Deferred Stock Law and Legal Definition

Deferred stocks are stocks whose holders are entitled to dividends only after a specified date or on the occurrence of an event, such as a company reaching certain profitability levels. Usually deferred stock is issued to company founders and certain members of management to restrict their access to dividends until dividends have been distributed to all other shareholders. Shareholders of deferred stock do not have any rights to the assets of a bankrupt corporation until all preferred and common stockholders have been paid.