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Significance of Par Value of a Stock

Common stock and other securities may be issued with or without a stated face value or “par” value. Par value is a nominal value of a security which is determined by an issuer company at a minimum price. Issuing stock with or without par or face value may have several consequences.

If authorized by its charter, a corporation may issue par value stock. However, it must collect at least the stated amount of the par value from the person to whom the stock is issued. The cumulative dollar amount of issued par value stock then must be maintained by the corporation as stated capital and must not be distributed to shareholders in the form of dividends. Further limitations on the use of stated capital may be set out in the state corporation statute.

At one time, the amount of stated capital of the corporation was a measure of the corporation’s credit capacity, and limitations on uses of stated capital still provide a small measure of protection for creditors of the corporation. However, credit of a modern corporation is more likely to depend on factors such as income and cash flow.

The fees and taxes to be paid by a corporation may be affected by the par value of the corporation’s stock. Such fees and taxes may vary in many jurisdictions according to the total par value of all authorized stock. For corporations that have authorized stock with no par value, fees and taxes may be set according to a presumption as to the par value of the stock to avoid the assessment of zero fees and taxes. In states that follow this procedure, the presumptive par value may be set much higher than the corporation might set if it had par value stock. In such instances, corporate charter authorization of par value stock with a minimal par value may reduce fees and taxes imposed on the corporation.

In describing the legal capital structure for corporations, the Model Corporation Act produced by the American Bar Association and adopted in various states does not rely on provisions describing par value or restricting use of stated capital. The Model Act does continue to permit issuance of par value stock, but requirements regarding distribution of corporate assets are not tied to the designation of stock as par value or no par value unless the board of directors chooses that result.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Director and Officer Liability under OSHA

Employers have a general duty under the Occupational Safety and Health Act (OSHA) to provide a workplace free from “recognized” hazards. A violation of this duty can lead to criminal sanctions in addition to civil penalties. An employer can also be exposed to liability under occupational safety and health regulations promulgated by the Secretary of the Department of Labor. Directors and high-level executive officers must act to reduce or eliminate workplace dangers or risk OSHA liability.

OSHA provides for criminal sanctions when (1) the employer’s willful violation of a standard, rule, order, or regulation has caused the death of an employee, (2) when the employer falsely represents its compliance with OSHA, or (3) when a person gives advance notice of an OSHA inspection. There have been few criminal prosecutions for OSHA violations.

OSHA imposes liability on an “employer.” An “employer” is defined as “a person engaged in a business affecting commerce who has employees . . .” A “person” is defined as “one or more individuals, partnerships, associations, corporations, business trusts, legal representatives, or any organized group of persons.” The OSHA Review Commission has declined to recognize a corporate officer as an employer; however, at least one federal district court concluded that the question of whether a corporate officer was an “employer” under OSHA was one of fact for the jury.

A federal district court in New Jersey found that “an officer’s or director’s role in a corporate entity (particularly a small one) may be so pervasive and total that the officer or director is in fact the corporation and is therefore an employer” under OSHA. The court acknowledged that if an employee’s role was not substantial enough to raise him to the level of an employer, he could not be charged as a principal or an aider and abettor. The Seventh Circuit Court of Appeals has indicated that an officer or director may fit the definition of an OSHA employer under the appropriate fact scenario and held liable as either a principal or an aider and abettor.

A director or officer who conducts corporate business before the corporation is formed or continues to conduct corporate business after the corporation is dissolved may qualify as an OSHA employer. Thus, the individual director or officer could be exposed to personal liability for violating OSHA provisions.

Most courts recognize that OSHA did not preempt the field of workplace safety. In fact, at least 20 states and two territories have the Secretary of Labor’s approval of their own workplace safety plans. Even though corporate officers and directors may not qualify as “employers” in some jurisdictions and under certain fact circumstances, they may nonetheless be held personally liable for breaches of fiduciary duty and other claims independent of OSHA.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

The Natural Objects of One’s Bounty – III

The Natural Objects of One’s Bounty – III

This article is the third part of a three-part series describing the traditional names for the various members of one’s family.

The first article discussed the phrase “the natural objects of one’s bounty,” which means the closest surviving members of one’s family. The first article discussed how ancestors are described in terms of parent relationship and lineal descendants are described in terms of child relationship.

The second article discussed collateral relatives such as cousins and the distinction between being related by blood (consanguinity) and by marriage (affinity).

Traditionally, marriage was always understood to be between a man and a woman. During the marriage of a man and a woman, the male spouse is known as the husband and the female spouse is known as the wife. The father of one’s spouse is one’s father-in-law. The mother of one’s spouse is one’s mother-in-law. A son-in-law is the spouse of one’s daughter. A daughter-in-law is the spouse of one’s son. A brother-in-law is the brother of one’s spouse. A sister-in-law is the sister of one spouse. Other in-laws are referred to by their relationship to a closer relative (e.g., “my daughter-in-law’s sister”).

A stepparent is the person one’s parent marries after the termination of his or her relationship with the other parent. A male stepparent is a stepfather. A female stepparent is a stepmother. Stepbrothers and stepsisters are male and female children, respectively, from a stepparent’s prior relationship. An child of one spouse from another relationship is one’s stepchild. Collectively, more than one stepchild are known as stepchildren.

When one’s parent has a child with one’s stepparent, the child is known as one’s half-brother, if the child is a male, or half-sister, if the child is a female. Because half-brothers and half-sisters have only one common natural parent, they are said to related of the half-blood. Because full-blooded brothers and sisters have two common natural parents, they are said to be related of the whole-blood. Where a man with sons from a prior marriage marries a woman with daughters from a prior marriage–the “Brady Bunch” situation–none of the males are related by blood to any of the females.

The only generally accepted meaning for the term “family” is a group of people with a common affiliation. Some use the term to refer to parents and their children. Some use the term to refer to blood relatives. Some use the term to refer to in-laws, and so on. The term “family” has no generally accepted meaning other than a group of people with a common affiliation.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.