Shares and Distributions

C.R.S. tit. 7, art. 106

in effect

C.R.S. § 7-106-101 Authorized shares

7-106-101. Authorized shares. (1) The articles of incorporation shall state the classes of shares and the number of shares of each class that the corporation is authorized to issue. If more than one class of shares is authorized, the articles of incorporation shall state a distinguishing designation for each class, and, before the issuance of shares of any class, the preferences, limitations, and relative rights of that class shall be stated in the articles of incorporation. All shares of a class shall have preferences, limitations, and relative rights identical with those of other shares of the same class except to the extent otherwise permitted by section 7-106-102. (2) The articles of incorporation shall authorize: (a) One or more classes of shares that together have unlimited voting rights; and (b) One or more classes of shares, which may be the same class or classes as those with voting rights, that together are entitled to receive the net assets of the corporation upon dissolution. (3) The articles of incorporation may authorize one or more classes of shares that: (a) Have special, conditional, or limited voting rights, or no right to vote; except that no condition, limitation, or prohibition on voting shall eliminate any right to vote provided by section 7-110-104; (b) Are redeemable or convertible as stated in the articles of incorporation: (I) At the option of the corporation, the shareholder, or another person or upon the occurrence of a designated event; (II) For money, indebtedness, securities, or other property; or (III) In a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic facts or events; (c) Entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative, or partially cumulative; or (d) Have preference over any other class of shares with respect to distributions, including dividends and distributions upon the dissolution of the corporation. (4) The description of the preferences, limitations, and relative rights of classes of shares in subsection (3) of this section is not exhaustive.

C.R.S. § 7-106-102 Terms of class or series determined by board of directors

7-106-102. Terms of class or series determined by board of directors. (1) If the articles of incorporation so provide, the board of directors may determine, in whole or in part, the preferences, limitations, and relative rights, within the limits set forth in section 7-106-101, of: (a) Any class of shares before the issuance of any shares of that class; or (b) One or more series within a class before the issuance of any shares of that series. (2) Each series of a class shall be given a distinguishing designation. (3) All shares of a series shall have preferences, limitations, and relative rights identical with those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those of other series of the same class. (4) Before issuing any shares of a class or series, the preferences, limitations, and relative rights of which are determined by the board of directors under this section, the corporation shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of amendment to the articles of incorporation, which are effective without shareholder action, that state: (a) The domestic entity name of the corporation; (b) The text of the amendment determining the designations, preferences, limitations, and relative rights of the class or series of shares; (c) The date the amendment was adopted; and (d) A statement that the amendment was duly adopted by the board of directors.

C.R.S. § 7-106-103 Issued and outstanding shares

7-106-103. Issued and outstanding shares. (1) A corporation may issue the number of shares of each class or series authorized by the articles of incorporation. Shares that are issued are outstanding shares until they are reacquired, redeemed, converted, or canceled. (2) The reacquisition, redemption, or conversion of outstanding shares is subject to the limitations contained in subsection (3) of this section and is subject to section 7-106-401. (3) At all times that shares of the corporation are outstanding, one or more shares that together have unlimited voting rights and one or more shares that together are entitled to receive the net assets of the corporation upon dissolution shall be outstanding.

C.R.S. § 7-106-104 Fractional shares

7-106-104. Fractional shares. (1) A corporation may: (a) Issue fractions of a share or pay in cash the value of fractions of a share; (b) Arrange for disposition of fractional shares by the shareholders; or (c) Issue scrip in registered form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share. (2) Each certificate representing scrip shall be conspicuously labeled "scrip" and shall contain the information required to be included in a share certificate by sections 7-106-206 (2)(a), (2)(c), and (4) and 7-106-208 (2). (3) The holder of a fractional share is entitled to exercise the rights of a shareholder, including the right to vote, to receive dividends, and to participate in the assets of the corporation upon liquidation. The holder of scrip is not entitled to any of these rights unless the scrip provides for them. (4) The board of directors may authorize the issuance of scrip subject to any condition considered desirable, including: (a) That the scrip will become void if not exchanged for full shares before a stated date; and (b) That the shares for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders.

