O.C.G.A. § 14-2-620 (2019)
Subscription for shares before incorporation
(a) A written subscription for shares entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation.
(b) The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors must be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise.
(c) Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement.
(d) If a subscriber defaults in payment of money or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the shares if the debt remains unpaid more than 20 days after the corporation sends written demand for payment to the subscriber.
(e) A subscription agreement entered into after incorporation is a contract between the subscriber and the corporation subject to Code Section 14-2-621.
History
(Code 1981, § 14-2-620, enacted by Ga. L. 1988, p. 1070, § 1.)
Annotations
Law reviews. - For article discussing guidelines governing share subscription agreements, see 3 Ga. L. Rev. 11 (1968). COMMENT Source: Model Act, § 6.20. This replaces former § 14-2-83. Subsection (a) is substantially identical to former § 14-2-83(a). It provides that preincorporation subscriptions in writing are irrevocable for six months unless the subscription agreement provides that they are revocable or that they are irrevocable for some other period, or unless all the subscribers agree to revocation. In essence, there is an irrevocability agreement among all of the subscribers. The terms of this contract are set forth in subsections (b) and (d). Subsection (b) is substantially similar to former § 14-2-83(c). Subsection (b) provides that after incorporation the board of directors may determine the payment
terms of subscriptions, but that calls must be uniform so far as practicable as to all shares of the same class or series unless the subscriptions provide otherwise. Subsection (d) provides alternative methods of enforcement of preincorporation subscriptions by the corporation. Subsection (c) is clarifying, and states that shares are fully paid and nonassessable when the consideration called for in the subscription agreement is paid. This represents a major departure from the old legal capital rules of former § 14-2-84(a), which required shares with par value to be issued for consideration not less than the par value of the shares. Subsection (e) clarifies that post-incorporation subscription agreements are also valid. Cross-References Consideration for shares, see § 14-2-621. Effective date of notice, see § 14-2-141. ‘‘Notice’’ defined, see § 14-2-141. JUDICIAL DECISIONS Editor’s notes. - In light of the similarity of the statutory provisions, decisions under former Code 1993, § 22-504 and former Code Section 14-2-83, which were repealed by Ga. L. 1988, p. 1070, § 1, effective July 1, 1989, are included in the annotations for this Code section. Stock subscription agreements enforceable only if written. - An alleged oral promise to pay for stock is unenforce-
able under former Code 1933, § 22-504 (see now O.C.G.A. § 14-2-620), which requires enforceable stock subscription agreements to be in writing. Super Valu Stores, Inc. v. First Nat’l Bank, 463 F. Supp. 1183 (M.D. Ga. 1979) (decided under former Code 1933, § 22-504). Cited in Putnam v. Williams, 652 F.2d 497 (5th Cir. 1981).
RESEARCH REFERENCES Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, § 475 et seq. C.J.S. - 18 C.J.S., Corporations, §§ 249, 250, 252, 279. ALR. - Liability of corporation on contracts of promoters, 17 ALR 452; 49 ALR 673; 123 ALR 726. Binding effect of subscription to stock in corporation to be formed, 61 ALR 1463. Infant’s rights and liabilities on subscription to or purchase of corporate stock, 64 ALR 972. Liability under trust-fund doctrine of subscribers to stock of corporation the charter of which has been canceled for reasons other than insolvency, 71 ALR 103; 90 ALR 1350. Necessity and sufficiency of notice of withdrawal of subscription to stock in projected corporation, 71 ALR 1345. Liability of promoters for fraud or misrepresentation to persons subscribing for
shares after formation of corporation, 72 ALR 355. Fraud: necessity for knowledge of falsity of representation as to value, inducing subscription to or purchase of corporate stock, or other securities, 73 ALR 1120. Construction, application, and effect of statutes giving corporation a lien on shares of its stockholders for debts due from stockholders to corporation, 80 ALR 1338. Validity and effect of extrinsic agreement absolving one, in whole or part, from liability on subscription to corporate stock, 81 ALR 198. Right of action to recover purchase price under sale of corporate stock where title has not passed as affected by provision of Sales Act, 99 ALR 275. Validity of release, cancellation, or compromise of unpaid subscription for stock
CORPORATIONS & PARTNERSHIPS
by corporation or its representatives, 101 ALR 231. Disposition of interest or rights in corporation represented by stock the owners of which cannot be found, 101 ALR 670. Consideration for subscription agreements, 151 ALR 1238.
Enforcement of stock subscription after suit on note of subscriber is barred by statute of limitations, 11 ALR2d 1380. Applicability of Blue Sky Laws to preincorporation subscriptions, 50 ALR2d 1103.