LAW 3102 Study Guide - Midterm Guide: Watered Stock, Preferred Stock, Treasury Stock
Document Summary
Olympic national agencies was organized with an authorized capitalization of preferred stock and common stock. The articles of incorporation provided for a 7 percent annual dividend for the preferred stock. The articles further stated that the preferred stock would be given priority interests in the corporation"s assets up to the par value of the stock. The liquidating trustee petitioned the court for instructions on the respective rights of the shareholders in the assets of the corporation upon dissolution. The court ordered the trustee to distribute the corporate assets remaining after the preference of the preferred stock is satisfied to the common and preferred stockholders on a pro rata basis. The preferred stockholders should be paid only the par value of their stock before any liquidation dividends are paid to the common stockholders. Yes the court is correct in rendering this decision.
