How to Issue Shares to a Sole Stockholder for a Delaware Corporation

Issuing shares to a sole stockholder in a Delaware corporation is an important aspect of corporate governance. This process involves multiple steps and compliance with various legal requirements. In this guide, we will walk you through the necessary procedures to ensure a smooth and compliant issuance.

Steps to Issue Shares

1. Review the Certificate of Incorporation

The first step in issuing shares to a sole stockholder is to review the corporation's Certificate of Incorporation. This document defines the authorized shares and any restrictions on issuing shares. It's crucial to understand these details before proceeding with the issuance.

2. Document with a Formal Board Resolution

Although the sole stockholder can also act as the board, it is advisable to document the issuance with a formal board resolution. This resolution should specify:

The number of shares to be issued The class of shares (if applicable) The consideration payment or other value for the shares

Example:

RESOLUTION OF THE BOARD OF DIRECTORS
[Corporation Name]
Date: [Insert Date]
RESOLVED that [Number] shares of [Class] stock are hereby issued to [Stockholder's Name] for a consideration of [Amount].

3. Determine Consideration for Shares

The consideration provided by the sole stockholder in exchange for the shares is a critical aspect of the issuance. This can be cash, property, or services. Ensure that this consideration meets the minimum requirements under Delaware law.

4. Prepare Stock Certificates

Once the shares are issued, prepare stock certificates for each share. Each certificate should include the following information:

The name of the corporation The name of the stockholder The number of shares and class of stock A statement of the par value (if applicable) An authorized signature from an officer of the corporation

Example:

[Corporation Name]
Stock Certificate
Certificate No.: [Number]
Shares: [Number] shares of [Class] stock
This certifies that [Stockholder's Name] is the owner of [Number] shares of the [Class] stock of [Corporation Name].

5. Update the Stock Ledger

Record the issuance in the corporation's stock ledger. This should include the name of the stockholder, the number of shares issued, and the date of issuance. Proper documentation is essential to maintain accurate records.

6. File Necessary Documents if Applicable

Depending on the nature of the issuance and the corporation's structure, you may need to file Form 8832 if electing to be taxed as an S corporation or other tax forms. It's important to check for any specific requirements.

7. Compliance with Securities Laws

Ensure compliance with any applicable securities laws, even for private placements. While Delaware law may be more permissive, federal securities regulations still apply. It's crucial to review and adhere to these laws to avoid potential issues.

8. Consult Legal Counsel

To ensure all legal requirements are met and the process is properly documented, it's advisable to consult with an attorney or a corporate secretary. Legal advice can help prevent any missteps that might lead to future complications.

Conclusion

Issuing shares to a sole stockholder in a Delaware corporation is a necessary yet nuanced process. Proper documentation and adherence to legal requirements are crucial to maintain a smooth and compliant transaction. By following these steps, you can ensure that the issuance is handled accurately and efficiently.