CORPORATIONS - STATUTES DECLARING WATERED STOCK VOID - EFFECT UPON THE STOCKHOLDER'S LIABILITY TO CREDITORS

Authors

Abstract

Prior to the present era of "blue sky" laws providing for the careful scrutiny by the state of the issuance of stock, the evil of watered stock was sought to be curbed by constitutional and statutory provisions of a prohibitory and often penal nature. These statutes and constitutional provisions very generally take one of two forms.

The Colorado and the Arizona provisions are typical. In practical effect the two types of provisions are indistinguishable. The phrase "bona fide subscribers" in the Arizona form is construed to mean one who actually turns something of value over to the corporation in lieu of the stock issued to him. Although in many states today the issuance of stock is carefully scrutinized and the manner of liability thereon is carefully spelled out by statute, constitutional and statutory provisions like the ones quoted above still remain the law of the land in some twenty-seven states. Hence the problem of interpreting them properly is very much alive today.

Recommended Citation

CORPORATIONS - STATUTES DECLARING WATERED STOCK VOID - EFFECT UPON THE STOCKHOLDER'S LIABILITY TO CREDITORS, 35 Mich. L. Rev. 108 (1936).
Available at: https://repository.law.umich.edu/mlr/vol35/iss1/7