Also known as: authorized but unissued shares · authorized but unissued stock · unissued shares
Written by attorneys · grounded in primary & secondary sources — see below
Shares of a corporation that the articles of incorporation have authorized for issuance but that the corporation has not yet sold or distributed to any shareholder. Such shares remain available for future board action to issue on terms the articles or statute permit without further shareholder approval.
Atlas Ventures holds all outstanding shares of Alpine Mining. The board decides to issue 100,000 shares to a new investor. Anita Ali, an existing shareholder, claims a right to buy a proportional block first. Because the shares are authorized but unissued, the articles contain no preemptive-rights clause, and the board proceeds with the issuance to the new investor.
Atlas Corp. conveys authorized but unissued shares to its shareholders with a remainder to their children living at death, but only if they survive by twenty-five years. The remainder might vest more than twenty-one years after lives in being. The limitation is nevertheless valid under the rule against perpetuities because the subject matter consists of authorized but unissued shares of a corporation.
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Aurora Biotech buys back 50,000 shares from Alexis Archer. The articles permit the corporation to hold reacquired shares for reissuance. The shares become authorized but unissued and may be sold again to a new employee without amending the articles or obtaining a shareholder vote.
Atlas Corp. creates a class gift of authorized but unissued shares for the benefit of grandchildren living at the settlor's death, with later-born grandchildren allowed to join. The gift might remain open longer than the perpetuities period. The limitation is nevertheless valid because the subject matter consists of authorized but unissued corporate shares rather than land or other property.
Blasius Industries acquires 51 percent of Atlas Corp. stock and threatens a merger vote. The Atlas board issues 15 percent of the corporation's authorized but unissued shares to a friendly buyer. The issuance dilutes Blasius's voting power and prevents the merger from obtaining the required shareholder approval.
Signal negotiates to buy control of UOP. It first purchases 1.5 million authorized but unissued UOP shares at $21 per share, contingent on a successful tender offer for the remaining public shares at the same price. The block of authorized but unissued shares gives Signal a majority stake once the tender closes.
A board may issue authorized but unissued shares without a shareholder vote when the articles grant the board power to classify or set terms for such shares. The board must fix all terms before issuance and file articles of amendment with the secretary of state.
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Shareholders have no preemptive rights to authorized but unissued shares unless the articles expressly create those rights. The default rule under the Model Business Corporation Act denies preemptive rights to unissued shares.
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Repurchased shares become authorized but unissued shares unless the articles prohibit reissuance. The corporation may later reissue them without amending the articles to restore the authorized number.
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…followed, an understanding was reached between the two companies whereby Signal agreed to purchase from UOP 1.5 million of UOP's authorized but unissued shares for a price of $21 per share. This purchase, however, was made contingent upon Signal making a successful cash tender offer for 4.3 million publicly held shares of UOP, also at a price of…