(a) A board ofdirectors may authorize and the corporation may make distributions to itsshareholders subject to restriction by the articles of incorporation and thelimitation in subsection (c).
(b) If the board ofdirectors does not fix the record date for determining shareholders entitled toa distribution (other than one involving a purchase, redemption, or otheracquisition of the corporation's shares), it is the date the board of directorsauthorizes the distribution.
(c) No distribution maybe made if, after giving it effect:
(1) The corporationwould not be able to pay its debts as they become due in the usual course ofbusiness; or
(2) The corporation'stotal assets would be less than the sum of its total liabilities plus (unlessthe articles of incorporation permit otherwise) the amount that would beneeded, if the corporation were to be dissolved at the time of thedistribution, to satisfy the preferential rights upon dissolution ofshareholders whose preferential rights are superior to those receiving thedistribution.
(d) The board ofdirectors may base a determination that a distribution is not prohibited undersubsection (c) on financial statements prepared on the basis of accountingpractices and principles that are reasonable in the circumstances, and maydetermine asset values either on book values or on a fair valuation or othermethod that is reasonable in the circumstances.
(e) Except as providedin subsection (g), the effect of a distribution under subsection (c) ismeasured:
(1) In the case ofdistribution by purchase, redemption, or other acquisition of the corporation'sshares, as of the earlier of (i) the date money or other property istransferred or debt incurred by the corporation or (ii) the date theshareholder ceases to be a shareholder with respect to the acquired shares;
(2) In the case of anyother distribution of indebtedness, as of the date the indebtedness isdistributed;
(3) In all other cases,as of (i) the date the distribution is authorized if the payment occurs within120 days after the date of authorization or (ii) the date the payment is madeif it occurs more than 120 days after the date of authorization.
(f) A corporation'sindebtedness to a shareholder incurred by reason of a distribution made inaccordance with this section is at parity with the corporation's indebtednessto its general, unsecured creditors except to the extent otherwise provided byagreement.
(g) Indebtedness of acorporation, including indebtedness issued as a distribution, is not considereda liability for purposes of determinations under subsection (c) if its termsprovide that payment of principal and interest are made only if and to theextent that payment of a distribution to shareholders could then be made underthis section. If an indebtedness with such terms is issued as a distribution,each payment of principal or interest is treated as a distribution the effectof which is measured on the date the payment is actually made.
(h) Any action by ashareholder to compel the payment of dividends may be brought against thedirectors, or against the corporation with or without joining the directors asparties. The shareholder bringing such action shall be entitled, in the eventthat the court orders the payment of a dividend, to recover from thecorporation all reasonable expenses, including attorney's fees, incurred inmaintaining such action. If a court orders the payment of a dividend, theamount ordered to be paid shall be a debt of the corporation.
(i) As used in thissubsection, net profits shall mean such net profits as can lawfully be paid individends to a particular class of shares after making allowance for the priorclaims of shares, if any, entitled to preference in the payment of dividends. If during its immediately preceding fiscal period a corporation having lessthan 25 shareholders on the final day of said period has not paid to any classof shares dividends in cash or property amounting to at least one‑thirdof the net profits of said period allocable to that class, the holder orholders of twenty percent (20%) or more of the shares of that class may, withinfour months after the close of said period, make written demand upon thecorporation for the payment of additional dividends for that period. After acorporation has received such a demand, the directors shall, during the thencurrent fiscal period or within three months after the close thereof, either(i) cause dividends in cash or property to be paid to the shareholders of thatclass in an amount equal to the difference between the dividends paid in saidpreceding fiscal period to shareholders of that class and one‑third ofthe net profits of said period allocable to that class, or in such lesseramount as may be demanded, or (ii) give notice pursuant to subsection (j) ofthis section to all shareholders making such demand. Such corporation shallnot, however, be required to pay dividends pursuant to such demand insofar as(i) such payment would exceed fifty percent (50%) of the net profits of thecurrent fiscal period in which such demand is made, or (ii) the net profits arebeing retained to eliminate a deficit, or (iii) the payment of dividends wouldbe a breach of a bona fide agreement between the corporation and its creditorsrestricting the payment of dividends, or (iv) the directors of the corporationcan show that its earnings are being retained to meet the reasonablyanticipated needs of the business and that such retention of earnings is notinequitable in light of all the circumstances. Upon receipt of such a demand acorporation may elect to treat any dividend previously paid in the currentfiscal period as having been paid in the preceding fiscal period, in whichevent the corporation shall so notify all shareholders. If a dividend is paidin satisfaction of a demand made in accordance with this subsection it shall bedeemed to have been paid in the period for which it was demanded, and allshareholders shall be so informed concurrently with such payment.
