(1) A subscription for shares entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation before the time the corporation is incorporated and accepts the subscription.
(2) The acceptance by the corporation of a subscription entered into before incorporation and the authorization of the issuance of shares pursuant thereto are subject to section 7-106-202.
(3) The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement states them. A call for payment by the board of directors shall be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement states otherwise.
(4) Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration stated in the subscription agreement.
(5) If a subscriber defaults in payment of money or other property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as it might collect any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the shares if the debt remains unpaid more than twenty days after the corporation sends written demand for payment to the subscriber.
(6) A subscription agreement entered into after incorporation is a contract between the subscriber and the corporation subject to section 7-106-202.
Source: L. 93: Entire article added, p. 755, § 1, effective July 1, 1994. L. 2003: (3) and (4) amended, p. 2316, § 229, effective July 1, 2004.
ANNOTATION
Law reviews. For comment on Burch v. Exploration Data Consultants, Inc. (cited below), see 46 U. Colo. L. Rev. 125 (1974).
Annotator's note. Since § 7-106-201 is similar to § 7-4-103 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.
An accepted subscriber to the capital stock of a corporation becomes a stockholder by the mere act of subscription, regardless of whether the subscription is paid or not. Mtn. Water Works Constr. Co. v. Holme, 49 Colo. 412, 113 P. 501 (1911).
And is entitled to vote the shares held by him at all meetings of the stockholders even though the stock is not full paid and the corporation retains the certificates to secure payment. Lilylands Canal & Reservoir Co. v. Wood, 56 Colo. 130, 136 P. 1026 (1913).
Thus a bylaw allowing only full paid stock to vote is void. A corporation cannot declare, through a bylaw, that only such stock as has been full paid shall be represented and allowed to vote at stockholders' meetings. Lilylands Canal & Reservoir Co. v. Wood, 56 Colo. 130, 136 P. 1026 (1913).
Subscription agreements are enforceable and subscription rights are legally transferable. Burch v. Exploration Data Consultants, Inc., 33 Colo. App. 155, 518 P.2d 288 (1973).
Subscribers may receive many rights as shareholders before full payment. Subscribers may, and often do, receive many rights as shareholders, including voting rights, rights to dividends, right to inspection of corporate books and records, etc., before full payment is made. Burch v. Exploration Data Consultants, Inc., 33 Colo. App. 155, 518 P.2d 288 (1973).
The unpaid balance upon a stockholder's subscription is not in and of itself a legal debt due the corporation, and until demand is made as provided and the period mentioned has expired, no cause of action accrues in favor of the corporation and no action can be maintained in its name. Universal Fire Ins. Co. v. Tabor, 16 Colo. 531, 27 P. 890 (1891).
However judgment creditors of corporations may reach the unpaid balance of the stockholder's subscription and apply it to the discharge of their judgments. Universal Fire Ins. Co. v. Tabor, 16 Colo. 531, 27 P. 890 (1891).
The six-year statute of limitations under § 13-80-111 is applicable for the recovery of stock under this section. Dunne v. Stotesbury, 16 Colo. 89, 26 P. 333 (1891) (decided prior to 1986 repeal and reenactment of article 80 of title 13).