Distributions

Question 1

Methods

Answer 1

Corp can declare cash dividend or buy back shares

1. Paying out dividend
2. Buy-back (buying stock from SHs)
3. Distribution of indebtedness

Question 2

Priorities

Answer 2

Preferred, preferred participating, cumulative, common

Question 3

Authorization

Answer 3

In Bd’s discretion

SH canot’ compel distribution unless Bd acts in bad faith & abuses discretion

Question 4

Insolvency

Answer 4

Corp can’t make distrib if insolvent or distrib would make it insolvent

Question 5

Distribution Liability

Answer 5

If director violates duty of care/loyalty in approving improper dividend, director personally liable for any amount above lawful distribution amount

Director entitled to contributions from other directors who violated duties & from SHs who knowingly accepted unlawful distributions