271B.6-400 Distributions to shareholders.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
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 (3) of this section.
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 shall be the date the board of directors
authorizes the distribution.
No distribution shall be made if, after giving it effect:
(a) The corporation would not be able to pay its debts as they become due in the
usual course of business; or
(b) 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 prohibited
under subsection (3) of this section 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.
Except as provided in subsection (7) of this section, the effect of a distribution
under subsection (3) of this section shall be measured:
(a) In the case of distribution by purchase, redemption, or other acquisition of the
corporation's shares, as of the earlier of:
1.
The date money or other property is transferred or debt incurred by the
corporation; or
2.
The date the shareholder ceases to be a shareholder with respect to the
acquired shares;
(b) In the case of any other distribution of indebtedness, as of the date the
indebtedness is distributed; and
(c) In all other cases, as of:
1.
The date the distribution is authorized if the payment occurs within one
hundred twenty (120) days after the date of authorization; or
2.
The date the payment is made if it occurs more than one hundred twenty
(120) days after the date of authorization.
A corporation's indebtedness to a shareholder incurred by a reason of a distribution
made in accordance with this section shall be at parity with the corporation's
indebtedness to its general creditors except to the extent subordinated by agreement.
Indebtedness of a corporation, including indebtedness issued as a distribution, shall
not be considered a liability for purposes of determinations under subsection (3) of
this section 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 shall be treated as a distribution, the effect of which
is measured on the date the payment is actually made.
Effective: January 1, 1989
History: Created 1988 Ky. Acts ch. 23, sec. 48, effective January 1, 1989.
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