(j) Upon receipt of ademand from the holders of twenty percent (20%) or more of the shares of anyclass of shares pursuant to subsection (i) of this section, the corporationreceiving such demand may, during the then fiscal period or within three monthsafter the close thereof, give written notice to each shareholder making suchwritten demand that the corporation elects to redeem all shares held by suchshareholder in lieu of the payment of dividends as provided in subsection (i)of this section and shall pay to such shareholder the fair value of his sharesas of the day preceding the mailing or otherwise reasonably dispatching of thenotice. A shareholder receiving such notice shall thereafter be entitled towithdraw his dividend demand by giving written notice of such withdrawal to thecorporation within 10 days after receipt of the redemption notice of thecorporation or, if no such withdrawal is made, to receive the fair value of hisshares, subject only to the surrender by him of the certificate or certificatesrepresenting his shares and to the provisions of G.S. 55‑6‑31,which value shall be determined and paid as follows:
(1) If within 30 daysafter the date upon which a shareholder becomes entitled to payment for hisshares under this subsection, the value of the shares is agreed upon betweenthe shareholder and the corporation, payment therefor shall be made within 60days after the agreement, upon surrender of the certificate representing theshares, whereupon the shareholder shall cease to have any interest in suchshares or in the corporation.
(2) If within the such30‑day period the shareholder and the corporation do not agree as to thevalue of the shares, the shareholder may, within 60 days after the expirationof the 30‑day period, file a petition in the superior court of the countyof the registered office of the corporation asking for the appointment by theclerk of three qualified and disinterested appraisers to appraise the fairvalue of the shares. A summons as in other cases of special proceedings,together with a copy of the petition, shall be served on the corporation atleast 10 days prior to the hearing of the petition by the court. The award ofappraisers, or a majority of them, if no exceptions be filed thereto within 10 daysafter the award shall have been filed in court, shall be confirmed by thecourt, and when confirmed shall be final and conclusive, and the shareholderupon depositing the proper share certificates in court, shall be entitled tojudgment against the corporation for the appraised value thereof as of the dateprescribed in this section, together with interest thereon to the date of suchconfirmation. If either party files exceptions to such award within 10 daysafter the award shall have been filed in court, the case shall be transferredto the civil issue docket of the superior court for trial during term and shallbe there tried in the same manner, as near as may be practicable, as isprovided in Chapter 40A for the trial of cases under the eminent domain law ofthis State, and with the same right of appeal as is permitted in said Chapter. The court shall assess the cost of said proceedings as it shall deemequitable. Upon payment of the judgment the shareholder shall cease to haveany interest in the shares or in the corporation and the corporation shall beentitled to have said share certificates surrendered to it by the clerk ofcourt for cancellation. Unless the shareholder shall file such petition withinthe time herein prescribed, he and all persons claiming under him shall have noright of payment hereunder but in that event nothing herein shall impair hisstatus as shareholder.
(k) Nothing in thissection shall impair any rights which a shareholder may have on generalprinciples of equity to compel the payment of dividends. (Code,s. 681; 1901, c. 2, ss. 33, 52; Rev., ss. 1191, 1192; C.S., ss. 1178, 1179;1927, c. 121; 1933, c. 354, s. 1; G.S., ss. 55‑115, 55‑116; 1955,c. 1371, s. 1; 1957, c. 1039; 1959, c. 1316, ss. 16, 19, 35; 1963, c. 666; 1965,c. 726; 1967, c. 1163; 1969, c. 751, ss. 21‑27, 45; 1973, c. 469, ss. 17‑20,c. 683, c. 1067, c. 1087, ss. 3‑5; 1975, c. 19, s. 17, c. 304; 1985, c.117, s. 3; 1989, c. 265, s. 1; 1989 (Reg. Sess., 1990), c. 1024, s. 12.9; 1991,c. 645, s. 4.)
