N.Y. Public Service Law § 89-f: Approval of issues of stock, bonds and other forms of indebtedness

§ 89-f. Approval of issues of stock, bonds and other forms of

indebtedness. A water-works corporation organized or existing, or

hereafter incorporated, under or by virtue of the laws of the state of

New York, may issue stocks, bonds, notes or other evidences of

indebtedness payable at periods of more than twelve months after the

date thereof, or a receiver of such a corporation, if duly authorized by

law, may issue receiver's certificates, when necessary for the

acquisition of property, the construction, completion, extension or

improvement of its water system, or for the improvement or maintenance

of its service or for the discharge or lawful refunding of its

obligations or for the reimbursement of moneys actually expended from

income or from any other moneys in the treasury of the corporation not

secured or obtained from the issue of stocks, bonds, notes or other

evidences of indebtedness of such corporation, within five years next

prior to the filing of an application with the commission for the

required authorization, for any of the aforesaid purposes except

maintenance of service and except replacements in cases where the

applicant shall have kept its accounts and vouchers of such expenditure

in such manner as to enable the commission to ascertain the amount of

moneys so expended and the purposes for which such expenditure was made;

provided and not otherwise that there shall have been secured from the

commission an order authorizing such issue, and the amount thereof, and

stating the purposes to which the issue or proceeds thereof are to be

applied, and that, in the opinion of the commission, the money, property

or labor to be procured or paid for by the issue of such stock, bonds,

notes or other evidences of indebtedness is or has been reasonably

required for the purposes specified in the order, and that except as

otherwise permitted in the order in the case of bonds, notes and other

evidences of indebtedness, such purposes are not in whole or in part

reasonably chargeable to operating expenses or to income. Stock may be

issued to stockholders as a stock dividend provided that there shall

have been secured from the commission an order authorizing such issue

and a transfer of surplus to capital in an amount equal to the par or

stated value of the stock so authorized and stating that a sum equal to

the amount to be so transferred was expended for the purposes enumerated

in this section. Stock may be issued to an employee or director of a

waterworks corporation under a stock option plan pursuant to which such

corporation grants options to its employees or directors to purchase

shares of stock, such options to be exercisable for a stated period of

time to purchase shares of stock at the market value of the stock at the

time of issuance of the option, provided that there shall have been

secured from the commission an order authorizing such issue and that the

proceeds from the exercise of the stock options are needed for one of

the purposes enumerated in this section. The issue of stocks, bonds or

other evidences of indebtedness, within the meaning of this section,

shall include the sale hereafter by any such corporation of its stocks,

bonds or other evidences of indebtedness previously issued and

reacquired, whether originally issued at, before or after the time this

section takes effect, provided, however, for good cause shown the

commission may exempt from the restriction hereof stocks, bonds or other

evidences of indebtedness. For the purpose of enabling it to determine

whether it should issue such an order, the commission shall make such

inquiry or investigation, hold such hearings and examine such witnesses,

books, papers, documents or contracts as it may deem of importance in

enabling it to reach a determination. Such corporation shall not without

the consent of the commission apply said issue or any proceeds thereof

to any purpose not specified in such order. Such corporation may issue

notes, for proper corporate purposes and not in violation of any

provision of this or of any other act, payable at periods of not more

than twelve months without such consent; but no such notes shall, in

whole or in part, directly or indirectly be refunded by any issue of

stock or bonds or by any evidences of indebtedness running for more than

twelve months without the consent of the commission. The commission

shall have power to require every such corporation to file with the

commission after the issuance of stocks, bonds, notes or other evidences

of indebtedness, issued with or without the approval of the commission

as herein provided, a notice of such transaction in such form as the

commission may prescribe. Provided, however, that the commission shall

have no power to authorize the capitalization of any franchise to be a

corporation nor to authorize the capitalization of any franchise or the

right to own, operate or enjoy any franchise whatsoever in excess of the

amount (exclusive of any tax or annual charge) actually paid to the

state or to any political subdivision thereof as the consideration for

the grant of such franchise or right, nor to authorize the issuance of

any stocks or other securities for any purposes other than those

enumerated in this section. Nor shall the capital stock of a corporation

formed by the merger or consolidation of two or more other corporations,

exceed the sum of the capital stock of the corporations, so

consolidated, at the par value thereof, or such sum and any additional

sum actually paid in cash; nor shall any contract for consolidation or

lease be capitalized in the stock of any corporation whatever; nor shall

any corporation hereafter issue any bonds against or as a lien upon any

contract for consolidation or merger.