CAPITAL STOCK
All shares constituting ownership of a business,
including common stock and preferred stock. The
amount of shares that a corporate charter requires
to be subscribed and paid, or secured to be paid, by
shareholders. The amount of stock that a corporation
may issue; the amount actually contributed,
subscribed, or secured to be paid on. The liability
of the corporation to its shareholders after creditors’
claims have been settled. The valuation of the
corporation as a business enterprise.
Capital stock is distinguishable from the
property and assets of the corporation. The
property of a corporation fluctuates and may be
greater or less than the original capital invested,
but the capital stock remains intact and unaffected
by the vicissitudes of business.
Undivided profits, or surplus, are not part of
the capital stock, although they are included in
the general capital or assets of the corporation.
The capital stock of a corporation serves
only corporate purposes. It functions as security
for the creditors of the corporation who have
relied on its existence, since it cannot be diverted
or withdrawn to the detriment of corporate
creditors. Capital stock is sometimes regarded as
a trust fund.
