Also known as: plough back · plowback · ploughs back · plowed back · ploughed back · reinvest · reinvestment of profits
Written by attorneys · grounded in primary & secondary sources — see below
To reinvest earnings and profits in the business or trust rather than paying them out as dividends or distributions to owners or beneficiaries.
Select any source to read its text and confirm it supports the definition.
Pinnacle Holdings earned substantial quarterly profits from its manufacturing operations. The board voted to use the entire surplus to purchase new equipment and expand facilities rather than declare any dividend. This decision allowed the company to grow its production capacity without seeking outside financing.
Paige Porter served as trustee of a family trust holding dividend-paying stocks. Instead of distributing current income to the life beneficiary, she reinvested the earnings in additional shares to increase the corpus for the remaindermen. The trust instrument authorized such accumulation during the beneficiary's minority.
Pedro Pacheco and his fellow shareholders in a closely held manufacturing firm faced pressure from a minority owner seeking cash distributions. The majority instead retained all net earnings to fund plant upgrades and repay loans. This choice preserved corporate resources while limiting immediate payouts to owners.
Phoenix Technologies, controlled by its founder, generated record profits from vehicle sales. Management directed the funds toward lowering prices and building additional factories instead of issuing dividends to shareholders. The policy prioritized long-term market share over immediate returns to investors.
Pulse Media declared a stock dividend that increased each shareholder's holdings proportionally. Recipients who elected to keep the new shares rather than sell them effectively plowed the corporate earnings back into additional equity ownership. The transaction did not constitute taxable income to the shareholders at the time of distribution.
Paul Peterson and his partners in a real estate venture received notice of a cash distribution right held by a transferee. The managing partners nevertheless retained the net rental income and reinvested it in property renovations to raise long-term values. No cash reached the transferee that quarter.
A corporation may lawfully reinvest earnings rather than distribute them when acting within its statutory powers to invest and reinvest funds. The Model Business Corporation Act expressly grants corporations authority to lend, invest, and reinvest, confirming that retention for business purposes is permitted.
Retention of earnings for legitimate business needs such as expansion or debt reduction does not automatically give rise to a successful claim by minority owners. Courts examine whether the decision reflects a good-faith business judgment rather than an oppressive freeze-out.
…his livelihood. Thus, he cannot afford to wait passively. He must liquidate his investment in the close corporation in order to reinvest the funds in income-producing enterprises. At this point, the true plight of the minority stockholder in a close corporation becomes manifest. He cannot easily reclaim his capital. In a…
…dividends, the company paid sixty per cent, on its capitalization of two million dollars, or $1,200,000, leaving $58,000,000 to reinvest
…he should have left the selection to his trustees.- But as it would have been necessary to empower them to change, sell out and reinvest
…was "entitled to interest at the rate of 21%, which is the rate . . . it would obtain if it could foreclose on the vehicle and reinvest
…as the ‘Charles B. Henry and Fannie Belle Henry Fund’, for the following uses and purposes: “(a) My Trustee shall invest and reinvest
A trustee may retain and reinvest income when the trust instrument or prudent-investor standards authorize accumulation to preserve or grow the corpus. Such action is evaluated under fiduciary duties rather than requiring unanimous beneficiary approval.
A transferee is entitled only to distributions the partnership actually declares. Retention decisions made in good faith for renovations or operations do not create an independent right to payment or an economic substitute for the transferee.
A trustee exercising the same powers as an individual owner may sell assets and reinvest proceeds in new ventures without prior court approval, provided the action complies with fiduciary duties of prudence and loyalty.