Iowa Code 490.630 – Shareholders’ preemptive rights
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1. The shareholders of a corporation do not have a preemptive right to acquire the corporation’s unissued shares except to the extent the articles of incorporation so provide.
Terms Used In Iowa Code 490.630
- Articles of incorporation: means the articles of incorporation described in section 490. See Iowa Code 490.140
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Person: means a person as defined in section 4. See Iowa Code 490.140
- Shareholder: means a record shareholder. See Iowa Code 490.140
- Shares: means the units into which the proprietary interests in a domestic or foreign corporation are divided. See Iowa Code 490.140
- Voting power: means the current power to vote in the election of directors. See Iowa Code 490.140
- year: means twelve consecutive months. See Iowa Code 4.1
2. A statement included in the articles of incorporation that “the corporation elects to have preemptive rights”, or words of similar effect, means that the following principles apply except to the extent the articles of incorporation expressly provide otherwise:
a. 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.
b. A preemptive right may be waived by a shareholder. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration.
c. There is no preemptive right with respect to any of the following:
(1) Shares issued as compensation to directors, officers, employees, or agents of the corporation, its subsidiaries, or its affiliates.
(2) Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, employees, or agents of the corporation, its subsidiaries, or its affiliates.
(3) Shares authorized in the articles of incorporation that are issued within six months from the effective date of incorporation.
(4) Shares sold otherwise than for cash.
d. Holders of shares of any class or series without voting power but with preferential rights to distributions have no preemptive rights with respect to shares of any class or series.
e. Holders of shares of any class or series with voting power but without preferential rights to distributions have no preemptive rights with respect to shares of any class or series with preferential rights to distributions unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire the 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 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.
3. As used in this section, “shares” includes a security convertible into or carrying a right to subscribe for or acquire shares.