Olympic National Agencies was organized with an
authorized capitalization of preferred stock and common stock. The
articles of incorporation provided for a 7 percent annual dividend for
the preferred stock. The articles further stated that the preferred
stock would be given priority interests in the corporation’s assets up
to the par value of the stock. After some years, the shareholders voted
to dissolve Olympic. Olympic’s assets greatly exceeded its liabilities.
The liquidating trustee petitioned the court for instructions on the
respective rights of the shareholders in the assets of the corporation
upon dissolution. The court ordered the trustee to distribute the
corporate assets remaining after the preference of the preferred stock
is satisfied to the common and preferred stockholders on a pro rata
basis. Was the court correct in rendering this decision? Explain.
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