CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 568. when a corporation has voted to issue further stock out of surplus profits — in effect to declare a stock dividend x — but has taken no further steps to file a certificate of the increase or to issue certificates of stock, a shareholder who stands by for a year until many shares have changed hands cannot compel the issue to him of his proportionate number of shares. 2 It ap- peared in this case that the increase had been voted for a special purpose which had become impracticable. The com- plainant argued that a stock dividend was like a cash dividend, and that he acquired a vested right to it from the moment of the vote. But the court said : 3 " There is a difference between a cash and a stock dividend. The former is created by a sim- ple vote of the directors, and the amount thereby becomes severed from the general fund and belongs to the stockholders pro rata. The latter can be initiated only by a vote of the stockholders. That is followed by issuing the stock, and the increase can only be completed legally by filing with the town clerk and with the secretary of state the certificates required by law. . . . Again, a cash dividend entitles the stockholder to so much money, the ordinary way in which he receives from time to time the fruits of his investment. Such dividends do not materially affect the value of the stock. A stock dividend is exceptional. It does not add to his ready cash, but changes the form of his investment by increasing the number of shares, therebv diminishing the value of each share, leaving 1 the ag-gre- Massachusetts, that after a dividend has been declared by vote of direct- ors, but payable at a future time, the vote may be rescinded at a sub- sequent directors' meeting held be- fore the time when the dividend becomes payable, if the fact that the dividend has been declared has not been made public or communi- cated to the shareholders, and no fund has been set apart for its pay- ment. Ford v. E. Thread Co., 158 Mass. 84. But see Dock v. Cordage Co., 167 Pa. St. 370. See, also, Hunt, Recr., v. O'Shea, Assignee, 69 N. H. 600, where it is held that the mere declaration of a dividend does not create a trust fund. Until some specific sum is set apart for the pur- pose of paying the dividend, the re- lation of the stockholders to the corporation with respect thereto is that of debtor and creditor. 1 A corporation having earned a dividend, and having power to in- crease its capital stock, may make a stock dividend. Howell v. Chicago and N. W. R'y Co., 51 Barb. 378; Williams v. Western Union Tel. Co., 93 N. Y. 162. 2 Terry v. Eagle Lock Co., 47 Conn. 141. 3 47 Conn. 164. 575
