Colorado § 7-106-206 - Form and content of certificates.

§ 7-106-206. Form and content of certificates.

(1) Shares may, but need not, be represented by certificates. Unless articles 101 to 117 of this title or another statute expressly provide otherwise, the rights and obligations of shareholders are not affected by the fact that their shares are not represented by certificates.

(2) Each share certificate shall state on its face:

(a) The domestic entity name of the issuing corporation and that the corporation is incorporated under the law of this state;

(b) The name of the person to whom the certificate is issued; and

(c) The number and class of shares and the designation of the series, if any, the certificate represents.

(3) Each share certificate:

(a) Shall be signed, either manually or in facsimile, by one or more officers designated in the bylaws or by the board of directors;

(b) May bear the corporate seal or its facsimile; and

(c) May contain such other information as the corporation deems necessary or appropriate.

(4) If the issuing corporation is authorized to issue different classes of shares or different series within a class, the share certificate shall contain a summary, on the front or the back, of the designations, preferences, limitations, and relative rights applicable to each class, the variations in preferences, limitations, and rights determined for each series, and the authority of the board of directors to determine variations for future classes or series. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish to the shareholder this information on request in writing and without charge.

(5) If the person who signed, either manually or in facsimile, a share certificate no longer holds office when the certificate is issued, the certificate is nevertheless valid.

Source: L. 93: Entire article added, p. 758, § 1, effective July 1, 1994. L. 2003: (2)(a) amended, p. 2317, § 232, effective July 1, 2004.

ANNOTATION

I. General Consideration.

II. Signatures of Officers.

III. Notice of Restrictions and Variations in Shares.

I. GENERAL CONSIDERATION.

Law reviews. For note, "Discount, Bonus and Watered Stock in Colorado", see 33 Rocky Mt. L. Rev. 197 (1961). For article, "The 1985 Proposed Revisions to the Colorado Corporation Code", see 14 Colo. Law. 34 (1985).

Annotator's note. Since § 7-106-206 is similar to § 7-4-108 as it existed prior to the 1993 recodification of the "Colorado Business Corporation Act", articles 101 to 117 of title 7, cases construing that provision and its predecessors have been included in the annotations to this section.

II. SIGNATURES OF OFFICERS.

Stock certificates which have been issued without authority and are not manually signed are nonetheless genuine, and the statutory requirement of a transfer agent's countersignature on stock certificates bearing facsimile signatures does not render them invalid or preclude bona fide purchase. Dempsey-Tegeler & Co. v. Otis Oil & Gas Corp., 293 F. Supp. 1383 (D. Colo. 1968).

For noncompliance with this section does not render certificates nongenuine or constitute an absolute defense effective against a purchaser for value and without notice under § 4-8-202 (3) of the commercial code, as certificates signed in facsimile are genuine under the uniform commercial code, "genuine" meaning free of forgery or counterfeiting. Thus even though certificates are issued without authority, it cannot be said that the signatures are either forged or counterfeit, and so in this sense they are effective against the issuer. Dempsey-Tegeler & Co. v. Otis Oil & Gas Corp., 293 F. Supp. 1383 (D. Colo. 1968).

III. NOTICE OF RESTRICTIONS AND VARIATIONS IN SHARES.

The purpose of this section is to ensure that a purchaser of stock has notice of voting restrictions at the time of purchase. Hampton v. Tri-State Fin. Corp., 30 Colo. App. 420, 495 P.2d 566 (1972).

The requirement of subsection (2) is aimed at avoiding shareholder misunderstandings. Hackbart v. Holmes, 675 F.2d 1114 (10th Cir. 1982).

However, this section does not require that the certificate carry the exact restrictions on the certificate, but only that the shareholder be informed by the certificate that upon request the corporation will furnish him with information as to classes of stock and their various restrictions. Hampton v. Tri-State Fin. Corp., 30 Colo. App. 420, 495 P.2d 566 (1972).

Yet this section makes no provision as to the consequences of a violation. Hampton v. Tri-State Fin. Corp., 30 Colo. App. 420, 495 P.2d 566 (1972).

But the stock contract is voidable. Absent a showing of actual knowledge at the time of purchase, failure to follow the statute renders the stock contract voidable on the part of the stockholder. Hampton v. Tri-State Fin. Corp., 30 Colo. App. 420, 495 P.2d 566 (1972).

And rescission is the most appropriate remedy. Where notice has not been given pursuant to the statute and where actual knowledge cannot be shown by the corporation, then, in the absence of fraud, rescission is the most appropriate remedy. Hampton v. Tri-State Fin. Corp., 30 Colo. App. 420, 495 P.2d 566 (1972).