Question

par value stock is capital stock that has been assigned a value per share in the corporate charter. The par value may be any amount selected by the corporation. Par value is usually quite low. Historically, par value was used to determine the legal capital per share that must be retained in the business for the protection of corporate creditors. It is the amount that is not available for withdrawal by stockholders. No-par value stock is capital stock that has not been assigned a value per share in the corporate charter. In many states the board of directors is permitted to assign the stated value to the no-par shares, which then becomes the legal capital per share. The state value of no-par stock may be changed at any time by action of the directors. Stated value, like par value, does not include or correspond to the market value of the stock.

Should corporations return to the historic standards of holding enough par-value stock to cover liabilities owed by the corporation? Why or why not?

Answer 1

Yes, it would be better that the historical standards of holding lowest par-value of the stock should be maintained. As corporately known that par-value of a stock is the legal value of capital per share which has to be kept in the business for the protection of the business creditors. This legal share capital per share has not to be withdrawn so that creditors of the business has confidence of recovery of their amount lent to the company. As the liability of the shareholder is limited to the par value of the share, so if the corporations again retain the historical standards of lower par-value, so that the shareholders feel safe towards their capital.

The historical pattern of keeping the stated value of the legal capital of the stock is good to hold, so that the flexibility of fixation of par value of the stock remains with the directors.

====================================