Distributions

Question 1

Who can authorize a distribution ?

Answer 1

The board unless the power is restricted by the articles

Question 2

What is a share dividend ?

Answer 2

Unless prohibited by the articles, the corporation may issue shares to to shareholders pro rata and without consideration

Question 3

When can a corp not Make a distributions

Answer 3

Corporation cannot make a distribution if it is insolvent or if the distribution would make the corporation insolvent

Question 4

When is a corp insolvent ?

Answer 4

A corporation is considered insolvent if
1. the payment of the distribution would prohibit C from paying its debts as they become due OR
2. if its liabilities exceed its assets

Question 5

D’s liability for unlawful distributions in violation of duty of care and loyalty

Answer 5

The defendant will be personally liable to the C for the amount in excess of a lawful amount

Question 6

Dividend distributions

Answer 6

Generally distributed to persons who are shareholders on the record date

Question 7

Restriction on stock transfers (shareholder agreement)

Answer 7

Are often imposed by smaller corporations and typically limit the of stock sale by shareholders to others outside of the corporation without first offering it to other shareholders

Question 8

What must a restriction on stock transfers be (3) “?

Answer 8

1. Valid- Must have a lawful purpose and cannot create an undue restraint on alienation
2. Reasonableness- a question of fact, absolute restrictions are considered unreasonable and void.
3. Enforceability- the restriction MUST be noted on the share certificate