What is the dividend paid in property and what are the problems related to such declaration of dividend?

The dividend paid in property is the dividend paid to shareholders by delivery of property belonging to the business corporation.

As a dividend must normally be paid in proportion to the shares held by each of the shareholders of the class concerned by a declaration of dividend, this can cause some problems.

For example, if there are several shareholders in the class concerned by the declaration of dividend and if it is a business corporation engaged in manufacturing, the problem will not arise in an acute manner; thus, each of these shareholders can receive, for example, a TV manufactured by the business corporation.

But if there are several shareholders in the class concerned by the declaration of dividend and if the dividend declared concerns a single property belonging to the business corporation, it will be very difficult for all these shareholders to share among them that sole property. Indeed, these shareholders would then become co-owners of that sole property which is paid to them in the form of a dividend paid in property. And in the event that one of these shareholders withdrew from the shareholding of the business corporation following the sale of his shares, what would happen to his share of the dividend that was paid to him in property and of which he is co-owner? Do his co-shareholders will then be required to redeem his share of the dividend that was paid to him in property?

In fact, this form of declaration of dividend meets specific needs among both the shareholders receiving such dividend and the business corporation declaring it and this form does not always adapt very well to the economic reality of businesses.

Issues related to the use of this form of dividend means that it is little used by the business corporations although the corporate laws allow it.