Shares Issuance and Distributions

R.I. Gen. Laws tit. 7, ch. 7-1.2, pt. 6

in effect

R.I. Gen. Laws § 7-1.2-601 Right of corporation to acquire, dispose of and cancel its own shares.

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. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-602 Authorized shares — Shares in classes or series — Issuance of shares.

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 shares, 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 the adoption of the prior resolution. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-603 Subscription for shares.

7-1.2-603. Subscription for shares. (a) A subscription for shares entered into before incorporation is irrevocable for a period of six (6) months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation. A subscription for shares is not enforceable against a subscriber unless in writing and signed by the subscriber or by an agent of the subscriber. (b) The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors must be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise. (c) Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement. (d) If a subscriber defaults in payment of money or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as 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 20 days after the corporation sends written demand for payment to the subscriber. (e) A subscription agreement entered into on or after incorporation is a contract between the subscriber and the corporation subject to § 7-1.2-604. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-604 Issuance of and consideration for shares.

7-1.2-604. Issuance of and consideration for shares. (a) Shares with par value may be issued for such consideration having a value not less than the par value thereof, as determined from time to time by the board of directors, or by the shareholders if the articles of incorporation so provide. (b) Shares without par value may be issued for such consideration as is determined from time to time by the board of directors, or by the shareholders if the articles of incorporation so provide. (c) The board of directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed or other securities of the corporation. (d) Before the corporation issues shares, the board of directors must determine that the consideration received or to be received for shares to be issued is adequate. The determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of the shares relates to whether the shares are validly issued, fully paid and nonassessable. (e) When the corporation receives the consideration for which the board of directors authorized the issuance of shares, the shares issued therefor are fully paid and nonassessable. (f) The corporation may place in escrow shares issued for a contract for future services or benefits or a promissory note, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against their purchase price, until the services are performed, the note is paid or the benefits received. If the services are not performed, the note is not paid, or the benefits are not received, the shares escrowed or restricted and the distributions credited may be cancelled in whole or part. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-605 Par value per share.

7-1.2-605. Par value per share. Solely for the purpose of any statute or regulation imposing any tax or fee based upon the capitalization of a corporation, unless otherwise stated in the articles of incorporation, all authorized shares of a corporation organized under this chapter are deemed to have a nominal or par value of one cent ($0.01) per share. If any federal or other statute or regulation applicable to a particular corporation requires that the shares of such corporation have a par value, such shares have the par value determined by the board of directors in order to satisfy the requirements of such statute or regulation. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2.

R.I. Gen. Laws § 7-1.2-606 Share rights and options.

7-1.2-606. Share rights and options. Subject to any provisions in respect to rights and options stated in its articles of incorporation, a corporation may create and issue, whether or not in connection with the issuance and sale of any of its shares or other securities, rights or options entitling the holders to purchase from the corporation shares of any class or classes. Those rights or options are evidenced, and the recipients thereof designated, in any manner that the board of directors approves and, subject to the provisions of the articles of incorporation, shall state the terms upon which, the time or times within which and the price or prices at which the shares may be purchased from the corporation upon the exercise of any right or option. In the absence of fraud in the transaction, the judgment of the board of directors as to the adequacy of the consideration received for the rights or options is conclusive. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2.

R.I. Gen. Laws § 7-1.2-607 Expenses of organization, reorganization and financing.

7-1.2-607. Expenses of organization, reorganization and financing. The reasonable charges and expenses of organization or reorganization of a corporation, and the reasonable expenses of and compensation for the sale or underwriting of its shares, may be paid or allowed by the corporation out of the consideration received by it in payment for its shares without rendering the shares not fully paid or assessable. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2.

R.I. Gen. Laws § 7-1.2-608 Form and content of certificates.

7-1.2-608. Form and content of certificates. (a) The shares of a corporation may but need not be represented by certificates as determined by the board of directors. Every holder of shares represented by certificates and upon request every holder of uncertificated shares is entitled to have a certificate signed by the officer or officers designated for the purpose by the bylaws of the corporation, and in the absence of any designation, by the chairperson or the vice chairperson of the board of directors, or the president or a vice president, and by the treasurer or the assistant treasurer, or the secretary or an assistant secretary of the corporation, representing the number of shares registered in certificate form and may be sealed with the seal of the corporation or a facsimile of the seal. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon the certificate has ceased to be the officer, transfer agent or registrar before the certificate is issued, it may be issued by the corporation with the same effect as if he or she were the officer, transfer agent or registrar at the date of its issue. (b) Every certificate representing shares issued by a corporation which is authorized to issue shares of more than one class must state upon the face or back of the certificate, or state that the corporation will furnish to any shareholder upon request and without charge, a full statement of the designations, preferences, limitations and relative rights of the shares of each class authorized to be issued and, if the corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each series so far as the series have been fixed and determined and the authority of the board of directors to fix and determine the relative rights and preferences of subsequent series. (c) Each certificate representing shares must state upon the face of the certificate: (1) That the corporation is organized under the laws of this state. (2) The name of the person to whom issued. (3) The number and class of shares, and the designation of the series, if any, which the certificate represents. (4) The par value of each of the shares, if any. (d) No certificate may be issued for any share until the share is fully paid. (e) Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send to the registered owner of the shares a written notice containing the information and statements required to be presented or stated on certificates pursuant to subsections (b) and (c) and § 7-1.2-609(b). (f) Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series are identical. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-609 Share transfer and ownership restrictions.

