N.Y. Business Corporation Law § 504: Consideration and payment for shares

§ 504. Consideration and payment for shares.

(a) Consideration for the issue of shares shall consist of money or

other property, tangible or intangible; labor or services actually

received by or performed for the corporation or for its benefit or in

its formation or reorganization; a binding obligation to pay the

purchase price or the subscription price in cash or other property; a

binding obligation to perform services having an agreed value; or a

combination thereof. In the absence of fraud in the transaction, the

judgment of the board or shareholders, as the case may be, as to the

value of the consideration received for shares shall be conclusive.

(c) Shares with par value may be issued for such consideration, not

less than the par value thereof, as is fixed from time to time by the

board.

(d) Shares without par value may be issued for such consideration as

is fixed from time to time by the board unless the certificate of

incorporation reserves to the shareholders the right to fix the

consideration. If such right is reserved as to any shares, a vote of

the shareholders shall either fix the consideration to be received for

the shares or authorize the board to fix such consideration.

(e) Treasury shares may be disposed of by a corporation on such terms

and conditions as are fixed from time to time by the board.

(f) Upon distribution of authorized but unissued shares to

shareholders, that part of the surplus of a corporation which is

concurrently transferred to stated capital shall be the consideration

for the issue of such shares.

(g) In the event of a conversion of bonds or shares into shares, or in

the event of an exchange of bonds or shares for shares, with or without

par value, the consideration for the shares so issued in exchange or

conversion shall be the sum of (1) either the principal sum of, and

accrued interest on, the bonds so exchanged or converted, or the stated

capital then represented by the shares so exchanged or converted, plus

(2) any additional consideration paid to the corporation for the new

shares, plus (3) any stated capital not theretofore allocated to any

designated class or series which is thereupon allocated to the new

shares, plus (4) any surplus thereupon transferred to stated capital and

allocated to the new shares.

(h) Certificates for shares may not be issued until the amount of the

consideration therefor determined to be stated capital pursuant to

section 506 (Determination of stated capital) has been paid in the form

of cash, services rendered, personal or real property or a combination

thereof and consideration for the balance (if any) complying with

paragraph (a) of this section has been provided, except as provided in

paragraphs (e) and (f) of section 505 (Rights and options to purchase

shares; issue of rights and options to directors, officers and

employees).

(i) When the consideration for shares has been provided in compliance

with paragraph (h) of this section, the subscriber shall be entitled to

all the rights and privileges of a holder of such shares and to a

certificate representing his shares, and such shares shall be fully paid

and nonassessable.

(j) Notwithstanding that such shares may be fully paid and

nonassessable, the corporation may place in escrow shares issued for a

binding obligation to pay cash or other property or to perform future

services, or make other arrangements to restrict the transfer of the

shares, and may credit distributions in respect of the shares against

the obligation, until the obligation is performed. If the obligation is

not performed in whole or in part, the corporation may pursue such

remedies as are provided in the instrument evidencing the obligation or

a related agreement or under law.