(a) A board ofdirectors may authorize and the corporation may make distributions to itsshareholders subject to restriction by the articles of incorporation and thelimitation in subsection (c).
(b) If the board ofdirectors does not fix the record date for determining shareholders entitled toa distribution (other than one involving a purchase, redemption, or otheracquisition of the corporation's shares), it is the date the board of directorsauthorizes the distribution.
(c) No distribution maybe made if, after giving it effect:
(1) The corporationwould not be able to pay its debts as they become due in the usual course ofbusiness; or
(2) The corporation'stotal assets would be less than the sum of its total liabilities plus (unlessthe articles of incorporation permit otherwise) the amount that would beneeded, if the corporation were to be dissolved at the time of thedistribution, to satisfy the preferential rights upon dissolution ofshareholders whose preferential rights are superior to those receiving thedistribution.
(d) The board ofdirectors may base a determination that a distribution is not prohibited undersubsection (c) on financial statements prepared on the basis of accountingpractices and principles that are reasonable in the circumstances, and maydetermine asset values either on book values or on a fair valuation or othermethod that is reasonable in the circumstances.
(e) Except as providedin subsection (g), the effect of a distribution under subsection (c) ismeasured:
(1) In the case ofdistribution by purchase, redemption, or other acquisition of the corporation'sshares, as of the earlier of (i) the date money or other property istransferred or debt incurred by the corporation or (ii) the date theshareholder ceases to be a shareholder with respect to the acquired shares;
(2) In the case of anyother distribution of indebtedness, as of the date the indebtedness isdistributed;
(3) In all other cases,as of (i) the date the distribution is authorized if the payment occurs within120 days after the date of authorization or (ii) the date the payment is madeif it occurs more than 120 days after the date of authorization.
(f) A corporation'sindebtedness to a shareholder incurred by reason of a distribution made inaccordance with this section is at parity with the corporation's indebtednessto its general, unsecured creditors except to the extent otherwise provided byagreement.
(g) Indebtedness of acorporation, including indebtedness issued as a distribution, is not considereda liability for purposes of determinations under subsection (c) if its termsprovide that payment of principal and interest are made only if and to theextent that payment of a distribution to shareholders could then be made underthis section. If an indebtedness with such terms is issued as a distribution,each payment of principal or interest is treated as a distribution the effectof which is measured on the date the payment is actually made.
(h) Any action by ashareholder to compel the payment of dividends may be brought against thedirectors, or against the corporation with or without joining the directors asparties. The shareholder bringing such action shall be entitled, in the eventthat the court orders the payment of a dividend, to recover from thecorporation all reasonable expenses, including attorney's fees, incurred inmaintaining such action. If a court orders the payment of a dividend, theamount ordered to be paid shall be a debt of the corporation.
(i) As used in thissubsection, net profits shall mean such net profits as can lawfully be paid individends to a particular class of shares after making allowance for the priorclaims of shares, if any, entitled to preference in the payment of dividends. If during its immediately preceding fiscal period a corporation having lessthan 25 shareholders on the final day of said period has not paid to any classof shares dividends in cash or property amounting to at least one‑thirdof the net profits of said period allocable to that class, the holder orholders of twenty percent (20%) or more of the shares of that class may, withinfour months after the close of said period, make written demand upon thecorporation for the payment of additional dividends for that period. After acorporation has received such a demand, the directors shall, during the thencurrent fiscal period or within three months after the close thereof, either(i) cause dividends in cash or property to be paid to the shareholders of thatclass in an amount equal to the difference between the dividends paid in saidpreceding fiscal period to shareholders of that class and one‑third ofthe net profits of said period allocable to that class, or in such lesseramount as may be demanded, or (ii) give notice pursuant to subsection (j) ofthis section to all shareholders making such demand. Such corporation shallnot, however, be required to pay dividends pursuant to such demand insofar as(i) such payment would exceed fifty percent (50%) of the net profits of thecurrent fiscal period in which such demand is made, or (ii) the net profits arebeing retained to eliminate a deficit, or (iii) the payment of dividends wouldbe a breach of a bona fide agreement between the corporation and its creditorsrestricting the payment of dividends, or (iv) the directors of the corporationcan show that its earnings are being retained to meet the reasonablyanticipated needs of the business and that such retention of earnings is notinequitable in light of all the circumstances. Upon receipt of such a demand acorporation may elect to treat any dividend previously paid in the currentfiscal period as having been paid in the preceding fiscal period, in whichevent the corporation shall so notify all shareholders. If a dividend is paidin satisfaction of a demand made in accordance with this subsection it shall bedeemed to have been paid in the period for which it was demanded, and allshareholders shall be so informed concurrently with such payment.
