An Act relating to the redemption of shares of certain Alaska corporations.

Posted: March 4, 2000
Contact: Representative Lisa Murkowski's office at (907) 465-3783

House Bill 357 allows for the redemption of preferred stock at the discretion of the shareholder. By providing this option, Alaska corporations are given an alternative to raise funds and Alaskan investors are given an expanded investment opportunity. As the Alaska Corporate Code stands now, redemption of preferred shares is only at the option of the issuer.

The right to have stock redeemed under specific conditions is an important commercial term in a sale to a holder, a provision commonly included in the sale of redeemable preferred stock. This share redemption right gives the holder an avenue to get the holder's cash back under terms negotiated with the issuing corporation.

With the enactment of this bill, share redemption would continue to be subject to other provisions of the code. For example, redemption is prohibited if the amount of the corporation's retained earnings immediately before the proposed distribution does not equal or exceed the amount of the proposed distribution. These restrictions on distributions are codified as AS 10.06.358.

The Alaska Corporations Code is modeled, in part, after the California Corporations Code which has been amended and expanded to allow issuance of stock that is redeemable under circumstances other than at the option of the issuing corporation. For example, in the case of preferred stock, share redemption is allowed at the option of the holder. A number of other states allow issuance of stock under conditions as provided in the proposed changes to the Alaska Corporations Code. These proposed changes would bring Alaska law in line with these other states and promote commerce in Alaska.

I urge your support of HB 357.