Restriction on payment of dividends; liability

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  • (a) A corporation or other entity may declare and pay dividends or make other distributions in cash or its bonds or its property, including the shares or bonds of other corporations, on its outstanding shares, except when the corporation is insolvent or would thereby be made insolvent, or when the declaration, payment or distribution would be contrary to any restrictions contained in the certificate of incorporation or organizational document.

  • (b) Dividends may be declared or paid and other distributions may be made out of surplus only, so that the net assets of the corporation or entity remaining after such declaration, payment or distribution at least equal the amount of its stated capital.

  • (c) Directors of a corporation or managers of an LLC who vote for or concur in any of the following corporate actions are jointly and severally liable to the corporation or LLC for the benefit of its creditors, shareholders or members, to the extent of any injury suffered by such persons, respectively, as a result of such action:

    • (1) The declaration of any dividend or other distribution to the extent that it is contrary to the provisions of subsections (a) and (b) of this section; and

    • (2) The distribution of assets to shareholders or members after dissolution of the corporation or LLC without paying or adequately providing for all known liabilities of the corporation or LLC, excluding any claims not filed by creditors within the time limit set in a notice given to creditors.


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