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Simple English definitions for legal terms
liquidating dividend
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A quick definition of liquidating dividend:
A liquidating dividend is a payment made to shareholders when a company decides to stop doing business. It comes from the company's capital and is usually given in cash. Dividends are payments made to shareholders from a company's profits. They can be given in different forms, such as cash, property, or stock. A preferred dividend is paid to preferred shareholders who have priority over common shareholders. A cumulative dividend grows from year to year when not paid and must be paid in full before common shareholders receive any payment. A noncumulative dividend does not accrue for the benefit of a preferred shareholder if there is a passed dividend in a particular year or period. A stock dividend is paid in stock expressed as a percentage of the number of shares already held by a shareholder.A more thorough explanation:
A liquidating dividend is a payment made to shareholders when a company decides to suspend all or part of its business operations. This payment is usually made from the capital of the corporation. It is called a liquidating dividend because it is paid out when the company is liquidating its assets.
For example, if a company decides to close down its operations and sell off its assets, it may pay a liquidating dividend to its shareholders from the proceeds of the sale. This payment is made to compensate the shareholders for their investment in the company.
Another example of a liquidating dividend is when a company decides to spin off a division or subsidiary. In this case, the company may pay a dividend to its shareholders from the proceeds of the sale of the division or subsidiary.
Overall, a liquidating dividend is a payment made to shareholders when a company is liquidating its assets or spinning off a division or subsidiary. It is a way for the company to compensate its shareholders for their investment in the company.