[GNC] Negative stock dividend

[Michael or Penny Novack]

On 10/5/2024 11:36 AM, sunfish62--- via gnucash-user wrote:
> How does a negative dividend work? I've never heard of one. Does the company force shareholders to pay more money to keep their shares?
>
> ⁣David T. ​

Well I suspect this is a terminology matter. Dividend probably the wrong 
term. Here are the only cases I can think of "the company force 
shareholders to pay more money to keep their shares?"

1) Erroneously paid out dividend being corrected (this is the closest 
case). Say the company declared and paid out a dividend before the court 
decided the case brought by bondholders (or some other protected 
creditor) to block that. Stockholders might be forced to disgorge that 
money. But it's not a negative dividend correcting that error. Note here 
it is not the company forcing the stockholder to pay back but a court << 
unlikely with a large publicly held corporation, but remember most are 
private and closely held >>

But cases where could be required to pay in

2) Incorporated partnership --- there might be rules about "assessments"

3) Par stock initially sold/issued below par. Mainly of historic 
interest as these days new issues more likely to be "no par" or nominal 
par (like $1). The initial buyer who paid below par (to the company 
being formed) can be assessed to pay in up to par. Nothing like a 
dividend. I'm not sure an instance of this has occurred in my lifetime. 
If my memory serves, this liability stayed with the initial purchaser 
(not the stock if sold on). Again it would be some action from creditors 
that would cause the assessment.

When we were taught limited liability means the shareholder not liable 
for debts of the corporation (could only lose what was paid for the 
stock) this exception usually ignored as made moot by time and change in 
business practice. But 100-200 years ago stocks were often issued with 
realistic par values and at the IPO, when auctioned, might have sold 
below par. In other words, while subsequent purchasers of the stock 
could only lose what they paid for the stock initial purchasers could 
lose up to par or what they paid, whichever greater.

Michael D Novack