restricted surplus

Restricted surplus

A portion of retained earnings not allowed by law to be used for the payment of dividends.

Restricted Retained Earnings

The earnings of a publicly-traded company that it is legally or contractually obligated not to pay as dividends. The most common reason for earnings to become restricted is the existence of dividends in arrears. That is, if a company has not made legally promised dividend payments to preferred stockholders, it must make these payments before it can pay any other dividends. Thus, the earnings become known as restricted retained earnings. Restricted retained earnings are also called the restricted surplus.

restricted surplus

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