United States · New York

How to issue shares in New York corporations

New York hosts many corporations through both incorporation in-state and qualification to do business from Delaware. NY BCL is the controlling statute for NY-incorporated corporations and applies to certain matters even for Delaware-incorporated corporations operating in NY.

Governing statute
New York Business Corporation Law, N.Y. Bus. Corp. Law
NY BCL § 504Consideration and payment for shares
NY BCL § 505Rights and options to purchase shares
NY BCL § 508Stock certificates; uncertificated shares
NY BCL § 624Books and records; inspection
NY BCL § 622Pre-emptive rights
NY GBL § 359-eState securities-law (Martin Act) filings
At a glance
  • Authorized by the board under NY BCL § 504; consideration in cash, property, services rendered
  • NY BCL § 622 pre-emptive rights default ON unless the certificate of incorporation negates them
  • Stock certificate default under § 508 with uncertificated permitted by board resolution
  • Books and records inspection under § 624 with proper-purpose-like standard
  • Martin Act filings under General Business Law § 359-e for offerings to NY residents

Board authorization under NY BCL § 504

Stock issuance is authorized by the board under NY BCL § 504. The board determines consideration. Like Delaware, NY does not permit future services as consideration (§ 504(a)), but services rendered are permitted. Par value rules apply: consideration cannot be less than par. Board action by meeting or by written consent under § 708(b) (unanimous consent required for written action).

Default pre-emptive rights under NY BCL § 622

NY BCL § 622 establishes default pre-emptive rights: shareholders of any class with voting or unlimited dividend rights have a right to subscribe to a pro-rata share of any new issuance of the same class. This default differs from Delaware (where pre-emptive rights default off). The certificate of incorporation must expressly negate pre-emptive rights to eliminate them. For NY-incorporated corporations with active financings, this is often a key consideration.

Stock certificates under § 508

NY BCL § 508 requires share certificates unless the corporation elects, by board resolution, that some or all of its shares be uncertificated. The certificate must contain the corporation's name, the holder's name, the class and number of shares, signatures of authorized officers. For uncertificated shares, the corporation provides a statement of holdings.

Books and records inspection under § 624

NY BCL § 624 requires every corporation to maintain books and records of account, minutes of meetings, and a list of shareholders. Shareholders may inspect on five days' written notice; the corporation may require the requester to demonstrate a purpose. The right is narrower than California's broad inspection but broader than the DGCL § 220 proper-purpose standard. The list of shareholders includes addresses and shares held.

Martin Act and federal compliance

Offerings to New York residents are subject to General Business Law Article 23-A (the Martin Act). A Form 99 filing is required unless an exemption applies. NSMIA pre-empts the Martin Act for Rule 506 offerings but not the notice filing. Federal Form D applies separately. The NY Attorney General's office has broad enforcement authority under the Martin Act, including for misrepresentations in securities offerings.

Common mistakes

Common New York-specific failure points in share issuance:

  • Forgetting that pre-emptive rights default ON; certificate of incorporation must expressly negate them
  • Treating future services as valid consideration (not permitted under NY BCL § 504(a))
  • Missing Martin Act notice filings for offerings to NY residents
  • Written board action not unanimous (NY requires unanimous written consent under § 708(b))
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FAQ

Common questions in New York

Under NY BCL § 622, shareholders have a default pre-emptive right to maintain their proportional interest in any new issuance of the same class with voting or unlimited dividend rights. This is the opposite default from Delaware. To eliminate the default, the certificate of incorporation must expressly state that pre-emptive rights are negated.

Yes, under NY BCL § 508, the board may resolve that some or all of the corporation's shares be uncertificated. The corporation then provides a statement of holdings to shareholders rather than physical certificates. The election is by board resolution; no certificate amendment is required.

The Martin Act (NY General Business Law Article 23-A) is New York's blue-sky law and the broadest state securities-law regime in the US. It applies to any offering of securities to NY residents. Form 99 filings or notice filings are typically required. NSMIA pre-empts the Martin Act for Rule 506 offerings but not the notice filing. The NY Attorney General has broad enforcement authority under the Martin Act, including fraud actions that have been used in high-profile cases.
Records that comply with NY BCL
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