Yes As a general rule the participation of each stockholder in the earnings of

Yes as a general rule the participation of each

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Yes. As a general rule, the participation of each stockholder in the earnings of the corporation is based on his total subscription and not the amount paid by him. X, Y, and Z each owns 10% of the capital stock of a corporation. X exercised his pre-emptive right to new shares while Y offered his corresponding new shares to Z who purchased the same, thereby increasing Z’s proportionate holdings . Has X a ground for complaint? No. the pre- emptive right of stockholders extends “to all issues or disposition of shares of any class” unless denied by the articles of incorporation or an amendment. Suppose the original capital stock of a corporation is divided into 100,000 shares which were all offered for subscription. Only 60,000 shares were subscribed including 12,000 shares by X. Is X entitled to pre-emption in case the remaining unissued 40,000 shares are again offered for subscription? No. X is not entitled to pre-emption with respect to the remaining unissued 40,000 shares. But where the number of shares initially offered for subscription was only 40,000, then X may exercise his pre-emptive right, in case of the remaining 40,000 shares are subsequently offered to subscription. The corporation has surplus profits amounting to more than 100% of its paid-up capital stock. It has not declared dividends for the last 5 years. May the corporation be compelled by the SEC to declare dividends to its stockholders? It depends. Stock corporations are prohibited from retaining surplus profits in excess of 100% of their paid-in capital stock, except when justified by definite corporate expansion projects or programs approved by BOD, or when the corporation is prohibited under any loan agreement with any financial institution or creditor and such consent has not yet been secured, or when it can be clearly shown that such retention is necessary under special circumstances.  A corporation borrowed money for the purpose of paying dividends. Is this legal? It depends. As a rule dividends cannot be declared out of borrowed money, for borrowed money is not profits; but money may be borrowed temporarily for the purpose of paying dividends, if the corporation has used its surplus assets to make improvements for which it might have borrowed money. STOCKS AND STOCKHOLDER Derivative suit  –   one brought by one or more stockholders or members in the name and on behalf of the corporation Watered stock  –  stock issued for no value at all or for a value less than its equivalent either in cash, property, services, or stock dividends. Call  –   declaration officially made by a corporation usually expressed in the form of a resolution of the BOD requiring the payment of all or a certain prescribed portion of a subscriber’s stock subscription. Highest bidder  – person offering at the sale “to pay the full amount of the balance on the subscription together with accrued interest for the smallest number of shares.

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