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Illegal Dividend

What is 'Illegal Dividend'

A dividend declared by a corporation that is in violation of its charter and/or of state laws. Should such a dividend be declared, the company's board of directors can be sued by its shareholders and creditors; the company may also face prosecution.

Explaining 'Illegal Dividend'

Many states prohibit dividend payments from the capital surplus account. Dividends are generally paid out of net income or retained earnings. Illegal dividends may significantly weaken the financial position of the company and expose its creditors to a greater degree of risk.


Further Reading


On the 'economic dividend'of devolution
rsa.tandfonline.com [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Behavioral rationality in finance: The case of dividendsBehavioral rationality in finance: The case of dividends
www.jstor.org [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Corporate governance and corporate performance: A comparison of Germany, Japan, and the USCorporate governance and corporate performance: A comparison of Germany, Japan, and the US
onlinelibrary.wiley.com [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Why individual investors want dividendsWhy individual investors want dividends
www.sciencedirect.com [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Blockholders Counterbalance, Illegal Behaviors and External Supervision: Evidences from Listed Companies from 2004 to 2005 <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-NKJJ200706011.htm' />Blockholders Counterbalance, Illegal Behaviors and External Supervision: Evidences from Listed Companies from 2004 to 2005 [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-NKJJ200706011.htm'>PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Law, finance, and economic growth in ChinaLaw, finance, and economic growth in China
www.sciencedirect.com [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Amnesty International? The nature, scale and impact of capital flight from South AfricaAmnesty International? The nature, scale and impact of capital flight from South Africa
www.tandfonline.com [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Shareholder wealth effects of dividend policy changes in an emerging stock market: The case of CyprusShareholder wealth effects of dividend policy changes in an emerging stock market: The case of Cyprus
papers.ssrn.com [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Taxes and dividend clientele: Evidence from trading and ownership structureTaxes and dividend clientele: Evidence from trading and ownership structure
www.sciencedirect.com [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …

Dividend yield investment strategies, the payout ratio and zero-dividend stocksDividend yield investment strategies, the payout ratio and zero-dividend stocks
joi.pm-research.com [PDF]
… INTRODUCTION operate. It is, after all, through institutions that economics delivers its ends, so that the latter must remain con … ethnic elites (A 1995; O, 1997). central bail-outs became illegal; in Romania munici … On the 'Economic Dividend' of Devolution 411 …



Q&A About Illegal Dividend


Who receives dividends?

Shareholders receive dividends.

Is there anything else I should know about corporate taxation and distributions before I invest in stocks with my retirement fund ?

Yes, please read up on capital gains and losses .

Can corporations decide not to distribute their profit and instead keep it all for themselves?

No, corporations cannot keep their profit for themselves; they must distribute it among their shareholders through either cash payments or stock repurchases (depending on the company).

Can companies be sued for declaring illegal dividends?

Yes, the company's board of directors can be sued by its shareholders and creditors.

How are dividends taxed?

Dividends may be subject to income tax depending on how they are distributed.

Where do dividends come from?

Dividends come from retained earnings or current year's profits.

What happens if you distribute more than your retained earnings or current year's profits allow for?

You will have to pay taxes on the excess amount you distributed as well as having to pay taxes on future distributions until you have paid off what you owe in taxes.

What does the word "distribution" mean in this context?

The word distribution means that the money is being given out.

What can happen to the company if it declares an illegal dividend?

The company may face prosecution.

Are there any restrictions on distributing dividends?

Yes, corporations must follow certain rules when distributing dividends to shareholders.

Are dividends generally paid out of net income or retained earnings?

Dividends are generally paid out of net income or retained earnings.

What states prohibit the payment of dividends from capital surplus accounts?

Many states prohibit this practice.

What is an illegal dividend?

An illegal dividend is a dividend declared by a corporation that is in violation of its charter and state laws.