Accrued Dividends on Cumulative Preferred Stocks: The Legal Doctrine

Abstract

The adjustment of accrued dividends on cumulative preferred stock is an absorbing problem both in terms of legal doctrine and practical implications. The problem is essentially dynamic and controversial, calling for the exercise of careful judgments on the basis of public policy. On the one hand, the promotion of healthy corporate enterprise demands that some solution be reached to free capital structures from what Mr. Justice Douglas has aptly characterized as "a morass of accumulated unpaid dividends." On the other hand, to borrow the words of Professor Dodd, the present system of adjusting accrued dividends is giving "to property rights a fluidity and an indefiniteness quite foreign to. anything which existed in the corporation law of a century or even a half-century ago."