C.R.S. § 7-106-105 Reverse split

7-106-105. Reverse split. (1) Unless otherwise provided in the articles of incorporation, the outstanding shares of a class or series may be reduced to a lesser number of shares by a reverse split made on the terms set forth in this section. (2) To effect the reverse split, each outstanding share of the class or series shall be divided by the same divisor as is every other such share. (3) Each share of the class or series shall have, after the reverse split, such par value, if any, as may be stated in the articles of incorporation. (4) If the articles of incorporation are to be amended in connection with the reverse split, whether to change the number of authorized shares of such class or series or the par value, if any, of the shares of such class or series or for any other reason, such amendment shall be effected pursuant to article 110 of this title. (5) In lieu of issuing fractional shares upon such reverse split, the corporation may take any of the actions provided for in section 7-106-104. (6) For the reverse split to be effected: (a) The board of directors shall recommend the reverse split to the holders of shares of the class or series that is to be reverse split and to each other voting group that is entitled, by reason of any provision in the articles of incorporation, to vote on the reverse split, unless the board of directors determines that, because of conflict of interest or other special circumstances, it should make no recommendation and communicates the basis for its determination to the shareholders with the submission of the reverse split; and (b) The holders of shares of the class or series that is to be reverse split, and each other voting group that is entitled, by reason of any provision in the articles of incorporation, to vote on the reverse split, shall approve the reverse split. (7) The board of directors may condition the effectiveness of the reverse split on any basis. (8) The corporation shall give notice, in accordance with section 7-107-105, to each shareholder entitled to vote on the reverse split, of the shareholders' meeting at which the reverse split will be voted upon. The notice of the meeting shall state that the purpose, or one of the purposes, of the meeting is to consider the reverse split, and the notice shall contain or be accompanied by a copy or a summary of the reverse split. (9) Unless articles 101 to 117 of this title, the articles of incorporation, bylaws adopted by the shareholders, or the proposing board of directors require a greater vote, the reverse split shall be approved by the votes required by sections 7-107-206 and 7-107-207 by every voting group entitled to vote on the reverse split.

C.R.S. § 7-106-201 Subscription for shares

7-106-201. Subscription for shares. (1) A subscription for shares entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation before the time the corporation is incorporated and accepts the subscription. (2) The acceptance by the corporation of a subscription entered into before incorporation and the authorization of the issuance of shares pursuant thereto are subject to section 7-106-202. (3) The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement states them. A call for payment by the board of directors shall be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement states otherwise. (4) Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration stated in the subscription agreement. (5) If a subscriber defaults in payment of money or other property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as it might collect any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the shares if the debt remains unpaid more than twenty days after the corporation sends written demand for payment to the subscriber. (6) A subscription agreement entered into after incorporation is a contract between the subscriber and the corporation subject to section 7-106-202.

C.R.S. § 7-106-202 Issuance of shares

7-106-202. Issuance of shares. (1) The powers granted in this section to the board of directors may be reserved to the shareholders by the articles of incorporation. (2) Subject to the limitations set forth in subsection (5) of this section, the board of directors may authorize the issuance of shares for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, and other securities of the corporation. (3) Before the corporation issues shares, the board of directors shall determine that the consideration received or to be received for the shares to be issued is adequate. In the absence of fraud in the transaction, that determination by the board of directors is conclusive insofar as the adequacy of such consideration relates to whether the shares are validly issued, fully paid, and nonassessable. (4) When the corporation receives the consideration for which the board of directors has authorized the issuance of shares, the shares issued therefor are fully paid and nonassessable. (5) The promissory note of a subscriber or an affiliate of the subscriber for shares shall not constitute consideration for the shares unless the note is negotiable and is secured by collateral, other than the shares, having a fair market value at least equal to the principal amount of the note. For the purposes of this subsection (5), "promissory note" means a negotiable instrument on which there is an obligation to pay independent of collateral and does not include a nonrecourse note. (6) Unless otherwise expressly provided in the articles of incorporation or bylaws, shares having a par value may be issued for less than the par value.

