Dividends Intro

Distributions that are beyond the standards will have personal liability issues for the directors.

Statutes
Model Act - dividends can only be paid out of earned surplus. Delaware - can pay out of all surplus. FL 607.06401 (3)(a)(b) (both must be met)
Equity insolvency test can you meet the debts? Balance Sheet test FL div. = Assets - (liabilities + Pref.Stock)

(4)
Directors can use a reasonable judgment on what their assets are outside of the balance sheet. For instance, if land is re-valuated at 3,000,000 from its cost of 200,000

607.0631 repurchase of shares is same as dividends because giving money to SH's
without affecting their % of ownership.

Stocks & Stock splits
Stock split/stock dividends Add more outstanding shares Creditors are not affected Assets are not affected Mostly a difference in accounting 20% or more = stock split Less = stock dividend

Nimble Dividend provision
allows dividends to be declared and paid either out of surplus or profits of the current fiscal year and/or the prior fiscal year.

Repurchase of Shares
Like reverse stock dividends, but if done proportionately. Why do it? To increase earnings-share ratio.
To increase stock price if there's extra cash lying around.

To merely invest in own stock. Doing it as a distribution
Must conform to the 607.06401 dividend standards.

If shares are bought back: If it's a public company can hold stock as treasury stock
This goes on the balance sheet as a negative figure (under equity)

In FL. Balanced by reducing stated capital and capital surplus and the amount of share . if not publicly traded company. then the stock just disappears.

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