N.Y. Business Corporation Law Section 504
Consideration and payment for shares


Consideration for the issue of shares shall consist of money or other property, tangible or intangible; labor or services actually received by or performed for the corporation or for its benefit or in its formation or reorganization; a binding obligation to pay the purchase price or the subscription price in cash or other property; a binding obligation to perform services having an agreed value; or a combination thereof. In the absence of fraud in the transaction, the judgment of the board or shareholders, as the case may be, as to the value of the consideration received for shares shall be conclusive.


Shares with par value may be issued for such consideration, not less than the par value thereof, as is fixed from time to time by the board.


Shares without par value may be issued for such consideration as is fixed from time to time by the board unless the certificate of incorporation reserves to the shareholders the right to fix the consideration. If such right is reserved as to any shares, a vote of the shareholders shall either fix the consideration to be received for the shares or authorize the board to fix such consideration.


Treasury shares may be disposed of by a corporation on such terms and conditions as are fixed from time to time by the board.


Upon distribution of authorized but unissued shares to shareholders, that part of the surplus of a corporation which is concurrently transferred to stated capital shall be the consideration for the issue of such shares.


In the event of a conversion of bonds or shares into shares, or in the event of an exchange of bonds or shares for shares, with or without par value, the consideration for the shares so issued in exchange or conversion shall be the sum of (1) either the principal sum of, and accrued interest on, the bonds so exchanged or converted, or the stated capital then represented by the shares so exchanged or converted, plus (2) any additional consideration paid to the corporation for the new shares, plus (3) any stated capital not theretofore allocated to any designated class or series which is thereupon allocated to the new shares, plus (4) any surplus thereupon transferred to stated capital and allocated to the new shares.


Certificates for shares may not be issued until the amount of the consideration therefor determined to be stated capital pursuant to section 506 (Determination of stated capital) has been paid in the form of cash, services rendered, personal or real property or a combination thereof and consideration for the balance (if any) complying with paragraph (a) of this section has been provided, except as provided in paragraphs (e) and (f) of section 505 (Rights and options to purchase shares; issue of rights and options to directors, officers and employees).


When the consideration for shares has been provided in compliance with paragraph (h) of this section, the subscriber shall be entitled to all the rights and privileges of a holder of such shares and to a certificate representing his shares, and such shares shall be fully paid and nonassessable.


Notwithstanding that such shares may be fully paid and nonassessable, the corporation may place in escrow shares issued for a binding obligation to pay cash or other property or to perform future services, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against the obligation, until the obligation is performed. If the obligation is not performed in whole or in part, the corporation may pursue such remedies as are provided in the instrument evidencing the obligation or a related agreement or under law.

Source: Section 504 — Consideration and payment for shares, https://www.­nysenate.­gov/legislation/laws/BSC/504 (updated Sep. 22, 2014; accessed Jun. 22, 2024).

Jun. 22, 2024

Last modified:
Sep. 22, 2014

§ 504’s source at nysenate​.gov

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