Exercise Extreme Caution when using many of our free forms - or any legal material. While they may provide general ideas on format & content, validity requirements can and do vary greatly from state to state. Many MUST be Properly Modified for your own location and circumstances. (Hint: If in doubt it's usually safer to include unneeded clauses than to leave out necessary ones. . . . but it's even safer to consult a competent source or use current, state specific ones like ours mentioned below.) Also, we urge people (and lawyers too) to read our Relying On Legal Info FAQ.
When a corporation is experiencing financial difficulties it has the right to reduced or even suspend payment of its dividends. Shareholders do not receive the amount promised when they purchased the stock, and most never see this money again.
If and when the company pulls itself out of danger, it may raise or resume dividend payments. Preferred share holders are the first to receive these payments, followed by common shareholders. Investors who purchased cumulative preferred stock, however, receive not only these refreshed dividends, but also the full amount that was unpaid while the company was in trouble. Cumulative preferred stock is a safer investment because of this guarantee, and so it is almost always issued with a lower interest rate than straight preferred stock. Greater risk means greater reward.
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