7-1.2-609. Share transfer and ownership restrictions. (a) The shares of a corporation are personal property and are transferable in accordance with the provisions of § 6A-8-204, as amended from time to time, except as may otherwise be provided in this chapter. (b) The articles of incorporation, bylaws, an agreement among all or less than all of the shareholders or an agreement between all or less than all of the 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 was adopted, unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction. (c) 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 chapter and its existence is noted conspicuously on the front or back of the certificate or is noted in the initial transaction statement required by § 6A-8-204(2). Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction. (d) A restriction on the transfer, ownership or registration of transfer of shares is authorized: (1) To maintain the corporation’s status when it is dependent on the number or identity of its shareholders; (2) To preserve exemptions under federal or state securities law; (3) To permit a corporation to qualify as: (i) A real estate investment trust under the provisions of the Internal Revenue Code of 1986, as heretofore or hereafter amended, or regulations adopted thereunder; or (ii) An investment company under the Investment Company Act of 1940, as heretofore or hereafter amended, or regulations adopted thereunder; and (4) For any other reasonable purpose. (e) A restriction on the transfer or registration of transfer of shares may: (1) Obligate the shareholder first to offer the corporation or other persons (separately, consecutively or simultaneously) an opportunity to acquire the restricted shares; (2) Obligate the corporation or other persons (separately, consecutively or simultaneously) to acquire the restricted shares; (3) Require the corporation, the holders of any class of its shares or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable; (4) Prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable. (f) For the purposes of this section, “shares” includes a security convertible into or carrying a right to subscribe for or acquire shares. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-610 Fractional shares.

7-1.2-610. Fractional shares. (a) A corporation may: (1) Issue fractions of a share; (2) Arrange for the disposition of fractional interests by those entitled to those interests; (3) Pay in cash the fair value of fractions of a share as of the time when those entitled to receive the fractions are determined; or (4) Issue scrip in registered or bearer form which entitles the holder to receive a certificate for a full share upon the surrender of the scrip aggregating a full share. (b) A certificate for a fractional share, but not scrip, entitles unless it otherwise provides, the holder to exercise voting rights, to receive dividends on that share, and to participate in any of the assets of the corporation in the event of liquidation. The board of directors may issue scrip subject to the condition that it becomes void if not exchanged for certificates representing full shares before a specified date, or subject to the condition that the shares for which scrip is exchangeable may be sold by the corporation and the proceeds from the sale distributed to the holders of scrip, or subject to any other conditions which the board of directors deems advisable. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-611 Bonds — Facsimile signatures and seals.

7-1.2-611. Bonds — Facsimile signatures and seals. The seal of the corporation and any or all signatures of the officers or other agents of the corporation upon a bond and any coupon attached to the bond may be facsimiles if the bond is countersigned by an officer or other agent of a trustee or other certifying or authenticating authority. In case any officer or other agent who has signed or whose facsimile signature has been placed upon the bond or coupon has ceased to be the officer or agent before the bond is issued, it may be issued by the corporation with the same effect as if he were the officer or agent at the date of its issue. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2.

R.I. Gen. Laws § 7-1.2-612 Liability of subscribers and shareholders.

7-1.2-612. Liability of subscribers and shareholders. (a) A holder of or subscriber to shares of a corporation is under no obligation to the corporation or its creditors with respect to the shares other than the obligation to pay to the corporation the unpaid portion of the consideration for which the shares were issued or to be issued, which in no event may be less than the amount of the consideration for which the shares could be lawfully issued. (b) 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 for the shares has not been paid is not personally liable to the corporation or its creditors for any unpaid portion of the consideration. An executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditors or receiver is not personally liable to the corporation as a holder of or subscriber to shares of a corporation but the estate and funds in his or her hands are so liable. (c) No pledgee or other holder of shares as collateral security is personally liable as a shareholder. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-613 Shareholder’s preemptive rights.

