A corporation commits to a legal obligation when it declares

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When a corporation declares a cash dividend, it commits to a legal obligation to pay that dividend to its shareholders. This obligation is enforceable by law, and failure to comply can result in legal action taken against the corporation. The declaration of a stock dividend does not create the same level of legal obligation as a cash dividend, as it is simply a distribution of additional shares of stock to existing shareholders, rather than a payment of cash. The declaration of a distribution date is simply a procedural step in the dividend process, and does not create a legal obligation on its own.

A Corporation Commits to a Legal Obligation When It Declares