2010 Pennsylvania Code
Title 15 - CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
Chapter 15 - Corporate Powers, Duties and Safeguards
1551 - Distributions to shareholders.

                               SUBCHAPTER C
                            CORPORATE FINANCE

     Sec.
     1551.  Distributions to shareholders.
     1552.  Power of corporation to acquire its own shares.
     1553.  Liability for unlawful dividends and other distributions.
     1554.  Financial reports to shareholders.
     § 1551.  Distributions to shareholders.
        (a)  General rule.--Unless otherwise restricted in the
     bylaws, the board of directors may authorize and a business
     corporation may make distributions. A provision in the articles
     setting forth a par value for any authorized shares or class or
     series of shares shall not restrict the ability of a corporation
     to make distributions.
        (b)  Limitation.--A distribution may not be made if, after
     giving effect thereto:
            (1)  the corporation would be unable to pay its debts as
        they become due in the usual course of its business; or
            (2)  the total assets of the corporation would be less
        than the sum of its total liabilities plus (unless otherwise
        provided in the articles) the amount that would be needed, if
        the corporation were to be dissolved at the time as of which
        the distribution is measured, to satisfy the preferential
        rights upon dissolution of shareholders whose preferential
        rights are superior to those receiving the distribution.
        (c)  Valuation.--The board of directors may base its
     determination that a distribution is not prohibited under
     subsection (b)(2) on one or more of the following:
            (1)  the book values of the assets and liabilities of the
        corporation, as reflected on its books and records;
            (2)  a valuation that takes into consideration unrealized
        appreciation and depreciation or other changes in value of
        the assets and liabilities of the corporation;
            (3)  the current value of the assets and liabilities of
        the corporation, either valued separately or valued in
        segments or as an entirety as a going concern; or
            (4)  any other method that is reasonable in the
        circumstances.
     In determining whether a distribution is prohibited by
     subsection (b)(2), the board of directors need not consider
     obligations and liabilities unless they are required to be
     reflected on a balance sheet (not including the notes thereto)
     prepared on the basis of generally accepted accounting
     principles, or such other accounting practices and principles as
     are used generally by the corporation in the maintenance of its
     books and records and as are reasonable in the circumstances.
        (d)  Date of distribution.--The effect of a distribution
     shall be measured:
            (1)  as of the date specified by the board of directors
        when it authorizes the distribution if the distribution
        occurs within 125 days of the earlier of the date so
        specified or the date of authorization; or
            (2)  as of the date of distribution in all other cases.
     In the case of a purchase, redemption or other acquisition of
     its own shares by a corporation, the distribution shall be
     deemed to occur as of the date money or other property is
     transferred or debt is incurred by the corporation or as of the
     date the shareholder ceases to be a shareholder of the
     corporation with respect to the shares, whichever is earlier.
        (e)  Redemption related and similar debt.--Indebtedness of a
     corporation to a shareholder incurred by reason of a
     distribution made in accordance with this section shall be at
     least on a parity with the indebtedness of the corporation to
     its general unsecured creditors except to the extent
     subordinated by agreement.
        (f)  Certain subordinated debt.--Indebtedness of a
     corporation, including indebtedness issued as a distribution,
     shall not be considered a liability for purposes of
     determinations under subsection (b) 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 such indebtedness is issued as a
     distribution, each payment of principal or interest shall be
     treated as a distribution, the effect of which shall be measured
     on the date the payment is actually made.
        (g)  Cross references.--See Subchapter B of Chapter 17
     (relating to fiduciary duty) and section 3122 (relating to
     distributions by insurance corporations).
     (Dec. 19, 1990, P.L.834, No.198, eff. imd.)

        Cross References.  Section 1551 is referred to in sections
     1521, 1932, 2125, 2703, 2907 of this title.