C.R.S. § 7-106-203 Liability of shareholders

7-106-203. Liability of shareholders. (1) A purchaser from a corporation of shares issued by the corporation is not liable to the corporation or its creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued under section 7-106-202 or stated in a subscription agreement under section 7-106-201. (2) Unless otherwise provided in the articles of incorporation, a shareholder or a subscriber for shares of a corporation is not personally liable for the acts or debts of the corporation; except that such person may become personally liable by reason of the person's own acts or conduct. (3) Any person becoming an assignee or transferee of shares or of a subscription for shares in good faith and without knowledge or notice that the full consideration therefor has not been paid shall not be personally liable to the corporation or its creditors for any unpaid portion of such consideration.

C.R.S. § 7-106-204 Share dividends

7-106-204. Share dividends. (1) Unless otherwise provided in the articles of incorporation, shares may be issued pro rata and without consideration to the shareholders or to the shareholders of one or more classes or series of its shares. An issuance of shares pursuant to this subsection (1) is a share dividend. (2) Shares of one class or series may not be issued as a share dividend in respect of shares of another class or series unless: (a) The articles of incorporation so authorize; (b) Such issuance is approved by a majority of the votes entitled to be cast by the class or series to be issued; or (c) There are no outstanding shares of the class or series to be issued. (3) The bylaws or, in the absence of an applicable bylaw, the board of directors may fix a future date as the record date for determining shareholders entitled to a share dividend. If no future record date is so fixed, the record date is the date the board of directors authorizes the share dividend.

C.R.S. § 7-106-205 Share options and other rights - definitions

7-106-205. Share options and other rights - definitions. (1) For purposes of this section: (a) "Rights" means rights, options, warrants, or convertible securities entitling the holders thereof to purchase, receive, or acquire shares or fractions of shares of the corporation or assets or debts or other obligations of the corporation. (b) "Significant shareholder" means any person owning, or offering to acquire, directly or indirectly, a number or percentage, as stated by the board of directors, of the outstanding voting shares of a corporation, or any transferee of such person. (2) A corporation may create and issue rights, except as precluded or limited by provisions contained in the articles of incorporation at the time of such creation or issuance. The board of directors shall determine the terms upon which the rights are issued, their form and content, and the consideration, if any, for which shares or fractions of shares, assets, or debts or other obligations of the corporation are to be issued pursuant to the rights. In the absence of fraud in the transaction, the judgment of the board of directors as to the adequacy of consideration received for such rights shall be conclusive. (3) Notwithstanding any other provision of articles 101 to 117 of this title, the terms determined by the board of directors pursuant to subsection (2) of this section for rights issued before, on, or after January 1, 1994, to any shareholders, by way of distribution or otherwise, may, without limitation: (a) Preclude or limit any significant shareholder from exercising, converting, transferring, or receiving rights; (b) Impose conditions upon the exercise, conversion, transfer, or receipt of rights by any significant shareholder that differ from those imposed on other holders of the same class of rights; or (c) Provide that, upon exercise or conversion, any significant shareholder shall be entitled to receive securities, obligations, or assets, the terms or nature of which may differ from the securities, obligations, or assets to be received by the other holders of the same class of rights. (4) Nothing contained in this section shall be construed to effect a change in the fiduciary duties of directors.