7-1.2-613. Shareholder’s preemptive rights. (a) Except to the extent limited or denied by this section or by the articles of incorporation, shareholders of a corporation incorporated prior to July 1, 2005, have a preemptive right to acquire unissued shares or securities convertible into shares or carrying a right to subscribe to or acquire shares. Unless otherwise provided in the articles of incorporation: (1) No preemptive right exists: (i) To acquire any shares issued to directors, officers, or employees pursuant to approval by the affirmative vote of the holders of a majority of the shares entitled to vote on the acquisition or when authorized by and consistent with a plan previously approved by a vote of shareholders; or (ii) To acquire any shares sold other than for money. (2) Holders of shares of any class that is preferred or limited as to dividends or assets are not entitled to any preemptive right. (3) Holders of shares of any class are not entitled to any preemptive right to shares of any class that is preferred or limited as to dividends or assets or to any obligations, unless convertible into shares of that class or carrying a right to subscribe to or acquire shares of that class. (4) Holders of shares without voting power have no preemptive right to shares with voting power. (5) The preemptive right is only an opportunity to acquire shares or other securities under terms and conditions that the board of directors may fix for the purpose of providing a fair and reasonable opportunity for the exercise of the right. (b) The shareholders of a corporation incorporated on or after July 1, 2005, do not have a preemptive right to acquire a corporation’s unissued shares or securities convertible into shares or carrying a right to subscribe for or acquire shares except to the extent the articles of incorporation so provide. 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 the articles of incorporation expressly provide otherwise: (1) The shareholders of the corporation have a preemptive right, granted on 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 corporation’s unissued shares upon the decision of the board of directors to issue them. (2) A shareholder may waive his or her preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration. (3) There is no preemptive right with respect to: (i) Shares issued as compensation to directors, officers, agents, or employees of the corporation, 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, its subsidiaries or affiliates; (iii) Shares authorized in articles of incorporation that are issued within six (6) months from the effective date of incorporation; or (iv) Shares sold otherwise than for money. (4) 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. (5) 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. (6) 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 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 one year is subject to the shareholders’ preemptive rights. (c) For purposes of this section, “shares” includes a security convertible into or carrying a right to subscribe for or acquire shares. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.

R.I. Gen. Laws § 7-1.2-614 Distributions to shareholders.

7-1.2-614. Distributions to shareholders. (a) Distributions of other than shares. (1) The board of directors may authorize and the corporation may make distributions to its shareholders subject to restriction by the articles of incorporation and the limitation in subsection (a)(3) of this section. (2) If the board of directors does not fix 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), it is the date the board of directors authorizes the distribution. (3) No distribution may be made if, after giving it effect: (i) The corporation would be insolvent; or (ii) 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 (unless such preferential rights are waived by a majority of the shareholders entitled to such preferential rights, voting by class). (4) The board of directors may base a determination that a distribution is not prohibited under subsection (a)(3) of this section 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. (5) Except as provided in subsection (a)(7) of this section, the effect of a distribution under subsection (a)(3) of this section is measured: (i) In the case of distribution by purchase, redemption or other acquisition of the corporation’s shares, as of the earlier of (A) the date money or other property is transferred or debt incurred by the corporation or (B) the date the shareholder ceases to be a shareholder with respect to the acquired shares; (ii) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and (iii) In all other cases, as of (A) the date the distribution is authorized if the payment occurs within one hundred twenty (120) days after the date of authorization or (B) the date the payment is made if it occurs more than one hundred twenty (120) days after the date of authorization. (6) A corporation’s indebtedness to a shareholder incurred by reason of a distribution made in accordance with this section is at parity with the corporation’s indebtedness to its general, unsecured creditors except to the extent subordinated by agreement. (7) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (a)(3) of this section if its terms of the indebtedness provide that payment of principal and interest 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 is treated as a distribution, the effect of which is measured on the date the payment is actually made. (b) Distributions of shares. (1) Unless the articles of incorporation provide otherwise, shares may be issued pro rata and without consideration to the corporation’s shareholders or to the shareholders of one or more classes or series. An issuance of shares under this subsection is a share distribution. (2) Shares of one class or series may not be issued as a share distribution in respect to shares of another class or series unless (i) the articles of incorporation so authorize, (ii) a majority of the votes entitled to be cast by the class or series to be issued approve the issue, or (iii) there are not outstanding shares of the class or series to be issued. (3) If the board of directors does not fix a record date for determining shareholders entitled to share distribution, then it is the date the board of directors authorizes the share distribution. P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1; P.L. 2006, ch. 163, § 1; P.L. 2006, ch. 188, § 1.

Source: State of Rhode Island General Assembly (rilegislature.gov)URL: https://webserver.rilegislature.gov/Statutes/TITLE7/7-1.2/7-6/INDEX.htmFetched: 10/20/2026