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Simple English definitions for legal terms
Par-value stock
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A quick definition of Par-value stock:
Par-value stock is a type of stock that has a set value assigned to it by the company that issued it. This value is known as the par value. It is the minimum price at which the stock can be sold. For example, if a company issues par-value stock with a par value of $10, then the stock cannot be sold for less than $10.
A more thorough explanation:
Par-value stock is a type of stock that has a fixed face value, also known as par value, assigned to each share. This value is determined by the company issuing the stock and is usually very low, such as $0.01 or $0.10 per share. The par value has no relation to the market value of the stock.
For example, if a company issues 1,000 shares of par-value stock with a par value of $0.10 per share, the total par value of the stock would be $100. However, the market value of the stock could be much higher or lower than this amount.
Par-value stock is not commonly used today, as most companies issue no-par value stock or stock with a very low stated value. The par value of a stock is mainly used for legal and accounting purposes, such as determining the minimum legal capital requirements for a corporation.