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A corporation issues shares in return for capital, property or other consideration. Classes and/or series of shares can be created with different rights, particularly with respect to dividends and voting. Preemptive rights can also exist, by which the percentage of shares owned by current shareholders cannot be diluted by the issuance of new shares. In such cases, the current shareholders are given a right of first refusal with respect to purchasing the new shares. This requirement however can be avoided by disallowing the right in the articles, or by issuing a different series or classes of shares, avoiding the dilution within the present series/class. Corporations are generally allowed to repurchase or redeem their own shares in direct contrast to many civil law systems that place limits on treasury stock.

Excerpted with permission of the author from: American Business Law A Civil Law Perspective, Laura Carlson, J.D. (USA), LL.M. (Sweden)