Corporations - Preference Rights on Dissolution

Authors

Robert B. Fiske, Jr. S.Ed., University of Michigan Law SchoolFollow

Abstract

The capital structure of the defendant corporation consisted of class A, class B, and preferred stock. According to the articles of association, the class A stock was entitled to a ten percent dividend before any dividend was paid on the class B. After the class B stock had also received a ten percent dividend, the two classes were to share equally in any further dividends. The charter further provided that on dissolution the holders of the class A stock were entitled to cash to the amount of the par value of their stock before any payment in liquidation was made to the holders of the class B stock. Upon dissolution of the defendant, the class A stockholders claimed the right to share equally with the class B stockholders in surplus assets remaining after both had received the par value of their stock. Held, all assets remaining after the holders of class A stock have received par value are to be distributed to the class B shareholders. The preference given class A stockholders on dissolution is clearly exhaustive. Mohawk Carpet Mills, Inc. v. Delaware Rayon Company, (Del. Ch. 1954) 110 A. (2d) 305.

Recommended Citation

Robert B. Fiske, Jr. S.Ed., Corporations - Preference Rights on Dissolution, 53 Mich. L. Rev. 887 (1955).
Available at: https://repository.law.umich.edu/mlr/vol53/iss6/11