Also known as: fully-paid and non-assessable · fully paid & nonassessable · nonassessable shares · fully paid shares
Written by attorneys · grounded in primary & secondary sources — see below
Shares issued after the corporation receives the consideration authorized by the board of directors. The board's determination of adequacy conclusively establishes that the shares are validly issued without further liability for the holder.
Freya Freeman agreed to contribute cash, a promissory note, and future services to Flagship Logistics in exchange for new shares. The board formally determined that the package constituted adequate consideration and authorized the issuance. When an outside investor later challenged the adequacy of the note and services, the shares remained validly issued and free from further assessment because the board's determination controlled.
Frederick Ferguson and another incorporator received shares in Franklin Foundry in exchange for promissory notes and promises of future labor. Under the governing statute, neither notes nor future services counted as payment. The shares therefore never became fully paid and nonassessable, exposing the holders to liability when creditors later sought recovery.
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Yes. Once the board determines that the consideration is adequate before issuance, that determination is conclusive on whether the shares are validly issued, fully paid, and nonassessable. Courts will not revalue the consideration for that purpose even if later evidence suggests it was insufficient.
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Yes. Modern statutes expressly permit the board to accept any tangible or intangible property or benefit, including promissory notes and contracts for services to be performed. Once the corporation receives the authorized consideration, the shares are fully paid and nonassessable.
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The shares may not qualify as fully paid and nonassessable. The statute requires the board to determine adequacy before issuance, and only that determination triggers the conclusive protection for validity and payment status.
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Yes. When the corporation receives the consideration for which the board authorized issuance, the shares issued for that consideration become fully paid and nonassessable by operation of the statute.
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