Flashcards Studio

NovaMart Industrial, Inc. has authorized capital stock of 12,000,000 shares and 5,400,000 shares outstanding, all held by different stockholders. The board adopts a resolution to issue 2,000,000 new shares to a private investor at par, with no prior notice to stockholders and with no offer to subscribe pro rata to existing holders. Stockholder Luisa, who owns 60,000 shares, did not receive any notice of the proposed issuance. Luisa seeks to challenge the issuance on the ground that it violates stockholders’ pre-emptive rights. (a) Identify the doctrine protecting stockholders’ right to subscribe to new issuances and state its essential elements. (b) Apply the doctrine to the facts and discuss whether the proposed issuance violated those rights and what remedies would be available to Luisa if violated.