The person owning the stock at 5 r. m. on April 15 is entitled to the dividend. If another person's name is registered in the books of the company at that time, he will receive the dividend check but will have to account to the true owner of the stock.1 As to the Canadian law on the subject, Mr. Victor E. Mitchell, K. C., of Montreal, in his recent excellent treatise on Canadian Company Law, has this to say : To understand the position of those who acquire shares from the registered holder, in respect to the right to divi dends derived therefrom, it should first be remembered that a share in a. company merely confers on the holders thereof the right while the company is a going concern to a share in the profits when realized and divided by way of dividend or bonus. Consequently, when a shareholder disposes of shares, and nothing is said about dividends, there goes to the person acquiring them, all the incidents attaching thereto, the chief of which is to receive all dividends which accrue thereon on and after the date of the agreement by which title to the shares is passed. The dividends which have accrued prior to the date of agreement, even if payable thereafter, belong to the transferor, and those which have accrued subsequent to the date of agreement, even in respect to profits earned at any time prior thereto, belong to the transferee. It is usual in the sale of shares to express whether the sale is "curn div." or "ex. div." 13. Ownership of dividends on, securities bought and sold on, the New York Stock Exchange.—The ownership of dividends on securities bought or sold on the New York Stock Exchange is governed by the rules of the exchange. Every contract of pur chase and sale makes them a part of the contract. The number of transactions regularly consummated on the exchange is so large that it will be pertinent at this point to quote these rules at length: Sec. 1.1 On the dav of closing of the transfer books of a corporation for a dividend upon its shares all transactions therein for "Cash " 2 shall be "dividend on" up to the tirne officially designated for the closing of transfers; all transactions on that day other than for "Cash" shall be "ex-dividend." Should the closing of transfers occur upon a holiday or half-holiday, observed by the Exchange, transactions on the preceding business day other than for "Cash" shall be "ex dividend." Sec. ,9_. The buyer shall be entitled to receive all inter est, dividends, rights and privileges, except voting power, which may pertain to the securities contracted for, and for which the transfer books shall close during the pendency, of the contract.
When such contract shall mature before the official date for payment of interest or dividend, the seller shall deliver a due-bill therefor signed or endorsed by him.
When a security is sold before the day of closing books for "Rights" (and is quoted "ex-Rights" on that day), and is delivered thereafter, the buyer shall on its delivery pay only the market price of the security "ex-Right!" He shall pay' the balance due on the contract, when the seller delivers the "Rights," at any time on or before the day set by the C,ommittee on Securities for settlement of contracts in "Rights." When a security is loaned before the dav of closing books for "Rights" (and is quoted "ex-Rights" on that day), and is returned thereafter, the lender shall on its return pay only the market price of the security- "ex-Rights." He shall pay
the balance due on the contract, when the borrower delivers the "Rights," at any time on or before the day set by the Committee on Securities for settlement of contracts in "Rights." Sec. 3. A charge of one per cent may be made for col lecting dividends. For scrip or stock dividends the charge shall be computed upon the market value of such scrip or stock.
No charge shall be made for collecting dividends accruing on securities deliverable on a contract.
Sec. 4. Offers to buy or sell dividends shall not be made publicly on the Exchange. The Chairman shall impose a fine of twenty-five dollars for each violation of this rule.
14. Dividends on dissolution.—Since the stockhold ers are owners and not creditors, they cannot partici pate in the proceeds of liquidation until every man ner of debt has been paid. Whatever surplus is left, after the creditors have been satisfied, goes to the stockholders who share in each class in proportion to the number of shares held. One class, however, may be given preference over another. Thus, preferred stock, preferred as to assets, receives the par value of the shares before any distribution is made to the hold ers of the common. stock. Where nothing is said on this point in the corporate charter, one class has no preference over another.
15. Who has the right to vO te?—The right to vote belongs to the stockholders generally. It has been said that where securities are issued on the borderline between stocks and bonds, the right to vote given to the security bolder conclusively stamps the security as a stock. While it is true that some companies have issued so-called bonds which give to the holder the absolute or contingent right to vote for directors, there is some danger that the courts will construe these se curities to be ownership and not creditor instruments. If it is desired to give the bondholders the right to con trol, a voting trust arrangement similar to that used by the Hudson and _Manhattan Railroad Company is recommended. This plan was described in the cir cular sent to the stockholders, in 1913, in connection with the readjustment of the company's finances as follows: The deposited capital stock of the C'ompany is to be de posited with a bank or trust company under an agreement which will vest the voting power in respect of such stock for a period of five years from the date of the agreement in vot ing trustees to be named by the Readjustment Managers. Said Voting Trust Agreement shall provide that -whenever and so long as five per cent interest has not been paid on all the Adjustment Income Bonds outstanding during the last preceding fiscal year, the persons elected to the board of directors of the Company shall be persons so approved or nominated at a meeting of the holders of the Adjustment Income Bonds, until one less than a majority of the board of directors shall be persons so approved or nominated, pro vided that the action of the meeting of the holders of the Adjustment Income Bonds, approving or nominating the nec essary candidates for election shall be taken within a reason able time after the opportunity to do so is given.