Liability dividend

A liability dividend is a promise to shareholders to pay them a dividend at a later date. This promise is issued when a company is having liquidity problems and so does not have sufficient cash to make a payment in the near term. The recipient of a liability dividend can choose to wait until a later date to be paid, or can sell it right away to a third party at a discount. In the latter case, the recipient of the dividend profits from the amount of the discount it can extract from the original holder, but the recipient also takes on the risk of not being paid.

Related Courses

Corporate Finance 
Treasurer's Guidebook