Corporations 

New Jersey Statutes > Title 14A > Chapter 7 > § 14A:7-14.1 - Limitations on distributions to shareholders

    (1) "Distribution" means a direct or indirect transfer of money or other property (except its own shares) or incurrence of indebtedness by a corporation to or for the benefit of its shareholders in respect of any of its shares. A distribution may be in the form of a dividend, a purchase, redemption or other acquisition of its shares, or otherwise.

    (2) A corporation may not make a distribution if, after giving effect thereto, either:

    (a) The corporation would be unable to pay its debts as they become due in the usual course of its business; or

    (b) The corporation's total assets would be less than its total liabilities.

    (3) Determinations under paragraph 14A:7-14.1(2)(b) may be based upon (i) financial statements prepared on the basis of generally accepted accounting principles, (ii) financial statements prepared on the basis of other accounting practices and principles that are reasonable in the circumstances, or (iii) a fair valuation or other method that is reasonable in the circumstances.

    (4) In the case of a purchase, redemption or other acquisition by a corporation of its own shares, the effect of a distribution shall be measured as of the earlier of (i) the date money or other property is transferred or debt is incurred by the corporation, or (ii) the date the shareholder ceases to be a shareholder with respect to the acquired shares. In all other cases, the effect of a distribution shall be measured (i) as of the date of its authorization if payment occurs 120 days or less following the date of authorization, or (ii) as of the date of payment if payment occurs more than 120 days following the date of authorization.

    (5) A corporation's indebtedness to a shareholder incurred by reason of a distribution made in accordance with this section shall not be subordinated to the corporation's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.

    (added) 1988,c.94,s.44.
Prev | Next

________________________________________________________________________

Questions & Answers: Corporations

A corporation was dissolved by the state due to 17 years of unpaid annual report fees. The sole owner of the corporation has died. He has left the dissolved corporation's buildin...

Shari, Please clarify what you mean when you say the owner "left" the corporation's building to his children. Even though the corporation was dissolved it still continues to exist...

The building and the shares were given to the children the will. There are 17 years of back annual renewal fees that are delinquent and unpaid by the corporation. The will also s...

Shari, Strictly speaking, I don't see how the will could leave the building to the children. If I understand correctly, the father did not personally own the building in his own na...

There are 6 shareholders that are all related. Four of the shareholders are involved in the creation of the new LLC without the other 2 shareholders. No transfers of shares have...

If the president of a board says something to a child (member) in her vehicle on personal time. Then that child repeats it to another child (member) during company time is the boa...

U.S. Code Provisions: Corporations

U.S. Code > Title 15 > Chapter 98 - Public Company Accounting Reform And Corporate Responsibility

Related Articles: Corporations

Corporations

Shareholder Agreements

Comments (0)