A corporation may issue shares in more than one class, with each class having separate rights and powers.  In addition to the liquidation preference, discussed previously, a board can use §151 to issue shares with variable voting rights. For example, Facebook, Google, Twitter and other tech firms have used §151 to issue shares classes of stock to founders with 10 votes per share. Stock issued to the public have 1 vote per share, or in some cases, no votes at all. 

Shares issued by the corporation, may also be subject to redemption should that right be stipulated in the certificate of incorporation or the certificate of designation. In a redemption, the board may at any time make a “call” on the stock and can redeem the stock for a price determined in the certificate. A redemption differs from a stock repurchase in the a number of ways. First, a stock repurchase involves a decision by the stockholder to sell their stock. Absent consent of the stockholder, no one can force a stockholder to sell into a stock repurchase. A redemption can lack a certain degree of voluntariness. Stockholders take the stock knowing that the board has the power to redeem stock against the will of stockholders. Second, the stock repurchase can be done at any price. Presumably, the board will want a sufficient number of stockholders to voluntarily tender their shares, consequently the repurchase is typically done a premium to the market price. In a redemption, the redemption price, or at least a formula to calculate the price is set in the certificate of incorporation.

By now, stock options have become well known as a device for employee compensation in corporations.  A stock option provides the holder with the right to purchase a share of the corporation at a stated price.  When this “strike price” is below the price of the shares trading in the stock market, the options are considered “in the money” and the optionholder has an economic incentive to exercise the stock option. When the strike price is above the market price for the stock, the optionholder does not have an incentive to exercise the options.

Because stock options increase in value with an increase in the stock price, options are thought to be reasonably efficient incentive mechanisms, delivering value to employees when the firm succeeds.   Because stock options issued to employees also vest over time, the existence of unvested options as part of an employee's compensation package creates a bonding mechanism between the corporation and the employee.

Corporations, as entities separate from their stockholders, are empowered by the statute to hold and maintain all sorts of assets, including holding stock of other corporations (making the holding company possible). But can a corporation own its own stock? And, if it does, what are the implications? 

The short answer is that a corporation can indeed buy and own its own stock. However, the implications of the corporation buying its own stock are significant. When a corporation buys or redeems its own stock that stock is deemed to be “treasury stock” and is no longer outstanding stock. Treasury stock may not be voted and does not count towards determining a quorum at stockholder meetings. 

Any corporation stock held by wholly-owned subsidiary of the corporation is also deemed treasury stock. However, corporation stock held by the corporation in a fiduciary capacity (corporation stock held as part of an employee retirement plan managed by the corporation, for example), is not deemed to be treasury stock.

The board of directors has the authority to issuance of new shares of the corporation. Provided the shares have been authorized in the certificate of incorporation, the board need not seek stockholder approval prior to issuing such shares.

When a corporation has profits, it may distribute those profits back to stockholders. These profit distributions back to stockholders are known as “dividends”. 

The decision whether or not to issue dividends to stockholders lies wholly within the discretion of the board of directors. Unless the certificate of incorporation states otherwise, stockholders have no right to corporate dividends.

Some old-line corporations, like G.E. are well-known for a long-standing board policy of making dividend payments to their stockholders. Other corporations, like start-up corporations or corporations in high-growth stages of development, have the exact opposite policy. Companies like Alphabet or Facebook have board policies against making dividend payments to stockholders, opting to reinvest all their profits into the company. 

When a board issues new shares, in addition assigning voting rights to the shares, the board may also, pursuant to §202, place reasonable restrictions on the ability of stockholders to transfer or sell such shares.  There are a variety of common restrictions placed on shares, particularly shares of private corporations. For example, a board might include a right of first refusal restriction on shares it issues to ensure that existing stockholders the opportunity to purchase any shares that a stockholder would like to sell. Another common restriction prevents accumulation of shares by any one stockholder. For example, the Green Bay Packers restrict any one shareholder from owning more than 5% of the outstanding shares of the corporation. The ability of boards to design restrictions on the transfer of stock is fairly broad. Of course, this power is not without limits. For example, restrictions against selling stock to based on racial or gender categories would run afoul of Federal law and thus not be enforceable.

 In Phixios, the court is asked to rule on the ability of a corporation to place restrictions on stock ownership. In the facts presented in Phixios, it is clear that a corporation has the right, pursuant to Section 202, to place restrictions on who and under what conditions certain people may own shares in the stock of the corporation. 

The court's straightforward interpretation of Section 202 makes it clear that when a corporation purports to place restrictions on ownership or transfer of its stock that Section 202 requires actual knowledge by stockholders of such restrictions or at least disclosure of such restrictions on the face of the stock certificate.

Section 203 is an example of state anti-takeover legislation. Section 203 is a flavor of the kinds of restrictions on stock transfer as we saw in §202. In §203 restrictions a board may prohibit a stockholder from purchasing additional shares in the corporation for a period of time once they have completed a transaction that gives them control of the corporation. These restrictions are intended to delay the ability of a hostile acquirer to quickly complete a hostile acquisition of the corporation unless the corporation's board consents.