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Corporations • Rights of Shareholders
CORP#053
Legal Definition
Dividends can be paid to shareholders in the form of cash, property, or indebtedness while the corporation is operating.
Plain English Explanation
The most popular type of distribution people are usually familiar with is a dividend, which is usually a cash payment to shareholders based on how many shares of the company they own. For example, HypoCorp may declare a dividend of "$1 per share." If you owned 100 shares of HypoCorp, you would receive a check for $100.
However, sometimes a corporation will choose to give its shareholders indebtedness instead of cash. "Indebtedness" is just a promise to pay cash at a later point, like an "I.O.U.".
However, sometimes a corporation will choose to give its shareholders indebtedness instead of cash. "Indebtedness" is just a promise to pay cash at a later point, like an "I.O.U.".
Visual Aids
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