Also known as: stock dividend · share dividend
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
An issuance of additional shares of the same class to existing shareholders pro rata and without consideration. The board may fix a record date to determine entitlement, and the issuance does not require shareholder approval when the corporation has only one class of shares outstanding.
An issuance of additional shares of the same class to existing shareholders pro rata and without consideration. The board may fix a record date to determine entitlement, and the issuance does not require shareholder approval when the corporation has only one class of shares outstanding.
River Logistics maintains one class of common stock. Its board approves a stock dividend for employee shareholders and adopts an articles amendment raising authorized shares from one million to three million. The increase is sized to cover the dividend shares. The amendment takes effect without a shareholder vote because the statute permits board action when only one class is outstanding and the sole purpose is enabling the dividend.
Additional shares acquired by a testator after will execution as a direct result of ownership of specifically devised securities. Those shares pass to the devisee along with the original shares rather than falling into the residue.
Elena Vargas's will leaves 600 shares of Liberty Education to her niece Josiah. After execution, Liberty Education pays a stock dividend and later spins off its textbook division, distributing new shares to existing holders. Vargas dies still owning all the shares. Josiah receives the original shares plus the dividend and spin-off shares because both sets of additional securities arose directly from ownership of the devised stock.
Additional shares acquired by a testator after will execution as a direct result of ownership of specifically devised securities. Those shares pass to the devisee along with the original shares rather than falling into the residue.
Each sense below has its own examples, sources, and questions.
Crest Market declares a ten-percent stock dividend on its single class of common shares. Isabel, a recent purchaser, receives her proportionate number of new shares on the same terms as long-term holder Tiffany. The corporation issues the shares without any cash payment because the governing statute treats the distribution as a share dividend when made pro rata to existing holders of the same class.
A board may act unilaterally when the corporation has only one class of shares outstanding and the amendment increases authorized shares only to the extent necessary for the dividend. The statute creates a narrow exception to the usual shareholder-approval requirement for articles amendments.
No. Shares may be issued pro rata and without consideration to holders of the same class. The transaction is defined as a share dividend precisely because it occurs without payment and maintains proportional ownership.
Yes. Additional shares acquired after will execution as a result of the testator's ownership of the described securities are included in the specific devise. The rule treats those shares as accretions that follow the original gift rather than residue.
Those shares do not pass with the specific devise. Only automatic corporate distributions tied to existing ownership qualify as accretions. Voluntary purchases with new funds are treated as separate after-acquired property that falls into the residue.
…of the business of the corporation, being made directly through stock subscriptions or indirectly through the declaration of stock dividends. The capital stock of a corporation is always representative of the net assets of the corporation, whatever they may be, and so a share of stock may be worth more or less than its par…