Legal Definitions - corporate distribution

A corporate distribution refers to any transfer of assets by a corporation to its shareholders. These assets can include cash, property, or shares of the company's own stock or stock in another company. Corporate distributions typically represent a return of capital or a share of the company's profits to its owners, and they can occur for various reasons, such as regular profit sharing or the winding down of the business.

• Example 1: Cash Dividend

  Imagine a publicly traded company, "GreenEnergy Solutions Inc.," which has had a very profitable year. Its board of directors decides to reward its investors by declaring a quarterly cash dividend of $0.50 per share. On the payment date, the company transfers the total dividend amount from its corporate bank account directly to the brokerage accounts of its shareholders.

  This illustrates a corporate distribution because "GreenEnergy Solutions Inc." (the corporation) is transferring cash (an asset) directly to its shareholders as a share of its profits.

• Example 2: Stock Redemption (Buyback)

  Consider "InnovateTech Corp.," a mature technology company with significant cash reserves. Instead of paying a dividend, the company announces a program to repurchase 10 million of its own shares from the open market. Shareholders who choose to sell their shares back to the company receive cash in exchange for their stock.

  This is a corporate distribution because "InnovateTech Corp." (the corporation) is transferring cash (an asset) to its shareholders in exchange for their shares, effectively returning capital to those investors.

• Example 3: Liquidating Distribution

  Suppose a small manufacturing corporation, "Midwest Tools Inc.," decides to cease operations and dissolve the business. After selling all its equipment and inventory, and paying off all its outstanding debts and taxes, the remaining cash and a small parcel of land owned by the company are divided proportionally among its shareholders.

  This demonstrates a corporate distribution because "Midwest Tools Inc." (the corporation) is transferring its remaining assets (cash and property) to its shareholders as part of the process of winding down and closing the business.