(j) Upon receipt of ademand from the holders of twenty percent (20%) or more of the shares of anyclass of shares pursuant to subsection (i) of this section, the corporationreceiving such demand may, during the then fiscal period or within three monthsafter the close thereof, give written notice to each shareholder making suchwritten demand that the corporation elects to redeem all shares held by suchshareholder in lieu of the payment of dividends as provided in subsection (i)of this section and shall pay to such shareholder the fair value of his sharesas of the day preceding the mailing or otherwise reasonably dispatching of thenotice. A shareholder receiving such notice shall thereafter be entitled towithdraw his dividend demand by giving written notice of such withdrawal to thecorporation within 10 days after receipt of the redemption notice of thecorporation or, if no such withdrawal is made, to receive the fair value of hisshares, subject only to the surrender by him of the certificate or certificatesrepresenting his shares and to the provisions of G.S. 55‑6‑31,which value shall be determined and paid as follows:
(1) If within 30 daysafter the date upon which a shareholder becomes entitled to payment for hisshares under this subsection, the value of the shares is agreed upon betweenthe shareholder and the corporation, payment therefor shall be made within 60days after the agreement, upon surrender of the certificate representing theshares, whereupon the shareholder shall cease to have any interest in suchshares or in the corporation.
(2) If within the such30‑day period the shareholder and the corporation do not agree as to thevalue of the shares, the shareholder may, within 60 days after the expirationof the 30‑day period, file a petition in the superior court of the countyof the registered office of the corporation asking for the appointment by theclerk of three qualified and disinterested appraisers to appraise the fairvalue of the shares. A summons as in other cases of special proceedings,together with a copy of the petition, shall be served on the corporation atleast 10 days prior to the hearing of the petition by the court. The award ofappraisers, or a majority of them, if no exceptions be filed thereto within 10 daysafter the award shall have been filed in court, shall be confirmed by thecourt, and when confirmed shall be final and conclusive, and the shareholderupon depositing the proper share certificates in court, shall be entitled tojudgment against the corporation for the appraised value thereof as of the dateprescribed in this section, together with interest thereon to the date of suchconfirmation. If either party files exceptions to such award within 10 daysafter the award shall have been filed in court, the case shall be transferredto the civil issue docket of the superior court for trial during term and shallbe there tried in the same manner, as near as may be practicable, as isprovided in Chapter 40A for the trial of cases under the eminent domain law ofthis State, and with the same right of appeal as is permitted in said Chapter. The court shall assess the cost of said proceedings as it shall deemequitable. Upon payment of the judgment the shareholder shall cease to haveany interest in the shares or in the corporation and the corporation shall beentitled to have said share certificates surrendered to it by the clerk ofcourt for cancellation. Unless the shareholder shall file such petition withinthe time herein prescribed, he and all persons claiming under him shall have noright of payment hereunder but in that event nothing herein shall impair hisstatus as shareholder.
(k) Nothing in thissection shall impair any rights which a shareholder may have on generalprinciples of equity to compel the payment of dividends. (Code,s. 681; 1901, c. 2, ss. 33, 52; Rev., ss. 1191, 1192; C.S., ss. 1178, 1179;1927, c. 121; 1933, c. 354, s. 1; G.S., ss. 55‑115, 55‑116; 1955,c. 1371, s. 1; 1957, c. 1039; 1959, c. 1316, ss. 16, 19, 35; 1963, c. 666; 1965,c. 726; 1967, c. 1163; 1969, c. 751, ss. 21‑27, 45; 1973, c. 469, ss. 17‑20,c. 683, c. 1067, c. 1087, ss. 3‑5; 1975, c. 19, s. 17, c. 304; 1985, c.117, s. 3; 1989, c. 265, s. 1; 1989 (Reg. Sess., 1990), c. 1024, s. 12.9; 1991,c. 645, s. 4.)
