IS NON-CUMULATIVE PREFERRED STOCK CUMULATIVE?

Authors

Abstract

A corporation may not lawfully pay dividends except out of profits, this limitation representing one important distinction between stockholders and creditors. Furthermore, as a general rule, stockholders have no right to dividends even out of earnings until they have been declared, it being within the discretion of the directors whether any payment shall be made or not. N. Y. L. E. & W. v. Nickals, 119 U. S. 296. True, this power of the directors is limited by the rule of reasonableness. Dodge v. Ford Motor Co. 204 Mich. 459. But an action to compel a distribution of unreasonable accumulations requires a strong showing of abuse of discretion on the part of the directors.

Recommended Citation

IS NON-CUMULATIVE PREFERRED STOCK CUMULATIVE?, 23 Mich. L. Rev. 779 (1925).
Available at: https://repository.law.umich.edu/mlr/vol23/iss7/6