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    Section 42

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    Dene Balanon
    The document discusses a corporation's power to declare dividends. It states that dividends are profits set aside for distribution to shareholders, and can only come from unrestricted retained earnings. The board of directors has the power to declare dividends in cash, property, or stock, but stock dividends require approval by 2/3 of shareholders. Cash dividends on delinquent stocks first pay down unpaid balances. Corporations generally can't retain surplus over 100% of paid-in capital without justification.

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    Section 42

    Uploaded by

    Dene Balanon
    23 views6 pages
    The document discusses a corporation's power to declare dividends. It states that dividends are profits set aside for distribution to shareholders, and can only come from unrestricted retained earnings. The board of directors has the power to declare dividends in cash, property, or stock, but stock dividends require approval by 2/3 of shareholders. Cash dividends on delinquent stocks first pay down unpaid balances. Corporations generally can't retain surplus over 100% of paid-in capital without justification.

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    The document discusses a corporation's power to declare dividends. It states that dividends are profits set aside for distribution to shareholders, and can only come from unrestricted retained earnings. The board of directors has the power to declare dividends in cash, property, or stock, but stock dividends require approval by 2/3 of shareholders. Cash dividends on delinquent stocks first pay down unpaid balances. Corporations generally can't retain surplus over 100% of paid-in capital without justification.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    23 views6 pages

    Section 42

    Uploaded by

    Dene Balanon
    The document discusses a corporation's power to declare dividends. It states that dividends are profits set aside for distribution to shareholders, and can only come from unrestricted retained earnings. The board of directors has the power to declare dividends in cash, property, or stock, but stock dividends require approval by 2/3 of shareholders. Cash dividends on delinquent stocks first pay down unpaid balances. Corporations generally can't retain surplus over 100% of paid-in capital without justification.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 6

    Section 42:

    POWER TO DECLARE
    DIVIDENDS
    Section 42: Power to Declare Dividends
     DIVIDENDS – profits set aside and declared for distribution
    to the stockholders at a fixed time.

     UNRESTRICTED RETAINED EARNINGS – have not been


    reserved or set aside for some corporate purpose.

     DELINQUENT STOCK- failure of the holder to pay the


    unpaid subscription or balance.
    Section 42: Power to Declare Dividends
     The board of directors of a stock corporation may declare dividends
    out of the UNRESTRICTED RETAINED EARNINGS which shall be
    payable in cash, property, or in stock to all stockholders on the basis
    of outstanding stock held by them: Provided, That any cash
    dividends due on delinquent stock shall first be applied to the unpaid
    balance on the subscription plus costs and expenses, while stock
    dividends shall be withheld from the delinquent stockholders until
    their unpaid subscription is fully paid: Provided, further, That no
    stock dividend shall be issued without the approval of stockholders
    representing at least two-thirds (2/3) of the outstanding capital stock
    at a regular or special meeting duly called for the purpose.
    General rule : Stock corporations are prohibited from retaining surplus
    profits in excess of one hundred percent (100%) of their paid-in capital
    stock,
    except:
     (a) when justified by definite corporate expansion projects or
    programs approved by the board of directors; or
     (b) when the corporation is prohibited under any loan agreement
    with financial institutions or creditors, whether local or foreign,
    from declaring dividends without their consent, and such consent
    has not yet been secured; or
     (c) when it can be clearly shown that such retention is necessary
    under special circumstances obtaining in the corporation, such as
    when there is need for special reserve for probable contingencies
    KINDS OF DIVIDENDS
    CASH Payment of dividends is in the form of cash.
    PROPERTY Company gives shareholders a property instead of cash or cash equivalents.

    STOCK It is an additional share of stock instead of giving a cash dividend.

    BOND Dividends in the form of bond or notes for a long-term period .

    SCRIP Dividends which shareholders have the option to receive in the form of
    additional shares in the company instead of cash.
    LIQUIDATING When board of directors wishes to return the capital originally contributed by
    shareholders as a dividend.
    COMPOSITE Partly in the form of cash and partly in another form of asset other than cash.
    REQUISITES OF EXERCISING THE POWER

    1. Existence of the unrestricted retained earnings


    2. Resolution of the board of directors
    3. For stock dividends:
    a.A vote representing not less than 2/3 of the
    outstanding capital.
    b.A corporation must have also a sufficient
    number of authorized unissued shares for
    distribution.

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