A nimble dividend is a type of dividend that a corporation can pay to its shareholders, even when it has a net operating loss for the year. This dividend is drawn from the corporation's current earnings, rather than from retained earnings or other accounts. However, it's important to note that some state laws restrict the use of nimble dividends, and only a minority of states have provisions allowing them.
Nimble dividends are primarily relevant in corporate law, particularly in the context of dividend distribution. They allow corporations facing financial difficulties to still reward their shareholders, which can be important for maintaining investor confidence. Users may find forms related to dividend declarations or corporate resolutions useful, particularly if they are managing a corporation and need to navigate the complexities of dividend payments.
Here are a couple of examples of abatement:
Example 1: A corporation reports a net operating loss for the year but generates sufficient current earnings. It decides to issue a nimble dividend to its shareholders to maintain goodwill and investor confidence.
Example 2: A corporation in a state that allows nimble dividends pays a nimble dividend despite having a loss the previous year, complying with state laws that permit such payments. (hypothetical example)
| State | Nimble Dividend Rule |
|---|---|
| Delaware | Allows nimble dividends under specific conditions. |
| California | Does not allow nimble dividends. |
| Texas | Allows nimble dividends with certain restrictions. |
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
| Term | Description | Difference |
|---|---|---|
| Regular Dividend | A payment made to shareholders from retained earnings. | Regular dividends are paid only when there are sufficient retained earnings. |
| Liquidating Dividend | A payment made to shareholders during the dissolution of a corporation. | Liquidating dividends occur when a corporation is closing down, not based on current earnings. |
If you are a shareholder or a corporate officer considering a nimble dividend, first review your state's laws regarding dividend payments. Ensure that your corporation has current earnings and consult with a legal professional if you have questions about compliance. You can also explore US Legal Forms for templates that may assist in drafting necessary documentation for dividend declarations.
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A nimble dividend is a payment made to shareholders from current earnings, even when the corporation has a net operating loss.