What determines the right to declare dividends in a corporation?

The right to declare dividends in a corporation is primarily determined by the discretion of the Board of Directors. This means that it is within the authority of the board to decide when and how much dividend will be distributed to shareholders. The Board considers various factors, such as the corporation's profitability, cash flow, and overall financial health, to make a responsible decision that aligns with the best interests of the company and its stakeholders.

While a shareholder agreement, majority vote, and state law can provide frameworks and considerations regarding dividends, they do not override the board's discretion. Shareholder agreements may outline preferences for dividends or stipulate particular actions, but the final decision still rests with the Board. A majority vote can be relevant in instances such as approving extraordinary dividends or changes to dividend policy, but again, the board retains control over the declaration process. Lastly, state law often provides guidelines within which dividends can be declared but does not take precedence over the board's authority to make the final determination based on the corporation's circumstances.