Non-assessable stock is a class of stock ownership where the stock owner is limited in their liability to the amount paid for the stock. It means that in the instance of bankruptcy or a lawsuit, the shareholders cannot be found liable for any financial or legal troubles endured by the company they are investing in.
What are stocks that are not assessable?
Stocks issued by U.S. companies and traded on U.S. exchanges (and almost all other exchanges) are generally non-assessable. Non-assessable refers to a class of shares that do not allow the issuer to demand additional payment for the shares from stockholders.
What does fully paid and non-assessable shares of common stock mean?
This vintage Pennsylvania Power & Light Company common stock certificate for 20 shares, dating from 1973, contains the phrase "fully paid and non-assessable shares of the common stock without nominal or par value." The phrase is common for boilerplate language. Investopedia requires writers to use primary sources to support their work.
What is a'non-assessable stock'?
What is a 'Non-Assessable Stock'. The maximum liability the purchaser of the stock assumes is equal to the initial purchase price of the shares. Non-assessable stocks typically have the words "fully paid and non-assessable" printed on the stock certificate. Stocks issued by U.S. companies and traded on U.S. exchanges are generally non-assessable.
What is nonassessable stock law?
Nonassessable Stock Law and Legal Definition. Nonassessable stock refer to a class of stock owned by a holder whose potential liability is limited to the amount paid for the stock and who cannot be charged additional funds to pay the issuer's debts.
What are non-assessable shares of common stock?
A non-assessable stock is a class of stock in which the issuing company is not allowed to impose levies on its shareholders for additional funds in order to make further investments.
What does fully paid and non-assessable shares mean?
“Fully paid” means that the company has received proper “consideration” (payment) for the shares. “Non-assessable” means that the investor isn't required to make more payments to the company by reason of being a shareholder.
What is non-assessable mean?
Definition of nonassessable : exempting the owner from further contributions to the capital or business of an issuing corporation and when fully paid for entailing no further liability on the part of the owner either to the corporation or its creditors nonassessable stock.
What is a assessable stock?
Assessable stock was a type of stock issue sold to investors at a discount in exchange for the right to come back for more money at a later date. Assessable stock was sold at a discount, but the company could come back for additional funds at a later date.
What does validly issued mean?
validly issued means generally that there has been due compliance with applicable corporate law; for nonregulated corporations this can be determined by reading the corporate minutes and the corporation law in effect at the time of the action.
What is a non assessable insurance policy?
Nonassessable — the term refers to an insurance policy under which the insurer (e.g., a stock company) does not have the right to assess policyholders for additional amounts to make up shortfalls in the cost of operating the company. Such a policy is the opposite of one issued by an assessment company.
What does non assessable non exempt income mean?
Non-assessable, non-exempt income is income that we do not assess and you don't pay tax on. It doesn't affect your tax losses. Non-assessable, non-exempt income includes: the tax-free component of an employment termination payment (ETP)
What is a no par value share?
Key Takeaways. No-par value stock is issued without a par value. The value of no-par value stocks is determined by the price investors are willing to pay on the open market. The advantage of no-par value stock is that companies can then issue stock at higher prices in future offerings.
Is a gift of non assessable stock a sale?
An acceptance of a gift of non-assessable stock is NOT a sale of securities.
What is the difference between capital stock and common stock?
Capital stock vs common stock The capital stock is the total number of shares a company is legally authorized to issue in shares while common stock is a type of share issued by the company forming its capital stock. A company's capital stock is composed of common stock and preferred stock.
Is common stock publicly traded?
Although you can own shares in any sort of company or business/investment enterprise, the term "common stock" mainly refers to stock in a publicly traded company, as opposed to a privately held one. Of course, common stock shares can be as varied as the thousands of public companies out there.
What is non-assessable stock?
What Is a Non-Assessable Stock? A non-assessable stock is a class of stock in which the issuing company is not allowed to impose levies on its shareholders for additional funds in order to make further investments.
What does it mean when a stock is non-assessable?
When a stock is non-assessable, it also means that if the issuing company goes bankrupt, the shareholders cannot lose more money than they invested in the first place.
Why are investors more confident about buying non-assessable stocks?
Although equity was no longer sold at a discount compared to its share price, investors were more confident about buying non-assessable stocks because they no longer had to worry about the possibility that the issuer would force them to invest more money in the stock after the initial transaction.
What is the largest investment a non-assessable stock has to make?
The largest investment the purchaser of a non-assessable stock has to make is the initial purchase price of the shares. The investor may lose the invested amount if the stock price goes to zero. However, the investor will never be required by the issuing company to make additional investments as a condition of their stock ownership.
What is the maximum liability of a stock?
The maximum liability the purchaser of the stock assumes is equal to the initial purchase price of the shares. Stocks issued by U.S. companies and traded on U.S. exchanges (and almost all other exchanges) are generally non-assessable.
What happens if an investor refuses to pay?
If an investor refused to pay, the stock returned to the issuing company. Not surprisingly, assessable stock proved to be unpopular. Most companies switched over to issuing non-assessable stock in the early 1900s, and the last assessable shares were sold in the 1930s.
How It Works – Non-Assessable Stock in The United States
- Most stocks purchased on any major U.S. stock exchange, such as the New York Stock Exchange (NYSE) or NASDAQ, are non-assessable. It is of significant importance to both individual and institutional investors because if you, as an investor, were to purchase shares that traded on on…
Risks of Owning Assessable Stock
- Inversely, if you were to purchase company shares that are considered assessable, you would be exposing yourself to unlimited liability in some instances. it can allow for your home to potentially be repossessed if you were to buy a single share in a company that perhaps is found to have committed fraud. The risk-to-reward ratio of purchasing assessable shares is incredibly low, an…
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