Delaware Clauses Relating to Dividends, Distributions

• Category: Partnerships - Drafting Joint Venture Agreements
• State: Multi-State
• Control #: US-P0608-3AM
• Format: Word; Rich Text

Description

This sample form, containing Clauses Relating to Dividends, Distributions document, is usable for corporate/business matters. The language is easily adaptable to fit your circumstances. You must confirm compliance with applicable law in your state. Available in Word format.

Delaware Clauses Relating to Dividends and Distributions When it comes to corporate governance and the implementation of dividend and distribution policies, Delaware, known for its business-friendly environment, offers several clauses that companies can incorporate into their corporate bylaws or agreements. These clauses help define and regulate how dividends and distributions are determined and paid out. Below, we will explore some different types of Delaware clauses relating to dividends and distributions: 1. Dividend Determination Clause: The dividend determination clause outlines the procedure and factors considered when determining the payment of dividends to shareholders. It typically specifies that dividends may be paid at the discretion of the Board of Directors, subject to applicable laws and other contractual obligations. 2. Preferred Dividend Clause: This clause is specific to companies with preferred shares outstanding. It dictates the priority and entitlement of preferred shareholders to receive dividends before common shareholders. It ensures that preferred shareholders receive their fixed dividend amounts or preferred dividend rates before any payments are made to common shareholders. 3. Dividend Accumulation Clause: Some companies may incorporate a clause stating that in the event dividends are not paid in any year, they may accumulate and be paid in subsequent years before any dividends are paid to other shareholders. This clause protects the rights of shareholders by allowing them to eventually receive their unpaid dividends. 4. Dividend Preference Clause: This clause sets out the preferential rights of certain classes of shares to receive dividends over other classes. It establishes the priority of dividend payments based on the share class's rights, such as a higher dividend rate or a fixed dividend amount. 5. Mandatory Dividend Requirement Clause: This clause mandates the payment of dividends to shareholders under specific circumstances. It could be triggered by achieving certain financial milestones, meeting profitability targets, or fulfilling other predefined criteria agreed upon by the company and its shareholders. 6. Dividend Reinvestment Plan Clause: This clause allows shareholders to automatically reinvest their dividends into additional company shares instead of receiving cash distributions. It outlines the terms and conditions under which shareholders can participate in the dividend reinvestment plan. 7. Distribution Waterfall Clause: Commonly used in partnership agreements, this clause determines the order and priority of distributing profits or cash flows among partners or investors. It establishes the sequence in which distributions are allocated, taking into account factors like return on investment, preferred returns, capital contributions, and other financial parameters. These Delaware clauses related to dividends and distributions provide flexibility for companies to tailor their dividend policies to suit their specific circumstances and shareholder needs. It is essential for businesses to consult legal professionals when drafting and implementing these clauses to ensure compliance with applicable laws and protection of shareholder rights.