Title 7
Corporations, Associations, and Partnerships
Chapter 1.2
Rhode Island Business Corporation Act
Part 6
Shares Issuance and Distributions
R.I. Gen. Laws § 7-1.2-601
§ 7-1.2-601. Right of corporation to acquire, dispose of and cancel its own shares.
(a) Unless a corporation's articles of incorporation provide otherwise, subject to subsection (f), a corporation may at any time, by resolution of its board of directors, redeem purchase, take, receive, or otherwise acquire, hold, own, pledge, transfer or dispose of its own shares.
(b) In this section, "redeemable shares" means shares issued pursuant to § 7-1.2-602(c)(1). When redeemable shares are called for redemption, those shares are not outstanding shares for the purpose of voting or determining the total number of shares entitled to vote on any matter on and after the date on which written notice of redemption has been sent to holders thereof and a sum sufficient to redeem such shares has been set aside to pay the redemption price to the holders of the shares upon surrender of certificates therefor.
(c) When redeemable shares are redeemed or purchased by the corporation, the redemption or purchase effects a cancellation of the shares and a statement of cancellation must be filed pursuant to subsection (e).
(d) When shares of a corporation other than redeemable shares are purchased, a corporation may, at any time, by resolution of its board of directors, cancel all or any part of the shares of the corporation of any class or series reacquired by it by filing a statement of cancellation as provided in subsection (e).
(e) A statement of cancellation adopted by the board of directors must be delivered to the secretary of state for filing as follows:
(1) The statement of cancellation shall be executed by an authorized officer of the corporation, and must state:
(i) The name of the corporation.
(ii) The number of shares canceled through redemption or purchase, itemized by classes and series.
(iii) The aggregate number of issued shares, itemized by classes and series, after giving effect to the cancellation.
(iv) If the articles of incorporation provide that the canceled shares are not to be reissued, then the number of shares which the corporation has authority to issue, itemized by classes and series, after giving effect to the cancellation.
(2) An original statement of cancellation must be delivered to the secretary of state. If the secretary of state finds that the statement of cancellation conforms to law, the secretary of state shall, when all fees and franchise taxes have been paid:
(i) Endorse on the original the word "Filed", and the month, day, and year of the filing.
(ii) File the original in his or her office.
(3) Upon filing of the statement of cancellation, the shares are restored to the status of authorized but unissued shares unless the articles of incorporation provide that the shares, when redeemed or purchased, are not to be reissued, in which case the filing of the statement of cancellation constitutes an amendment to the articles of incorporation and reduces the number of shares of the class canceled which the corporation is authorized to issue by the number of shares canceled.
(f) No redemption or purchase of shares may be made by a corporation if, after giving it effect:
(1) The corporation would be insolvent; or
(2) The corporation's total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the redemption, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those redeeming shares (unless such preferential rights are waived by a majority of the shareholders entitled to such preferential rights, voting by class).
The board of directors may base a determination that a redemption is not prohibited under subsection (f) either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
(g) Nothing contained in this section is construed to forbid the cancellation of shares in any other manner permitted by this chapter.
History of Section.
P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.