C.R.S. § 7-106-206 Form and content of certificates

7-106-206. Form and content of certificates. (1) Shares may, but need not, be represented by certificates. Unless articles 101 to 117 of this title or another statute expressly provide otherwise, the rights and obligations of shareholders are not affected by the fact that their shares are not represented by certificates. (2) Each share certificate shall state on its face: (a) The domestic entity name of the issuing corporation and that the corporation is incorporated under the law of this state; (b) The name of the person to whom the certificate is issued; and (c) The number and class of shares and the designation of the series, if any, the certificate represents. (3) Each share certificate: (a) Shall be signed, either manually or in facsimile, by one or more officers designated in the bylaws or by the board of directors; (b) May bear the corporate seal or its facsimile; and (c) May contain such other information as the corporation deems necessary or appropriate. (4) If the issuing corporation is authorized to issue different classes of shares or different series within a class, the share certificate shall contain a summary, on the front or the back, of the designations, preferences, limitations, and relative rights applicable to each class, the variations in preferences, limitations, and rights determined for each series, and the authority of the board of directors to determine variations for future classes or series. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish to the shareholder this information on request in writing and without charge. (5) If the person who signed, either manually or in facsimile, a share certificate no longer holds office when the certificate is issued, the certificate is nevertheless valid.

C.R.S. § 7-106-207 Shares without certificates

7-106-207. Shares without certificates. (1) Unless otherwise provided by the bylaws, the board of directors may authorize the issuance by the corporation of some or all of the shares of any or all of its classes or series without certificates. The authorization does not affect shares already represented by certificates until they are surrendered to the corporation. (2) Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall send to the shareholder a written statement of the information required on certificates by subsections (2) and (4) of section 7-106-206 and section 7-106-208.

C.R.S. § 7-106-208 Restriction on transfer of shares and other securities

7-106-208. Restriction on transfer of shares and other securities. (1) The articles of incorporation, the bylaws, an agreement among shareholders, or an agreement among shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction does not affect shares issued before the restriction became effective unless the holder of such shares acquired such shares with knowledge of the restriction, is a party to the agreement containing the restriction, or voted in favor of the restriction or otherwise consented to the restriction. (2) A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this section and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by section 7-106-207 (2). Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction. (3) A restriction on the transfer or registration of transfer of shares is authorized: (a) To maintain the corporation's status when it is dependent on the number or identity of its shareholders; (b) To preserve entitlements, benefits, or exemptions under federal, state, or local laws; and (c) For any other reasonable purpose. (4) A restriction on the transfer or registration of transfer of shares may: (a) Obligate the shareholder first to offer to the corporation or other persons, separately, consecutively, or simultaneously, an opportunity to acquire the restricted shares; (b) Obligate the corporation or other persons, separately, consecutively, or simultaneously, to acquire the restricted shares; (c) Require, as a condition to such a transfer or registration, that any one or more persons, including the corporation or the holders of any of its shares, approve the transfer or registration, if the requirement is not manifestly unreasonable; or (d) Prohibit the transfer or the registration of a transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable. (5) For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares.

C.R.S. § 7-106-209 Expense of issue

7-106-209. Expense of issue. A corporation may pay the expenses of selling or underwriting its shares, and of incorporating, organizing, or reorganizing the corporation, from the consideration received for shares.

C.R.S. § 7-106-301 Shareholders' preemptive rights

7-106-301. Shareholders' preemptive rights. (1) The shareholders of a corporation do not have a preemptive right to acquire unissued shares except to the extent provided by subsections (3) to (6) of section 7-117-101 or the articles of incorporation. (2) A statement included in the articles of incorporation that "the corporation elects to have preemptive rights", or words of similar import, means that the following principles apply, except to the extent otherwise provided by subsections (3) to (6) of section 7-117-101 or the articles of incorporation: (a) The shareholders have a preemptive right, subject to any uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the unissued shares upon the decision of the board of directors to issue them. (b) A shareholder may waive the shareholder's preemptive right, and such waiver, if evidenced by a writing, is irrevocable even though it is not supported by consideration. (c) There is no preemptive right with respect to: (I) Shares issued as compensation to directors, officers, agents, or employees of the corporation or its subsidiaries or affiliates; (II) Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents, or employees of the corporation or its subsidiaries or affiliates; (III) Shares that are issued within six months after the effective date of incorporation; or (IV) Shares sold otherwise than for cash. (d) Holders of shares of any class without general voting rights but with preferential rights to distributions or assets have no preemptive rights with respect to shares of any class. (e) Holders of shares of any class with general voting rights but without preferential rights to distributions or assets have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights. (f) Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person, for a period of one year after being offered to shareholders pursuant to such preemptive rights, at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of such one-year period is subject to the shareholders' preemptive rights. (3) For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares.

