The true-value rule requires individuals purchasing stock in a company to pay the complete price as determined by the company. This payment can be made in either money or an equivalent asset. Even if the stock’s value decreases below the purchase price, the buyer remains obligated to pay the full amount. This rule is crucial for ensuring the accuracy of the company’s financial records in relation to its actual assets. If the true value is lower than the purchase price, the shareholder may be held responsible for the shortfall by creditors.
The true-value rule mandates that individuals who subscribe for and receive corporate stock must pay the par value, either in money or its equivalent. This requirement ensures that a corporation’s actual assets align with its financial records. If the true value of the stock is lower than the par value, the stock is deemed unpaid for the entire difference, and the shareholder becomes liable to creditors for that difference, regardless of the directors’ good faith. For instance, if someone subscribes for 100 shares of stock with a par value of $10 per share, they must pay $1,000. Even if the true value of the stock is only $8 per share, the shareholder remains responsible for the full $1,000, and the $200 difference is considered unpaid. The true-value rule plays a crucial role in upholding a corporation’s financial integrity and safeguarding the interests of shareholders and creditors.
The True-Value Rule is a legal principle that requires parties to accurately disclose the true value of assets or property in legal proceedings, such as in divorce or bankruptcy cases.
The True-Value Rule is important because it ensures that all parties involved in a legal matter have access to accurate and truthful information about the value of assets, which is crucial for making fair and informed decisions.
If someone violates the True-Value Rule by intentionally providing false or misleading information about the value of assets, they may face legal consequences such as fines, penalties, or even criminal charges for fraud.
Proving a violation of the True-Value Rule typically requires evidence such as financial records, appraisals, or expert testimony to demonstrate that the value of assets was misrepresented.
Yes, the True-Value Rule can apply to any type of asset or property, including personal belongings, vehicles, investments, and real estate.
If you suspect that someone is not accurately disclosing the value of assets in a legal matter, you should consult with a lawyer who can advise you on the best course of action, which may include gathering evidence and filing a complaint with the court.
There may be certain exceptions to the True-Value Rule in specific legal contexts, so it’s important to consult with a lawyer to understand how the rule applies to your particular situation.
Yes, the True-Value Rule can be enforced in alternative dispute resolution processes such as arbitration or mediation, where accurate valuation of assets is also important for reaching a fair resolution.
Failing to comply with the True-Value Rule in a divorce case can result in the court making decisions based on inaccurate information, which may lead to unfair outcomes for the parties involved.
To ensure that you are following the True-Value Rule, it’s important to be transparent and honest about the value of your assets, and to seek professional advice or appraisals if necessary to accurately determine their worth.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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