When Is A Gift A Sale?

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According to Black’s Law Dictionary, a “gift” is a “voluntary transfer of property to another made gratuitously and without consideration”. Thus, it would seem that a gift could not be a sale. The California Corporations Code, however, takes a different view in at least three different circumstances.

First, Section 25017(c) provides that any security that is given or delivered with, or as a bonus on account of, any purchase of securities or of any other thing constitutes a part of the subject of the purchase and is considered to have been offered and sold for value.

Second, a purported gift of assessable stock involves an offer and sale. Corp. Code § 25017(d).

Finally, and perhaps most surprisingly, California also treats most dividends of securities as sales. The only exception is for stock dividends payable with respect to common stock of a corporation solely (except for any cash or scrip paid for fractional shares) in shares of that common stock. Cal. Corp. Code § 25017(e). A stock dividend is not payable solely in shares of the common stock when shareholders are given the option to accept either cash or the additional shares of common stock. 10 CCR § 260.017(b).

 

Topics:  Corporate Gifts, Dividends, Sales, Securities, Stocks

Published In: Business Organization Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

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