6. Lost certificates.—If a. stockholder loses his cer tificate Ile may procure a new one, under ordinary practice, by making affidavit to the facts, and by put ting up a bond to protect the corporation in case the lost certificate is presented by a bona fide purchaser.
7. Stock certificates as evidence of stockholders' rights.—The stock certificate is only an evidence of the stockholder's interest in a company. The com plete terms of his contract with the company is con tained in the state, Dominion or provincial laws, in the certificate of incorporation and in the by-laws. Sometimes the clauses from the certificate and by- laws, describing special rights or limitations, are printed on the face of the certificate. Such clauses define the exact terms of preference in the distribution of profits, voting rights and the like. In other in stances, however, the certificate merely refers to the provisions of the certificate of incorporation or by laws bearing upon these questions.
8. Rights of individual stockholders.—The individ ual stockholder has the right to participate in the profits; the right to control the company; and the right to share in the proceeds of liquidation, after all debts have been paid. In this Text we shall confine ourselves largely to the right to control. Dividend contracts and dividend policies are discussed in the Text on "Corporation Finance." 9. Dividends.—Profits paid to stockholders are called dividends. They are usually paid in cash, but may be paid in scrip redeemable at some time in the future in cash, in stock, or even in property. A recent example of property dividends is found in the dis tribution of Anglo-French bonds to the stockholders of the Du Pont Powder Co.
10. Who has the right to declare dividends?—The directors, honestly exercising their discretion, have the sole right to declare dividends.' Stockholders can compel the payment of dividends only when they can show the violation of a contract, or fraud on the part of the directors. Thus, a certificate of stock bearing the statement that the holder shall be entitled to divi dends at the rate of 8 per cent, payable quarterly, on the first of January, April, July and October would riive a stockholder the riotht to insist that the dividend 275 shall be declared if the surplus is available. The
stockholder's gain this right thru the wording of the stock certificate in which there is an implied contract on the part of the corporation to declare and to pay these dividends. Moreover, if the stockholders can. show that the directors refuse to. pay dividends, in spite of a large surplus in the form of cash on deposit with banks in which the directors are personally in terested, the former can probably get a mandatory in junction directing the payment of reasonable divi dends.
11. Sources of dividends.—Dividends are paid only out of surplus or net profits.
The words net profits define themselves. They mean what shall remain as the clear gains of any business venture after deducting the capital invested in the business, the expenses incurred in its conduct, and the losses sustained in its prose cution.i Dividends must be declared generally on all shares of the same class of stock. An agreement to pay a fixed dividend on any class of stock- is valid so long as there are any profits out of which to pay it. Directors and officers who participate in the declaration and dis tribution of dividends out of capital are usually civilly liable to the injured parties and they may be prose cuted criminally.
Surplus need not be accumulated in the form of cash. If net profits of a corporation are tied up in property, the corporation may borrow cash to dis tribute as dividends.
12. 'no is entitled to dividends?—After a dividend is declared, the amount apportioned to the individual stockholder becomes a debt of' the corporation, and the stockholder may sue for it as for any other debt. If the amount of the dividend is set aside in a separate fund or bank account, it becomes a trust fund in which the stockholder has a right superior to that of' the creditors, in case the company subsequently becomes insolvent.
Dividends are treated as tho earned, when declared. The owner of stock at the time of declaration, not at the time of payment, is entitled to the dividend. Very frequently the declaration is made in this form: A dividend of per cent is hereby declared on the capi tal stock of the company payable on May 1 to stockholders of record of April 15. Books will close at 5 P. m. on April 15 and remain closed till May 1.