C.R.S. § 7-106-302 Corporation's acquisition of its own shares

7-106-302. Corporation's acquisition of its own shares. (1) A corporation may acquire its own shares, and, except as provided by section 7-117-101 (6), shares so acquired constitute authorized but unissued shares. (2) If the articles of incorporation prohibit the reissuance of acquired shares: (a) The number of authorized shares is reduced by the number of shares acquired by the corporation, effective upon amendment to the articles of incorporation; and (b) The corporation shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, articles of amendment to the articles of incorporation, which are effective without shareholder action, that state: (I) The domestic entity name of the corporation; (II) The reduction in the number of authorized shares, itemized by class and series; and (III) The total number of authorized shares, itemized by class and series, remaining after reduction of the shares.

C.R.S. § 7-106-401 Distributions to shareholders

7-106-401. Distributions to shareholders. (1) A board of directors may authorize, and the corporation may make, distributions to its shareholders subject to any restriction in the articles of incorporation and subject to the limitations set forth in subsection (3) of this section. (2) The bylaws or, in the absence of an applicable bylaw, the board of directors may fix a future date as the record date for determining shareholders entitled to a distribution, other than one involving a purchase, redemption, or other acquisition of the corporation's shares. If a record date is necessary but no future record date is so fixed, the record date is the date the board of directors authorizes the distribution. (3) No distribution may be made if, after giving it effect: (a) The corporation would not be able to pay its debts as they become due in the usual course of business; or (b) 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 distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. (4) The board of directors may base a determination that a distribution is not prohibited under subsection (3) of this section either on financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances or on a fair valuation or other method that is reasonable under the circumstances. (5) Except as provided in subsection (6) of this section, the time for measuring the effect of a distribution under subsection (3) of this section is: (a) In the case of distribution by purchase, redemption, or other acquisition of the corporation's shares, as of the earlier of: (I) The date money or other property is transferred or debt is incurred by the corporation; or (II) The date the shareholder ceases to be a shareholder with respect to the acquired shares; (b) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and (c) In all other cases, as of either: (I) The date the distribution is authorized, if the payment occurs within one hundred twenty days after the date of authorization; or (II) The date the payment is made, if it occurs more than one hundred twenty days after the date of authorization. (6) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (3) of this section if its terms provide that payment of principal and interest thereon are made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest thereon is treated as a distribution the effect of which is measured on the date the payment is actually made. (7) Unless otherwise expressly provided in the articles of incorporation or bylaws, a statement of par value for shares shall not impose any limitation on distributions and shall not require any separate designation, restriction, reservation, or other segregation of any capital account of a corporation.

C.R.S. § 7-106-402 Unclaimed distributions

7-106-402. Unclaimed distributions. If a corporation has mailed three successive distributions to a shareholder addressed to the shareholder's address shown on the corporation's current record of shareholders and the distributions have been returned as undeliverable, no further attempt to deliver distributions to the shareholder need be made until another address for the shareholder is made known to the corporation, at which time all distributions accumulated by reason of this section shall, except as otherwise provided by law, be mailed to the shareholder at such other address.

Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://leg.colorado.gov/sites/default/files/images/olls/crs2024-title-07.docxFetched: 10/6/2026