TITLE 7
Corporations, Associations, and Partnerships

CHAPTER 7-1.2
Rhode Island Business Corporation Act

PART 7-1.2-601
Shares Issuance and Distributions

SECTION 7-1.2-602


§ 7-1.2-602 Authorized shares – Shares in classes or series – Issuance of shares.

(a) Every corporation has the power to create and issue the number of shares stated in its articles of incorporation or any amendment thereto.

(b) Classes and series. As stated in the articles of incorporation or in any amendment thereto, or in the resolution or resolutions providing for the issue of such shares adopted by the board of directors pursuant to authority expressly vested in it by the provisions of its articles of incorporation, a corporation may issue one or more classes of shares, including one or more classes of common shares, or one or more series of shares within any class thereof, any or all of which classes or series of shares may be certificated or uncertificated, with par value or without par value, and which classes or series may have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof as are stated and expressed in the articles of incorporation or any amendment thereto, or in the resolution or resolutions providing for the issue of such shares adopted by the board of directors pursuant to the authority expressly vested in it by the provisions of its articles of incorporation.

(c) Without limiting the authority contained in these provisions, a corporation, when provided for in its articles of incorporation, may issue shares of preferred or special classes or series:

(1) Redeemable for cash, property, promissory notes or rights, including securities of any other corporation, at the option of either the holder or the corporation or upon the happening of a specified event, at the time or times, at the price or prices, or the rate or rates, and with the adjustments stated and expressed or provided for in the articles of incorporation or any amendment thereto, or in the vote or votes providing for the issuance of the shares adopted by the board of directors as previously provided; provided, however, that immediately following any such redemption the corporation must have outstanding one or more shares of one or more classes or series, which share, or shares together, have unlimited voting rights.

(2) Entitling the holders of the shares to cumulative, noncumulative, or partially cumulative dividends.

(3) Having preference over any other class or classes or series of shares as to the payment of dividends.

(4) Having preference in the assets of the corporation over any other class or classes or series of shares upon the voluntary or involuntary liquidation of the corporation.

(5) To the extent not inconsistent with this chapter, having limited or no voting rights, or having special voting rights including the power to elect one or more directors.

(6) Convertible into, or exchangeable for, at the option of either the holder or the corporation or upon the happening of a specified event, shares of any other class or classes or any other series of shares of the corporation, at such price or prices or at such rate or rates of exchange and with such adjustments as are stated in the articles of incorporation or in the resolution or resolutions providing for the issuance of such shares adopted by the board of directors.

(d) If the articles of incorporation expressly vest authority in the board of directors, then, to the extent that the articles of incorporation have not established series and fixed and determined the variations in the relative rights and preferences as between the series, the board of directors has authority to divide any or all of the classes into series and, within the limitations, if any, stated in the articles of incorporation, to fix and determine the relative rights and preferences of the shares of any series established.

(e)(1) Open-End investment company. Notwithstanding the provisions of subsections (a) and (b) of this section, the board of directors of a corporation that is registered or intends to register as an open-end investment company under the Investment Company Act of 1940, as heretofore or hereafter amended, after the registration as an open-end investment company takes effect, may increase or decrease the aggregate number of shares or the number of shares of any class or series that the corporation has authority to issue unless a provision has been included in the articles of incorporation of the corporation after July 1, 2001 prohibiting such an action by the board of directors to increase or decrease the aggregate number of shares or the number of shares of any class or series that the corporation has authority to issue.

(2) Conditional license of franchise. Any shares of a corporation which holds (directly or indirectly) a license or franchise from a governmental agency to conduct its business or is a member of a national securities exchange, which license, franchise or membership is conditioned upon some or all of the holders of its shares possessing prescribed qualifications may be made subject to redemption by the corporation to the extent necessary to prevent the loss of such license, franchise or membership or to reinstate it.

(f) Dividends. The holders of preferred or special shares of any class or of any series of shares are entitled to receive dividends at the rates, on the conditions and at the times that are stated and expressed in the articles of incorporation or in the vote or votes providing for the issue of the shares adopted by the board of directors as previously provided, payable in preference to, or in relation to, the dividends, payable on any other class or classes of shares, or of any other series of shares, and cumulative, non-cumulative or partially cumulative as is stated and expressed. When dividends upon the preferred and special shares, if any, to the extent of the preferences to which the shares are entitled, have been paid or declared and set apart for payment, a dividend on the remaining class or classes or series of shares may then be paid out of the remaining assets of the corporation available for dividends.

(g) Rights upon liquidation. The holders of the preferred or special shares of any class or of any series of shares are entitled to the rights upon the dissolution of, or upon any distribution of the assets or liquidation, voluntary or involuntary, of the corporation as are stated and expressed in the articles of incorporation or in the vote or votes providing for the issue of the shares adopted by the board of directors as previously provided.

(h) Facts ascertainable outside the articles of incorporation. Any of the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of any class or series of shares may be made dependent upon facts ascertainable outside the articles of incorporation or outside the resolution or resolutions providing for the issue of such shares adopted by the board of directors pursuant to authority expressly vested in it by its articles of incorporation, provided that the manner in which such facts operate upon the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of such class or series of shares is clearly and expressly set forth in the articles of incorporation or in the resolution or resolutions providing for the issue of such shares adopted by the board of directors. The term "facts," as used in this subsection, includes, but is not limited to, the occurrence of any event, including a determination or action by any person, including the corporation.

(i) Amendment of rights and restrictions by board of directors. Subject to subsection (j), unless otherwise provided in the articles of incorporation, if no shares have been issued of a class or series established by resolution of the board of directors, the voting powers, designations, preferences, and relative, participating optional or other rights, if any or the qualifications, limitations or restrictions thereof, may be amended by a resolution or resolutions adopted by the board of directors.

(j)(1) Issuance. Before any corporation issues any shares of any class or of any series of any class of which the voting powers, designations, preferences, and relative, participating, optional, or other rights, if any, or the qualifications, limitations, or restrictions of the share, if any, have not been stated in the articles of incorporation but are provided for in a vote or votes adopted by the board of directors pursuant to authority expressly vested in it by the provisions of the articles of incorporation, a certificate presenting a copy of the vote or votes and the number of shares of the class or series must be signed by an authorized officer of the corporation and filed in accordance with § 7-1.2-105. Upon filing, the certificate constitutes an amendment to the articles of incorporation.

(2) Increase or decrease of shares. Unless otherwise provided in any vote or votes, the number of shares of any class or series as stated in the vote or votes may be increased or decreased (but not below the number of shares then outstanding) by a certificate likewise made, signed, and filed presenting a statement that a specified increase or decrease in the number of shares had been authorized and directed by a vote or votes likewise adopted by the board of directors. If the number of shares is decreased, the number of shares specified in the certificate resume the status which they had before to the adoption of the prior resolution.

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.)