N.Y. Business Corporation Law § 511: Share distributions and changes

§ 511. Share distributions and changes.

(a) A corporation may make pro rata distributions of its authorized

but unissued shares to holders of any class or series of its outstanding

shares, subject to the following conditions:

(1) If a distribution of shares having a par value is made, such

shares shall be issued at not less than the par value thereof and there

shall be transferred to stated capital at the time of such distribution

an amount of surplus equal to the aggregate par value of such shares.

(2) If a distribution of shares without par value is made, the amount

of stated capital to be represented by each such share shall be fixed by

the board, unless the certificate of incorporation reserves to the

shareholders the right to fix the consideration for the issue of such

shares, and there shall be transferred to stated capital at the time of

such distribution an amount of surplus equal to the aggregate stated

capital represented by such shares.

(3) A distribution of shares of any class or series may be made to

holders of the same or any other class or series of shares unless the

certificate of incorporation provides otherwise, provided, however, that

in the case of a corporation incorporated prior to the effective date of

subparagraph (4) of this paragraph, then so long as any shares of such

class remain outstanding a distribution of shares of any class or series

of shares of such corporation may be made only to holders of the same

class or series of shares unless the certificate of incorporation

permits distribution to holders of another class or series, or unless

such distribution is approved by the affirmative vote or the written

consent of the holders of a majority of the outstanding shares of the

class or series to be distributed.

(4) A distribution of any class or series of shares shall be subject

to the preemptive rights, if any, applicable to such shares pursuant to

this chapter.

(b) A corporation making a pro rata distribution of authorized but

unissued shares to the holders of any class or series of outstanding

shares may at its option make an equivalent distribution upon treasury

shares of the same class or series, and any shares so distributed shall

be treasury shares.

(c) A change of issued shares of any class which increases the stated

capital represented by those shares may be made if the surplus of the

corporation is sufficient to permit the transfer, and a transfer is

concurrently made, from surplus to stated capital, of an amount equal to

such increase.

(d) No transfer from surplus to stated capital need be made by a

corporation making a distribution of its treasury shares to holders of

any class of outstanding shares; nor upon a split up or division of

issued shares of any class into a greater number of shares of the same

class, or a combination of issued shares of any class into a lesser

number of shares of the same class, if there is no increase in the

aggregate stated capital represented by them.

(e) Nothing in this section shall prevent a corporation from making

other transfers from surplus to stated capital in connection with share

distributions or otherwise.

(f) Every distribution to shareholders of certificates representing a

share distribution or a change of shares which affects stated capital or

surplus shall be accompanied by a written notice (1) disclosing the

amounts by which such distribution or change affects stated capital and

surplus, or (2) if such amounts are not determinable at the time of such

notice, disclosing the approximate effect of such distribution or change

upon stated capital and surplus and stating that such amounts are not

yet determinable.

(g) When issued shares are changed in any manner which affects stated

capital or surplus, and no distribution to shareholders of certificates

representing any shares resulting from such change is made, disclosure

of the effect of such change upon the stated capital and surplus shall

be made in the next financial statement covering the period in which

such change is made that is furnished by the corporation to holders of

shares of the class or series so changed or, if practicable, in the

first notice of dividend or share distribution or change that is

furnished to such shareholders between the date of the change of shares

and the next such financial statement, and in any event within six

months of the date of such change.