Nonqualified preferred stock.The nonqualified preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. (NQPS) rules of Sec. 351 (g), originally enacted in 1997, generally treat certain preferred stock as "boot" in certain exchanges under Secs. 351, 354, 355, 356 and 1036. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Sec. 351 (g)(3)(A), the term "preferred stock" means stock limited and preferred as to dividends and that does not participate in corporate growth to any significant extent. New Law AJCA AJCA American Jobs Creation Act of 2004 (US) AJCA American Jersey Cattle Association AJCA Association of Juvenile Compact Administrators AJCA All Japan Cooks Association AJCA Alabama Junior Cattlemen’s Association Section 899 further refines the definition of preferred stock for purposes of the NQPS rules, by appending a sentence to the end of Sec. 351 (g) (3) (A), providing: Stock shall not be treated as participating in corporate growth to any significant extent unless there is a real and meaningful likelihood of the shareholder actually participating in the earnings and growth of the corporation. Effective Date The provision is effective for transactions after May 14, 2003. Implications The new language is intended to clarify that, labels notwithstanding, stock will be treated as preferred stock under Sec. 351 (g) (and, thus, potentially treated as NQPS) when, based on an analysis of the surrounding facts and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , it does not have a real and meaningful likelihood of actually participating in the corporation's earnings and profits. An example in the Conference Report illustrates that instruments preferred on liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy and entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to the same dividends as may be declared on common stock will not escape preferred stock classification, for purposes of the NQPS rules, by reason of the dividend participation right, if the corporation does not in fact pay dividends either to its common or preferred stockholders. FROM KIRSTEN SIMPSON, WASHINGTON, DC |
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