par-value stock

When companies issue par-value stocks, the par value refers to the minimum amount that the company could sell these stocks to stockholders. Therefore, the par value is set at the issuance of the stocks. The corporate charter contains specific provisions for par-value stocks, noting that each stock has a specific value that is the minimum at which investors must pay for the stock. 

The total amount received from the stock sale at the price of par value makes up the company’s legal capital. A corporation must always maintain a sum that is at least the same as its legal capital to protect the rights of creditors. If the value of the stocks ever drops below the par value, the corporation becomes liable to the shareholders for the price drop. By contrast, no-par stocks are those where the value of the stocks relies completely on the market.

[Last updated in November of 2023 by the Wex Definitions Team