611.32 Promoter stock.

(1) Mandatory purchase. During the period of effectiveness of the organization permit the incorporators, directors, and principal officers of a stock corporation shall among themselves subscribe and pay, at the public offering price, at least $100,000 in cash or in property of equivalent value approved by the commissioner, for shares offered by the corporation under the organization permit.

(2) Restrictions on issuance.

(a) No person may subscribe for promoter stock on terms more favorable than those on which subscriptions are being solicited from the general public.

(b) Except under this section and s. 611.18 (2) (a) 2., and except for stock dividends, no promoter stock may be issued for 5 years following the initial issuance of the certificate of authority, without the approval of the commissioner which may be granted by the commissioner only if he or she finds that:

1. The corporation is in need of additional capital; and

2. The value proposed to be given for the stock is fair to existing shareholders and has a reasonable relation to the current value of the outstanding shares.

(c) This subsection shall not affect the exercise of preemptive rights.

(3) Restrictions on transfer.

(a) Deposit in escrow. Shares of promoter stock and any stock received thereon as the result of a stock dividend, stock split or exercise of preemptive rights shall be deposited in escrow with a depository satisfactory to the commissioner under an agreement providing that the shares may not be transferred without the approval of the commissioner.

(b) Release from escrow. If the corporation issues any life insurance policies, any shares subject to this section shall be released from escrow 5 years after issuance of the certificate of authority. In other cases, the shares shall be released from escrow 3 years after issuance of the certificate of authority.

(4) Approval.

(a) Definition. In this subsection, “earned surplus" means the balance of the net profits, income, gains and losses of a corporation from the date of incorporation.

(b) Conditions. Approval of the transfer of promoter stock under sub. (3) (a):

1. Shall be granted upon request if the corporation has made an addition to earned surplus in each of the 2 immediately preceding years of at least 6 percent of the capital raised by the sale of shares under the organization permit; and

2. May be granted upon a showing of hardship by the shareholder or the shareholder's estate or legatee, if the release from escrow of the shares or a portion thereof would not, in the commissioner's opinion, endanger the interests of insureds or the public.

(5) Options to purchase stock. For 3 years after the issuance of the certificate of authority, an option to purchase stock may be issued only pursuant to a plan approved by the commissioner.

History: 1971 c. 260; 1979 c. 102 s. 236 (5); 1989 a. 303; 1991 a. 316.