What is par value? Can a corporation legally issue no-par stock?

Question

What will be an ideal response?

Answer 1

Traditionally, the minimum amount for which a share could be issued was called the par value. In general, this amount was so low (often $1 ) that the likelihood of a buyer not paying at least that much for the stock was slim. The total par value of all stock initially issued by a corporation was known as stated capital. Some states allowed the issuance of no-par stock, which is stock that does not have a stated par value, but when a corporation issued no-par stock, the board of directors still had to designate a stated valued for the stock. The sum of the stated values was the stated capital of the corporation. The Revised Model Business Corporation Act (RMBCA) has done away with the terms par, no par, and stated capital. Now, before issuing any shares, the board of directors must determine that the amount of consideration received or about to be received is adequate. When the corporation receives the consideration for which the board of directors authorized the issuance of the shares, the shares are deemed fully paid. Under the RMBCA and most current state laws, the consideration paid for the stock may be in the form of money, property, or past services. The RMBCA also allows for payment by promissory notes and agreements to provide future services.