STOCK (AS. stocc, OHG. stoc. Ger. Stock, post, trunk; probably connected with Skt. tuj, to thrust). In corporation law, the rights or interest which the organizers of a corporation, or persons who contribute to its capital, have in its assets, franchises, management, and profits. The amount fixed by the charter of a corporation as the sum which is to be paid into its treasury for use in its business operations is called the capital stock. The latter term is sometimes inaccurately applied to the actual property owned by a corporation, as the capital stock of a corporation may not represent its actual assets, even at the time of its organization. The total capital stock of a corporation is divided into shares, which are represented by certificates, and the latter are distributed to subscribers according to the amounts of their respective sub scriptions. Shares of stock may be made of any value, the par value being fixed by dividing the number of shares issued into the total amount of capital stock. The usual par value is $100, but shares representing other sums, even so small as $1 each, are sometimes issued, espe cially in industrial enterprises. Many States require stock to lie issued at its par value.
Treasury stock is that which is not allotted to subscribers, but retained by the corporation for the purpose of selling it from time to time to raise funds.
Stock may be divided into preferred and com mon shares. The amount in dividends which the former can receive in each year is usually fixed and certain, and if more is paid as dividend it must be paid on the common stock. Preferred stock may be cumulative or If the former, any deficiencies in dividends in one year must be made up later, before a dividend can be declared on the common. For example,
if 7 per cent. cumulative preferred stock is is sued, and the earnings are only sufficient to pay 5 per cent. on it in a given year, the deficiency of 2 per cent. must be made up later. If such stock were non-cumulative, the preferred stock would only receive 5 per cent, for that year, even though the earnings the next year were sufficient to pay 15 per cent, on the amount of the capital stock, and an 8 per cent, dividend were declared on the common stock.
The name of each person to whom a* share of stock is issued is entered upon the books of the corporation.
Shares of stock are transferable by assign ment, and the transferee obtains a right to have his name entered upon the books of the company as a stockholder in the place of his transferrer. However, shares of stock are not negotiable instruments in the strict sense of that term, but they are commonly indorsed in blank and transferred from one person to an other as if such transfer were protected by the same rules of law. For this reason the courts in the United States generally protect an inno cent purchaser for value. on the ground of estoppel. The English courts do not go so far in this respect, and the only safe course there is for a purchaser of stock to have the transfer entered on the books of the corporation immediately. Dividends are paid to the record owner of stock irrespective of who holds the certificates. A record owner of stock is called a stockholder. See Cook. Stock and Stockholders (New York, 1887) Dos Passos, The Lau of Stock Brokers and Stock Exchanges (New York, 1882) ; also CORPORATIONS and authorities there cited.