2006 Code of Virginia § 13.1-1227 - Distributions to beneficial owners

13.1-1227. Distributions to beneficial owners.

A. The trustees may authorize and the business trust may make distributionsto its beneficial owners, subject to restriction by the articles of trust orgoverning instrument and the limitation in subsection C.

B. If the trustees do not fix the record date for determining beneficialowners entitled to a distribution, other than one involving a repurchase orreacquisition of beneficial interests, it is the date the trustees authorizethe distribution.

C. No distribution may be made if, after giving it effect:

1. The business trust would not be able to pay its debts as they become duein the usual course of business; or

2. The business trust's total assets would be less than the sum of its totalliabilities plus (unless the articles of trust permit otherwise) the amountthat would be needed, if the business trust were to be dissolved at the timeof the distribution, to satisfy the preferential rights upon dissolution ofbeneficial interests whose preferential rights are superior to thosereceiving the distribution.

D. The trustees may base a determination that a distribution is notprohibited under subsection C either on financial statements prepared on thebasis of accounting practices and principles that are reasonable in thecircumstances or on a fair valuation or other method that is reasonable inthe circumstances.

E. The effect of a distribution under subsection C is measured:

1. In the case of a distribution by purchase, redemption, or otheracquisition of the business trust's beneficial interests, as of the earlierof (i) the date money or other property is transferred or debt incurred bythe business trust or (ii) the date the beneficial owners cease to bebeneficial owners with respect to the acquired beneficial interests;

2. In the case of any other distribution of indebtedness, as of the date theindebtedness is distributed;

3. In all other cases, as of (i) the date the distribution is authorized ifthe payment occurs within 120 days after the date of authorization or (ii)the date payment is made if it occurs more than 120 days after the date ofauthorization.

F. A business trust's indebtedness to a beneficial owner incurred by reasonof a distribution made in accordance with this section is at parity with thebusiness trust's indebtedness to its general, unsecured creditors except tothe extent subordinated by agreement.

(2002, c. 621.)