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Simple English definitions for legal terms
no-par stock
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A quick definition of no-par stock:
A no-par stock is a type of stock where the value of the stock is not based on a guaranteed minimum value (called the par value) set at the time of issuance. Instead, the value of the stock is determined by the market. This means that investors rely completely on the market to determine the value of their shares. No-par stocks were originally used to give corporations more flexibility in selling their stocks and using their resources, but today, most states allow corporations to issue par value stocks with a very low value, essentially avoiding any difficulties with the par value.
A more thorough explanation:
No-par stock is a type of stock where the value of the shares is not based on a guaranteed minimum value, known as the par value. Instead, the value of the shares is determined by the market. This means that investors rely completely on the market to determine the value of their shares.
For example, if a company issues 100 shares of no-par stock and the market determines that each share is worth $10, then the total value of the shares would be $1,000.
No-par stocks were originally used to provide greater flexibility for corporations in selling their stocks and using their resources. However, today, most states allow corporations to issue par stock with a very low par value, such as one penny, which eliminates the need for no-par stock.
Overall, no-par stock is a type of stock that does not have a guaranteed minimum value and relies completely on the market to determine its value.