CORPORATIONS - OBLIGATION TO REFUND DIVIDENDS PAID OUT OF CAPITAL

Authors

Abstract

The general rule is fairly well established that, where dividends are paid, in whole or in part, out of the capital stock, corporate creditors, being such when the dividend was declared, or becoming such at any subsequent time, may, to the extent of their claims, if such claims are not otherwise paid, compel the stockholders to whom the dividend has been paid to refund whatever portion of the dividend was taken out of the capital stock. This, however, has been modified in the federal courts to the extent that where the dividend, although paid entirely out of capital, was received in good faith by the stockholders, and where the corporation was not insolvent at the time of payment, it cannot be recovered on behalf of the creditors.

Recommended Citation

CORPORATIONS - OBLIGATION TO REFUND DIVIDENDS PAID OUT OF CAPITAL, 30 Mich. L. Rev. 1070 (1932).
Available at: https://repository.law.umich.edu/mlr/vol30/iss7/5