2007 Minnesota Code
Chapters 300 - 319B Corporations
Chapter 302A Business Corporations
Section 302A.405 CONSIDERATION FOR SHARES; VALUE AND PAYMENT; LIABILITY.

302A.405 CONSIDERATION FOR SHARES; VALUE AND PAYMENT; LIABILITY.
Subdivision 1. Consideration; procedure. Subject to any restrictions in the articles:
(a) Shares may be issued for any consideration, including, without limitation, money or other
tangible or intangible property received by the corporation or to be received by the corporation
under a written agreement, or services rendered to the corporation or to be rendered to the
corporation, as authorized by resolution approved by the affirmative vote of the directors required
by section 302A.237, or, if provided for in the articles, approved by the affirmative vote of the
shareholders required by section 302A.437, establishing a price in money or other consideration,
or a minimum price, or a general formula or method by which the price will be determined; and
(b) A corporation may, without any new or additional consideration, issue its own shares
in exchange for or in conversion of its outstanding shares, or, subject to authorization of share
dividends, divisions, and combinations according to section 302A.402, issue its own shares pro
rata to its shareholders or the shareholders of one or more classes or series, to effectuate share
dividends, divisions, or combinations. No shares of a class or series, shares of which are then
outstanding, shall be issued to the holders of shares of another class or series (except in exchange
for or in conversion of outstanding shares of the other class or series), unless the issuance either
is expressly provided for in the articles or is approved at a meeting by the affirmative vote of
the holders of a majority of the voting power of all shares of the same class or series as the
shares to be issued.
Subd. 2. Value; liability. The determinations of the board or the shareholders as to the
amount or fair value or the fairness to the corporation of the consideration received or to be
received by the corporation for its shares or the terms of payment, as well as the agreement to
issue shares for that consideration, are presumed to be proper if they are made in good faith
and on the basis of accounting methods, or a fair valuation or other method, reasonable in the
circumstances, and, unless otherwise required by the articles, the consideration may be less than
the par value, if any, of the shares. Directors or shareholders who are present and entitled to vote,
and who, intentionally or without reasonable investigation, fail to vote against approving an issue
of shares for a consideration that is unfair to the corporation, or overvalue property or services
received or to be received by the corporation as consideration for shares issued, are jointly and
severally liable to the corporation for the benefit of the then shareholders who did not consent to
and are damaged by the action, to the extent of the damages of those shareholders. A director
or shareholder against whom a claim is asserted pursuant to this subdivision, except in case of
knowing participation in a deliberate fraud, is entitled to contribution on an equitable basis from
other directors or shareholders who are liable under this section.
Subd. 3. Payment; liability; contribution; statute of limitations. (a) A corporation shall
issue only shares that are nonassessable or that are assessable but are issued with the unanimous
consent of the shareholders. "Nonassessable" shares are shares for which the agreed consideration
has been fully paid, delivered, or rendered to the corporation. Consideration in the form of a
promissory note, a check, or a written agreement to transfer property to a corporation in the
future is fully paid when the note, check, or written agreement is delivered to the corporation,
and consideration in the form of services to be rendered to the corporation is fully paid when the
issuance of the shares is authorized or approved pursuant to subdivision 1, paragraph (a).
(b) If shares are issued in violation of paragraph (a), the following persons are jointly and
severally liable to the corporation for the difference between the agreed consideration for the
shares and the consideration actually received by the corporation:
(1) A director or shareholder who was present and entitled to vote but who failed to vote
against the issuance of the shares knowing of the violation;
(2) The person to whom the shares were issued; and
(3) A successor or transferee of the interest in the corporation of a person described in clause
(1) or (2), including a purchaser of shares, a subsequent assignee, successor, or transferee, a
pledgee, a holder of any other security interest in the assets of the corporation or shares granted by
the person described in clause (1) or (2), or a legal representative of or for the person or estate of
the person, which successor, transferee, purchaser, assignee, pledgee, holder, or representative
acquired the interest knowing of the violation.
(c)(1) A pledgee or holder of any other security interest in all or any shares that have been
issued in violation of paragraph (a) is not liable under paragraph (b) if all those shares are
surrendered to the corporation. The surrender does not impair any rights of the pledgee or holder
of any other security interest against the pledgor or person granting the security interest.
(2) A pledgee, holder of any other security interest, or legal representative is liable under
paragraph (b) only in that capacity. The liability of the person under paragraph (b) is limited to
the assets held in that capacity for the person or estate of the person described in clause (1) or
(2) of paragraph (b).
(3) Each person liable under paragraph (b) has a full right of contribution on an equitable
basis from all other persons liable under paragraph (b) for the same transaction.
(4) An action shall not be maintained against a person under paragraph (b) unless commenced
within two years from the date on which shares are issued in violation of paragraph (a).
History: 1981 c 270 s 57; 1982 c 497 s 35; 1987 c 104 s 19,20; 1991 c 49 s 6; 1994 c 417
s 3; 1997 c 10 art 1 s 13; 1999 c 85 art 1 s 7; 2000 c 264 s 4