Dividend Restriction
/ˈdɪvɪˌdɛnd rɪˈstrɪkʃən/
Definitions
- (n.) A contractual or statutory limitation on the payment of dividends by a corporation to its shareholders, often to preserve capital or comply with financial covenants.
The loan agreement included a dividend restriction to ensure the company maintained sufficient reserves.
Forms
- dividend restriction
- dividend restrictions
Related terms
See also
Commentary
Dividend restrictions are frequently found in financing agreements and corporate charters to protect creditors and ensure corporate solvency; drafters should clearly specify conditions and exceptions.
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