be authorized. However, the corporation may not sell more shares than it is authorized to issue and it must receive consideration in exchange for its shares.
What is no Par Value Stock?
Since par value more or less means the price to be paid for the shares when purchased from the corporation, no par value stock is stock for which no fixed price is set. This is usually the case in small corporations where the owners issue themselves a number of shares and simply infuse money in the corporation when needed.
Corporations issue no par stock for flexibility. If the corporation's stock has no par value, then there is no set "price" for the stock. In this case, the directors can raise the "price" of the stock when the corporation becomes more valuable. You see, with no par value stock, the directors decide how much must be paid for the stock each time it is issued to a shareholder.
Must Stock Have a Par Value?
No. Most often in a small business corporation the stock is called "no par value stock" which simply means that there is no set amount of payment required to purchase the stock of the corporation. Each time stock is issued, the directors will decide how much must be received for the shares.
What is the difference between "par" and "no par" stock ?
Par value stock has a stated value on its face. No par value stock has no stated value and its worth depends on what an investor is willing to pay.
A business corporation must sell shares of stock in order to capitalize the corporation, that is, provide the corporation with its own capital, separate from the money of its owners. This separation provides part of the support for shielding the shareholders from personal liability for the debts and obligations of the corporation.
Shares of stock sold by the corporation represent proportionate ownership interests held by shareholders in the corporation. "Par value" is a dollar value assigned to shares of stock which is the minimum amount for which each share may be sold. There is no minimum or maximum value that must be assigned. Shares may also have "no par value," which means that the Board of Directors will assign a value to the stock below which the shares cannot be issued.
There is no minimum number of shares that must be authorized in the articles of incorporation. One or more shares may be authorized. However, the corporation may not sell more shares than it is authorized to issue and it must receive consideration in exchange for its shares.
What is no Par Value Stock?
Since par value more or less means the price to be paid for the shares when purchased from the corporation, no par value stock is stock for which no fixed price is set. This is usually the case in small corporations where the owners issue themselves a number of shares and simply infuse money in the corporation when needed.
Corporations issue no par stock for flexibility. If the corporation's stock has no par value, then there is no set "price" for the stock. In this case, the directors can raise the "price" of the stock when the corporation becomes more valuable. You see, with no par value stock, the directors decide how much must be paid for the stock each time it is issued to a shareholder.
Must Stock Have a Par Value?
No. Most often in a small business corporation the stock is called "no par value stock" which simply means that there is no set amount of payment required to purchase the stock of the corporation. Each time stock is issued, the directors will decide how much must be received for the shares.
What is the difference between "par" and "no par" stock ?
Par value stock has a stated value on its face. No par value stock has no stated value and its worth depends on what an investor is willing to pay.
posted by Pankaj Ratna at 10:34 AM
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