Florida Statutes 607.06401 – Distributions to shareholders
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(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 limitations in subsection (3).
(2) The board of directors may fix the record date for determining shareholders entitled to a distribution, but the date may not be retroactive. If the board of directors does not fix the record date for determining shareholders entitled to a distribution (other than one involving a purchase, redemption, or other acquisition of the corporation’s shares), the record date is the date the board of directors authorizes the distribution.
(3) No distribution may be made if, after giving it effect:
(a) The corporation would not be able to pay its debts as they become due in the usual course of the corporation’s activities and affairs; or
Terms Used In Florida Statutes 607.06401
- Articles of incorporation: includes original, amended, and restated articles of incorporation, articles of share exchange, and articles of merger, and all amendments thereto. See Florida Statutes 607.01401
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- 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. See Florida Statutes 607.01401
- Interest: means :(a) A share in a corporation for profit;(b) A membership in a nonprofit corporation;(c) A partnership interest in a general partnership, including a limited liability partnership;(d) A partnership interest in a limited partnership, including a limited liability limited partnership;(e) A membership interest in a limited liability company;(f) A share or beneficial interest in a real estate investment trust;(g) A member's interest in a limited cooperative association;(h) A beneficial interest in a statutory trust, business trust, or common law business trust; or(i) A governance interest or distributional interest in another entity. See Florida Statutes 607.01401
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Lien: A claim against real or personal property in satisfaction of a debt.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Record date: means the date fixed for determining the identity of the corporation's shareholders and their share holdings for purposes of this chapter. See Florida Statutes 607.01401
- Shareholder: means a record shareholder. See Florida Statutes 607.01401
- Shares: means the units into which the proprietary interests in a corporation are divided. See Florida Statutes 607.01401
(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 and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up 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) on:
(a) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances; or
(b) A fair valuation or other method that is reasonable under the circumstances. In the case of any distribution based upon such a valuation, each such distribution shall be identified as a distribution based upon a current valuation of assets, and the amount per share paid on the basis of such valuation shall be disclosed to the shareholders concurrent with their receipt of the distribution.
(5) If the articles of incorporation of a corporation engaged in the business of exploiting natural resources or other wasting assets so provide, distributions may be paid in cash out of depletion or similar reserves; and each such distribution shall be identified as a distribution based upon such reserves, and the amount per share paid on the basis of such reserves shall be disclosed to the shareholders concurrent with their receipt of the distribution.
(6) Except as provided in subsection (8), the effect of a distribution under subsection (3) is measured:
(a) In the case of a distribution by purchase, redemption, or other acquisition of the corporation’s shares, as of the earlier of the date on which:
1. Money or other property is transferred or the debt to a shareholder is incurred by the corporation, or
2. The shareholder ceases to be a shareholder with respect to the acquired shares;
(b) In the case of a distribution of indebtedness, as of the date on which the indebtedness is distributed;
(c) In all other cases, as of the date on which:
1. The distribution is authorized if the payment occurs within 120 days after that date; or
2. The payment is made if the payment occurs more than 120 days after the date the distribution is authorized.
(7) 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 provided otherwise by agreement. The obligation to pay such indebtedness may be secured by a lien on assets of the corporation if not prohibited by a law other than this chapter.
(8) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (3) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that a distribution to shareholders could then be made under this section. If such indebtedness is issued as a distribution, and by its terms provides that the payments of principal or interest are made only to the extent a distribution could be made under this section, then each payment of principal and interest of that indebtedness is treated as a distribution, the effect of which is measured on the date the payment is actually made.