(a) A board ofdirectors may authorize and the corporation may make distributions to itsshareholders subject to restriction by the articles of incorporation and thelimitation in subsection (c).
(b) If the board ofdirectors does not fix the record date for determining shareholders entitled toa distribution (other than one involving a purchase, redemption, or otheracquisition of the corporation's shares), it is the date the board of directorsauthorizes the distribution.
(c) No distribution maybe made if, after giving it effect:
(1) The corporationwould not be able to pay its debts as they become due in the usual course ofbusiness; or
(2) The corporation'stotal assets would be less than the sum of its total liabilities plus (unlessthe articles of incorporation permit otherwise) the amount that would beneeded, if the corporation were to be dissolved at the time of thedistribution, to satisfy the preferential rights upon dissolution ofshareholders whose preferential rights are superior to those receiving thedistribution.
(d) The board ofdirectors may base a determination that a distribution is not prohibited undersubsection (c) on financial statements prepared on the basis of accountingpractices and principles that are reasonable in the circumstances, and maydetermine asset values either on book values or on a fair valuation or othermethod that is reasonable in the circumstances.
(e) Except as providedin subsection (g), the effect of a distribution under subsection (c) ismeasured:
(1) In the case ofdistribution by purchase, redemption, or other acquisition of the corporation'sshares, as of the earlier of (i) the date money or other property istransferred or debt incurred by the corporation or (ii) the date theshareholder ceases to be a shareholder with respect to the acquired shares;
(2) In the case of anyother distribution of indebtedness, as of the date the indebtedness isdistributed;
(3) In all other cases,as of (i) the date the distribution is authorized if the payment occurs within120 days after the date of authorization or (ii) the date the payment is madeif it occurs more than 120 days after the date of authorization.
(f) A corporation'sindebtedness to a shareholder incurred by reason of a distribution made inaccordance with this section is at parity with the corporation's indebtednessto its general, unsecured creditors except to the extent otherwise provided byagreement.
(g) Indebtedness of acorporation, including indebtedness issued as a distribution, is not considereda liability for purposes of determinations under subsection (c) if its termsprovide that payment of principal and interest are made only if and to theextent that payment of a distribution to shareholders could then be made underthis section. If an indebtedness with such terms is issued as a distribution,each payment of principal or interest is treated as a distribution the effectof which is measured on the date the payment is actually made.
(h) Any action by ashareholder to compel the payment of dividends may be brought against thedirectors, or against the corporation with or without joining the directors asparties. The shareholder bringing such action shall be entitled, in the eventthat the court orders the payment of a dividend, to recover from thecorporation all reasonable expenses, including attorney's fees, incurred inmaintaining such action. If a court orders the payment of a dividend, theamount ordered to be paid shall be a debt of the corporation.
(i) As used in thissubsection, net profits shall mean such net profits as can lawfully be paid individends to a particular class of shares after making allowance for the priorclaims of shares, if any, entitled to preference in the payment of dividends. If during its immediately preceding fiscal period a corporation having lessthan 25 shareholders on the final day of said period has not paid to any classof shares dividends in cash or property amounting to at least one‑thirdof the net profits of said period allocable to that class, the holder orholders of twenty percent (20%) or more of the shares of that class may, withinfour months after the close of said period, make written demand upon thecorporation for the payment of additional dividends for that period. After acorporation has received such a demand, the directors shall, during the thencurrent fiscal period or within three months after the close thereof, either(i) cause dividends in cash or property to be paid to the shareholders of thatclass in an amount equal to the difference between the dividends paid in saidpreceding fiscal period to shareholders of that class and one‑third ofthe net profits of said period allocable to that class, or in such lesseramount as may be demanded, or (ii) give notice pursuant to subsection (j) ofthis section to all shareholders making such demand. Such corporation shallnot, however, be required to pay dividends pursuant to such demand insofar as(i) such payment would exceed fifty percent (50%) of the net profits of thecurrent fiscal period in which such demand is made, or (ii) the net profits arebeing retained to eliminate a deficit, or (iii) the payment of dividends wouldbe a breach of a bona fide agreement between the corporation and its creditorsrestricting the payment of dividends, or (iv) the directors of the corporationcan show that its earnings are being retained to meet the reasonablyanticipated needs of the business and that such retention of earnings is notinequitable in light of all the circumstances. Upon receipt of such a demand acorporation may elect to treat any dividend previously paid in the currentfiscal period as having been paid in the preceding fiscal period, in whichevent the corporation shall so notify all shareholders. If a dividend is paidin satisfaction of a demand made in accordance with this subsection it shall bedeemed to have been paid in the period for which it was demanded, and allshareholders shall be so informed concurrently with such payment.
