Dividends, Redemptions, and Stock Repurchases

Summary

This practice note discusses dividends, redemptions, and stock repurchases by corporations. A corporation that declares a dividend or redeems or repurchases its own securities must comply with applicable state corporation law and related case law governing such actions. A publicly held company must also comply with disclosure requirements adopted by the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (Exchange Act) and any national securities exchange on which the company's securities are listed. Definitions for dividends, redemptions, and stock repurchases (collectively referred to as distributions)are provided and the following Delaware corporation issues are discussed: Delaware law applicable to these distributions; resources from which distributions may be paid under such laws; actions necessary to conduct the distributions; and the Delaware courts' standards of review for distributions and the potential liability of directors under the Delaware ...