Special Report of the TriBar Opinion Committee: Duly Authorized Opinions on Preferred Stock

• Published in: The Business Lawyer 2008-05, Vol.63 (3), p.921-928
• Format: Article
• Language: English
• Subjects: Bar associations; Boards of directors; Business structures; Capital stock; Charters; Commercial law; Committees; Compliance; Corporate power; Corporate regulation; Corporations; Dividends; Federal legislation; Issued capital; Preferred stock; Preferred stocks; Provisions; Shareholder voting; Statutory law; Stock shares; Voting rights
• ISSN: 0007-6899; 2164-1838

Purchasers of newly-issued shares of preferred stock typically seek an opinion from the Company's counsel that the shares have been duly authorized and validly issued and are fully paid and nonassessable. This article amplifies the discussion in Section 6.2.1 of the 1998 TriBar Report of the meaning of the "duly authorized" part of this opinion when it is given on preferred stock. Modern corporation statutes typically grant corporations the authority to create preferred stock having terms as they may desire, subject only to compliance with the requirements of that statute and the requirements, if any, of the corporation's charter. Opinion recipients sometimes request that the opinion expressly confirm that the terms of the preferred stock do not violate the state corporation statute and the Company's charter. When preferred stock provisions are relatively straightforward, opinion preparers usually have little difficulty giving an unqualified duly authorized opinion.