2009 Iowa Code
Title 12 - Business Entities
Subtitle 2 - Business and Professional Corporations and Companies
CHAPTER 490 - BUSINESS CORPORATIONS
490.640 - DISTRIBUTION TO SHAREHOLDERS.

        490.640  DISTRIBUTION TO SHAREHOLDERS.
         1.  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.
         2.  If the board of directors does not fix the record date for
      determining shareholders entitled to a distribution, other than one
      involving a repurchase or reacquisition of shares, it is the date the
      board of directors authorizes the distribution.
         3.  No distribution may be made if, after giving it effect either
      of the following would result:
         a.  The corporation would not be able to pay its debts as they
      become due in the usual course of business.
         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.

         4.  The board of directors may base a determination that a
      distribution is not prohibited under subsection 3 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.
         5.  The effect of a distribution under subsection 3 is 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.
         (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.
         c.  In all other cases, as of:
         (1)  The date the distribution is authorized if the payment occurs
      within one hundred twenty days after the date of authorization.
         (2)  The date the payment is made if it occurs more than one
      hundred twenty days after the date of authorization.
         6.  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.
         7.  Indebtedness of a corporation, including indebtedness issued
      as a distribution, is not considered a liability for purposes of
      determinations under subsection 3 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.

         8.  This section shall not apply to distributions in liquidation
      under division XIV.  

         89 Acts, ch 288, §52; 2002 Acts, ch 1154, §13, 125; 2008 Acts, ch
      1015, §1
         Referred to in § 490.603, 490.732, 490.833, 490.1434