In re the Receivership of International Radiator Co.

Citations

• 10 Del. Ch. 358
• 92 A. 255
• 1914 Del. Ch. LEXIS 9

Syllabus

<p>Ordinarily a corporation may purchase its own stock, when the purchase does not diminish its ability to pay debts or lessen the security of its creditors.</p> <p>The Delaware General Corporation Law provides that a corporation may not use its funds or property to purchase shares of its own stock, when such use will cause an impairment of its capital. Held, that the word “capital,” as so used, did not mean the assets of the company, but was intended to imply that the funds and property of the corporation should not be used to purchase its own shares, when the value of its assets was less than the aggregate amount of all the shares of its capital stock; and hence the corporation, under such circumstances, had no authority to make a contract to re-purchase its own shares at an advance, from one. to whom it had sold the same.</p> <p>A corporation may pledge unissued stock as collateral security for a loan made to it, and when stock is so pledged the creditor may prove his debt against the corporation’s receiver and return the stock.</p>