D. 
Distributions



 



[§414-111]  Distributions to shareholders. 
(a)  A board of directors may authorize and the corporation may make
distributions to its shareholders subject to restriction by the articles of
incorporation and the limitation in subsection (c).



(b)  If the board of directors does not fix 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), it is the date the board of directors authorizes the distribution.



(c)  No distribution may be made if, after
giving it effect:



(1)  The corporation would not be able to pay its
debts as they become due in the usual course of business; or



(2)  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.



(d)  The board of directors may base a
determination that a distribution is not prohibited under subsection (c) either
on financial statements prepared on the basis of accounting practices and
principles that are reasonable in the circumstances or on a fair valuation or
other method that is reasonable in the circumstances.



(e)  Except as provided in subsection (g), the
effect of a distribution under subsection (c) is measured:



(1)  In the case of distribution by purchase,
redemption, or other acquisition of the corporation's shares, as of the earlier
of:



(A)  The date money or other property is
transferred or debt incurred by the corporation; or



(B)  The date the shareholder ceases to be a
shareholder with respect to the acquired shares;



(2)  In the case of any other distribution of
indebtedness, as of the date the indebtedness is distributed; and



(3)  In all other cases, as of:



(A)  The date the distribution is authorized if
the payment occurs within one hundred twenty days after the date of
authorization; or



(B)  The date the payment is made if it occurs
more than one hundred twenty days after the date of authorization.



(f)  A corporation's indebtedness to a shareholder
incurred by reason of a distribution made in accordance with this section is at
parity with the corporation's indebtedness to its general, unsecured creditors
except to the extent subordinated by agreement.



(g)  Indebtedness of a corporation, including
indebtedness issued as a distribution, is not considered a liability for
purposes of determinations under subsection (c) if its terms provide that
payment of principal and interest 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 is treated as a distribution, the effect of which is
measured on the date the payment is actually made. [L 2000, c 244, pt of §1]