Watered Stock Definition:

Shares in a corporation which is stated to be, or issued as fully paid but which in fact, has not been paid for.
Cook wrote:

"Watered stock or fictitiously paid-up stock is stock which is issued as fully paid-up stock, when in fact the whole amount of the par value thereof has not been paid in....

"Watered stock is, accordingly, stock which purports to represent, but does not represent, in good faith, money paid into the treasury of the company."

REFERENCES:

  • Cook, W., A Treatise on The Law of Corporations Having a Capital Stock (Boston: Little, Brown and Company, 1913), page 124.

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