3 AAC 08.225 - Preferred stock
(a) The administrator will, in the
administrator's discretion, disallow a public offering of preferred stock if
(1) the issuer's adjusted net earnings for
the last fiscal year or the issuer's average adjusted net earnings for the last
three fiscal years before the public offering were insufficient to
(A) pay the issuer's fixed charges and
preferred stock dividends, whether or not accrued; and
(B) meet the redemption requirements, if
applicable, of the preferred stock being offered; or
(2) a cash analysis indicates that the issuer
lacks sufficient cash to cover the preferred stock dividend, whether or not
declared.
(b) If
determining whether to disallow, under (a)(2) of this section, a public
offering of preferred stock, the administrator will, in the administrator's
discretion,
(1) consider the statement of cash
flows, if the statement demonstrates that the issuer had positive net cash
provided by operating activities for the issuer's last fiscal year before the
public offering; or
(2) require the
issuer to submit a financial statement demonstrating that the issuer had
average positive net cash provided by operating activities for the issuer's
last three fiscal years before the public offering.
(c) The requirements of (a) and (b) of this
section apply to a public offering of convertible preferred stock that is
superior in right to payment of dividends, interest, and liquidation proceeds
to any preferred stock and convertible debt that is or may be legally or
beneficially, directly or indirectly, owned by promoters. The risks of failure
to declare or pay dividends and the equity characteristics of the convertible
preferred stock must be disclosed in the prospectus. The administrator will, in
the administrator's discretion, review an offering of these securities using
the requirements in AS 45.55 and this chapter for equity offerings.
(d) If the issuer's net earnings are subject
to cyclical fluctuations or if the administrator determines redemption
requirements to be necessary for investor protection, the administrator will,
in the administrator's discretion, require that the issuer establish redemption
requirements.
(e) The administrator
will, in the administrator's discretion, disallow a public offering of equity
securities if the issuer's articles of incorporation authorize the issuer's
board of directors to issue preferred stock in the future without a vote of the
common shareholders, unless
(1) the issuer
represents in its prospectus or offering document that the issuer will not
offer preferred stock to a promoter except on the same terms as that stock is
offered to all other existing shareholders or to new shareholders; or
(2) the issuance of preferred stock is
approved by a majority of the issuer's independent directors without an
interest in the transaction; those directors must have access, before voting
and at the issuer's expense, to the issuer's or independent legal counsel; if
the issuer has on its board of directors only two independent directors without
an interest in the transaction, both independent directors must approve the
issuance of preferred stock.
Notes
Authority:AS 45.55.120
AS 45.55.950
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