The board of directors cannot declare dividends when the corporation:
A) issues new stock.
B) is merging with another corporation.
C) is the subject of a takeover bid.
D) is insolvent.

Question

Quizplus · Accepted Answer

The board of directors cannot declare dividends when the corporation is insolvent because it would be unable to meet its financial obligations to creditors, which is a legal requirement. Declaring dividends under insolvency could be considered a breach of fiduciary duty.

The Board of Directors Cannot Declare Dividends When the Corporation