(1) A board of directors may authorize, and the corporation may make, distributions to its shareholders subject to any restriction in the articles of incorporation and subject to the limitations set forth in subsection (3) of this section.
The bylaws or, in the absence of an applicable bylaw, the board of directors may fixa future date as the record date for determining shareholders entitled to a distribution, other than one involving a purchase, redemption, or other acquisition of the corporation's shares. If a record date is necessary but no future record date is so fixed, the record date is the date the board of directors authorizes the distribution.
No distribution may be made if, after giving it effect:
The corporation would not be able to pay its debts as they become due in the usualcourse of business; or
The corporation's total assets would be less than the sum of its total liabilities plus(unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
The board of directors may base a determination that a distribution is not prohibitedunder subsection (3) of this section either on financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances or on a fair valuation or other method that is reasonable under the circumstances.
Except as provided in subsection (6) of this section, the time for measuring the effectof a distribution under subsection (3) of this section is:
(a) In the case of distribution by purchase, redemption, or other acquisition of the corporation's shares, as of the earlier of:
The date money or other property is transferred or debt is incurred by the corporation;or
The date the shareholder ceases to be a shareholder with respect to the acquiredshares;
In the case of any other distribution of indebtedness, as of the date the indebtednessis distributed; and
In all other cases, as of either:
The date the distribution is authorized, if the payment occurs within one hundredtwenty days after the date of authorization; or
The date the payment is made, if it occurs more than one hundred twenty days afterthe date of authorization.
Indebtedness of a corporation, including indebtedness issued as a distribution, is notconsidered a liability for purposes of determinations under subsection (3) of this section if its terms provide that payment of principal and interest thereon are made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest thereon is treated as a distribution the effect of which is measured on the date the payment is actually made.
Unless otherwise expressly provided in the articles of incorporation or bylaws, astatement of par value for shares shall not impose any limitation on distributions and shall not require any separate designation, restriction, reservation, or other segregation of any capital account of a corporation.
Source: L. 93: Entire article added, p. 762, § 1, effective July 1, 1994.