CORPORATIONS-DECLARATION OF DIVIDENDS-STOCKHOLDERS AS CREDITORS

Authors

Abstract

When can a stockholder say with any assurance that the accumulated profits of the corporation are really his? It is clear that the stockholder has no legal right to any share of the undivided profits before there has been a declaration of dividends. But it has been asserted and reasserted, times without number, that, upon the mere declaration of a dividend, it immediately becomes separated and segregated from the profits, and the rights of a creditor thereto promptly vest in the stockholder. This statement of the rule, at least in regard to cash dividends, may be taken with no more than the usual "grain of salt" that attaches to the expression of any broad general rule, if we are sure of what we mean by "declaration." What must be done to segregate the profits? Is it enough that the directors say at a meeting, "we hereby declare a six percent dividend"; or must they record this statement on the books; or must they announce the same to the public and to the stockholders; or must the declared amount be formally credited pro rata on the books of the corporation to each stockholder; or must the declared sum be physically set aside in a separate fund to pay the stockholders; or must the stated dividend be actually paid in part or wholly to some or all of the stockholders?

Recommended Citation

CORPORATIONS-DECLARATION OF DIVIDENDS-STOCKHOLDERS AS CREDITORS, 28 Mich. L. Rev. 914 (1930).
Available at: https://repository.law.umich.edu/mlr/vol28/iss7/6