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Arkansas Code Title 4. Business and Commercial Law § 4-26-611. Purchase of shares by corporation

Current as of March 28, 2024 | Updated by FindLaw Staff

(a) A corporation shall not purchase directly or indirectly any of its own shares unless the purchase is authorized by this section and not prohibited by its articles of incorporation.

(b)(1) A corporation may not purchase its own shares:

(A) If there is a reasonable ground for believing that the corporation is, or as a result of such purchase would be, unable to meet its obligations as they become due in the ordinary course of business or that the present fair value of the remaining assets of the corporation would be less than one and one-fourth (1 1/4 ) times the amount of its liabilities to creditors; or

(B) If the net assets remaining after the purchase would be less than the aggregate amount payable in the event of voluntary liquidation to the holders of shares having preferential rights to the assets of the corporation; or

(C) If, in respect to purchases out of earned surplus, there are unpaid accrued preferential dividends on shares entitled to priority in respect to dividends over the shares to be purchased.

(2) Subject to these three (3) restrictions, a corporation may purchase its own shares under the conditions set out in subsections (c)-(e) of this section next following.

(c)(1) A corporation may purchase its own shares out of stated capital only in the following instances:

(A) Where the purchase is to eliminate fractional shares; or

(B) Where the purchase is to collect or compromise in good faith any indebtedness to the corporation; or

(C) Where the purchase is to pay dissenting shareholders entitled to payment of their shares under the provisions of this chapter; or

(D) Where the purchase is to effect, subject to the other provisions of this chapter, the retirement of its redeemable shares at not to exceed the redemption price and this purchase does not reduce the net assets below the stated capital remaining after giving effect to the cancellation of the purchased shares.

(2) The purchases permitted under this subsection may be made solely under the authority of the board of directors.

(d) A corporation may purchase its own shares out of unrestricted earned surplus, this purchase to be authorized by the board of directors, and no stockholders' authorization is required.

(e) If the articles of incorporation so permit, the corporation, acting through its directors, may purchase its own shares out of capital surplus other than revaluation surplus. If the articles contain no such authorization but do not prohibit the purchase of such shares from capital surplus, then the corporation, on the authorization of its board of directors and of the holders of at least two-thirds ( 2/3 ) of all shares of each class, whether or not entitled to vote, voting separately, may purchase the corporation's shares from capital surplus, other than revaluation surplus.

(f) In exercising the powers conferred by this section, it is not required that the shares purchased by the corporation must be purchased pro rata from all of its shareholders, or ratably from the holders of all the shares of any class or series. However, this section is not intended to validate stock purchases designed to effect fraudulent, improper, or unfair liquidating distributions to one (1) or more shareholders; or fraudulently, improperly, or unfairly designed to augment the voting power of any one (1) or more shareholders as against the voting power of other shareholders; or otherwise designed to effect any fraudulent, unfair, or improper discrimination in favor of any one (1) or more shareholders as against others.

(g) A corporation shall be bound by any restrictions contained in its articles of incorporation in respect to the purchase of its own shares, and such articles may wholly prohibit such purchase.

(h) Nonredeemable shares acquired by a corporation under the provisions of this section may be cancelled, held, pledged, sold, transferred, or otherwise disposed of by the corporation. The purchase by a corporation of its redeemable shares shall result in a cancellation of such shares according to § 4-26-614.

(i)(1) Except to the extent permitted under subsection (c) of this section, the purchase by a corporation of its own shares shall not effect a reduction of stated capital unless in connection therewith the stated capital is reduced pursuant to § 4-26-614 or § 4-26-612.

(2) Upon the purchase by a corporation of its own shares out of earned or capital surplus, such surplus account shall be reduced in an amount equal to the purchase price paid therefrom.

(3) The impact upon the surplus accounts of the cancellation of treasury shares through a reduction of stated capital or from the resale of treasury shares is controlled by § 4-26-616(c).

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Cite this article: FindLaw.com - Arkansas Code Title 4. Business and Commercial Law § 4-26-611. Purchase of shares by corporation - last updated March 28, 2024 | https://codes.findlaw.com/ar/title-4-business-and-commercial-law/ar-code-sect-4-26-611/

Read this complete Arkansas Code Title 4. Business and Commercial Law § 4-26-611. Purchase of shares by corporation on Westlaw

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