[ Settlement Trusts ] [ Stock to Afterborns ]
about Stock to the Afterborns
From time to
time, we are asked general questions about the issuance of stock to those
born after the passage of ANCSA in December, 1971, and as a service to the
Alaska Native community, the following general questions and answers are
made available. The following is not intended to be legal advice, and if
you have specific questions, we encourage you to call or email us.
What is the procedure to adopt a plan to allow those born after December
18, 1971 (the so-called “afterborns”) ownership in an ANCSA
the Board of Directors adopts a resolution describing the manner in
which the afterborns will be permitted stock ownership, subject to
approval by 50% plus one of the outstanding Class A shares.
Without this shareholder vote the plan cannot be implemented.
Does this mean the Board cannot adopt such a plan on its own?
The Board cannot adopt a plan without shareholder approval.
Does ANCSA permit different types of stock for afterborns?
Yes. This stock could be identical to the present Class A stock,
that is, it is permanent, voting, and with full right to a pro rata
distribution when declared. It
could be life estate stock, that is, it could be canceled when the
holder dies. It could be
non-dividend, that is, it would not receive any current distributions.
It could be issued only if it is purchased for the recipient.
It could be made to be non transferable, that is, only the
specific afterborn could own it.
Would an ANCSA corporation have to issue such stock to all afterborns, or
could we limit it only to those born between December, 1971 and before a
not completely clear on this, although we think a court would require
all afterborns to receive stock (if the shareholders approve).
That is, once the shareholders approve an afterborn program, all
afterborns would receive the stock.
How much dilution would our existing stockholders suffer?
knows the answer to this, and we recommend that any
Board of Directors conduct a nonbinding survey to try to develop
information on this. Under
this approach, each shareholder would be sent a survey, asking them to
identify within their own immediate family those persons born after
December, 1971 who are not already shareholders.
While this will still not be a complete answer, it will be a good
start in beginning to identify how many new shareholders would have to
Please give an example of how dilution affects the value for existing
example only, assume where were one hundred new shareholders added to a
corporation with 500 original enrollees.
Assume further that the corporation has $12 million in net
assets, so that each original enrollee’s share of assets is $24,000.
After the 100 new shareholders are added, the share of the net
assets for each of the 600 shareholders now is only $20,000.
the actual calculations of dilution will be based on shares (rather than
number of shareholders). However, the math works the same way.
Does this mean that if an afterborn program is left open, that
there are potentially an unlimited number of new shareholders?
you decide to leave the afterborn program open, that is, whenever a new
baby is born to an ANCSA Corporation shareholder the baby is
automatically added as an afterborn shareholder, the total number of new
shareholders is potentially unlimited.
Are there other special factors to think about?
shareholder vote can be held at either an annual meeting or a meeting
called just for that purpose. ANCSA requires a minimum of 50 days notice
to the shareholders. As
practical matter, this puts at least a three-month lead-time to write a
good proxy statement and provide correct notice.
Another factor you will want to give thought to in establishing
your time frames is the degree of shareholder education you think
appropriate. Also, ANCSA
gives a Board of Directors the right to postpone a vote for any reason
for up to 45 days. This is
a good reason for the vote on the afterborns to be held at a special
meeting of shareholders.