Differentiating capital stocks;

              30 HASKINS & SELLS April
Differentiating
ANOTHER corporation apparently has
been added to the list of those who
have been misled as to the precise nature
of capital stock without nominal or par
value. The evidence is contained in an
advertisement of a recent stock offering.
The advertisement in question offers a
number of shares of Class A stock of a cer­tain
corporation. The company also has
an amount of Class B stock outstanding.
Both classes represent stocks of no par
value. The offering sheet states plainly
that "the company has no bonds, pre­ferred
stock, or funded debt."
Nevertheless, Class A stock is described
as having priority over Class B stock both
as to assets and as to dividends. With
regard to dividends, Class A stock is en­titled
to non-cumulative payments of
seventy-five cents a share before any
declarations may be made on Class B
stock. Before Class A stockholders may
receive any further dividends, however,
Class B stockholders are entitled to a pay­ment
equal in the aggregate to the total
amount paid Class A stockholders. Any
Capital Stocks
further dividends are to be divided equally
between the two classes.
Somewhat the same provisions are to
apply to the distribution of net assets in
case of liquidation or dissolution of the cor­poration.
Each share of Class A stock is
entitled to twelve dollars before Class B
stockholders receive anything. The latter
are then to receive, for ratable division
among themselves, an amount equal in the
aggregate to the total paid to Class A
stockholders. The two classes are to share
equally in whatever surplus remains, if
any. Class A stock is non-voting, except
as specially provided. It was offered at
$11.25 per share.
It will be noted that the provisions
governing the issuance of the Class A
stock bear all the earmarks of a regular
preferred issue. Nevertheless, the stock is
never referred to as such. It is even stated
specifically that the corporation has no
preferred stock. The two classes are
evidently taken as being slight variations
of one class of common stock.
The confusion very probably arose be-