(j) Upon receipt of ademand from the holders of twenty percent (20%) or more of the shares of anyclass of shares pursuant to subsection (i) of this section, the corporationreceiving such demand may, during the then fiscal period or within three monthsafter the close thereof, give written notice to each shareholder making suchwritten demand that the corporation elects to redeem all shares held by suchshareholder in lieu of the payment of dividends as provided in subsection (i)of this section and shall pay to such shareholder the fair value of his sharesas of the day preceding the mailing or otherwise reasonably dispatching of thenotice. A shareholder receiving such notice shall thereafter be entitled towithdraw his dividend demand by giving written notice of such withdrawal to thecorporation within 10 days after receipt of the redemption notice of thecorporation or, if no such withdrawal is made, to receive the fair value of hisshares, subject only to the surrender by him of the certificate or certificatesrepresenting his shares and to the provisions of G.S. 55‑6‑31,which value shall be determined and paid as follows:
(1) If within 30 daysafter the date upon which a shareholder becomes entitled to payment for hisshares under this subsection, the value of the shares is agreed upon betweenthe shareholder and the corporation, payment therefor shall be made within 60days after the agreement, upon surrender of the certificate representing theshares, whereupon the shareholder shall cease to have any interest in suchshares or in the corporation.
(2) If within the such30‑day period the shareholder and the corporation do not agree as to thevalue of the shares, the shareholder may, within 60 days after the expirationof the 30‑day period, file a petition in the superior court of the countyof the registered office of the corporation asking for the appointment by theclerk of three qualified and disinterested appraisers to appraise the fairvalue of the shares. A summons as in other cases of special proceedings,together with a copy of the petition, shall be served on the corporation atleast 10 days prior to the hearing of the petition by the court. The award ofappraisers, or a majority of them, if no exceptions be filed thereto within 10 daysafter the award shall have been filed in court, shall be confirmed by thecourt, and when confirmed shall be final and conclusive, and the shareholderupon depositing the proper share certificates in court, shall be entitled tojudgment against the corporation for the appraised value thereof as of the dateprescribed in this section, together with interest thereon to the date of suchconfirmation. If either party files exceptions to such award within 10 daysafter the award shall have been filed in court, the case shall be transferredto the civil issue docket of the superior court for trial during term and shallbe there tried in the same manner, as near as may be practicable, as isprovided in Chapter 40A for the trial of cases under the eminent domain law ofthis State, and with the same right of appeal as is permitted in said Chapter. The court shall assess the cost of said proceedings as it shall deemequitable. Upon payment of the judgment the shareholder shall cease to haveany interest in the shares or in the corporation and the corporation shall beentitled to have said share certificates surrendered to it by the clerk ofcourt for cancellation. Unless the shareholder shall file such petition withinthe time herein prescribed, he and all persons claiming under him shall have noright of payment hereunder but in that event nothing herein shall impair hisstatus as shareholder.
(k) Nothing in thissection shall impair any rights which a shareholder may have on generalprinciples of equity to compel the payment of dividends. (Code,s. 681; 1901, c. 2, ss. 33, 52; Rev., ss. 1191, 1192; C.S., ss. 1178, 1179;1927, c. 121; 1933, c. 354, s. 1; G.S., ss. 55‑115, 55‑116; 1955,c. 1371, s. 1; 1957, c. 1039; 1959, c. 1316, ss. 16, 19, 35; 1963, c. 666; 1965,c. 726; 1967, c. 1163; 1969, c. 751, ss. 21‑27, 45; 1973, c. 469, ss. 17‑20,c. 683, c. 1067, c. 1087, ss. 3‑5; 1975, c. 19, s. 17, c. 304; 1985, c.117, s. 3; 1989, c. 265, s. 1; 1989 (Reg. Sess., 1990), c. 1024, s. 12.9; 1991,c. 645, s. 4.)
