Utah Code 16-6a-824. Liability of directors for unlawful distributions

(1)

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Terms Used In Utah Code 16-6a-824

Articles of incorporation: include :

(a)	amended articles of incorporation;

(b)	restated articles of incorporation;

(c)	articles of merger; and

(d)

a document of a similar import to the documents described in Subsections (3)(a) through (c). See Utah Code 16-6a-102

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.

Director: means a member of the board of directors. See Utah Code 16-6a-102

Distribution: means the payment of a dividend or any part of the income or profit of a nonprofit corporation to the nonprofit corporation's:

(i)

members;

(ii)	directors; or

(iii)

officers. See Utah Code 16-6a-102

Member: includes :

(i)	"voting member"; and

(ii)

a shareholder in a water company. See Utah Code 16-6a-102

Proceeding: includes :

(a)	a civil suit;

(b)	arbitration;

(c)	mediation;

(d)	a criminal action;

(e)	an administrative action; or

(f)

an investigatory action. See Utah Code 16-6a-102

(a)

A director who votes for or assents to a distribution made in violation of Section 16-6a-1301 or the articles of incorporation is personally liable to the nonprofit corporation for the amount of the distribution that exceeds what could have been distributed without violating Section 16-6a-1301 or the articles of incorporation, if it is established that the director’s duties were not performed in compliance with Section 16-6a-822.

(b)	In any proceeding commenced under this section, a director has all of the defenses ordinarily available to a director.

(2)

A director held liable under Subsection (1) for an unlawful distribution is entitled to contribution:

(a)	from every other director who could be held liable under Subsection (1) for the unlawful distribution; and

(b)	from each member who accepted the distribution knowing the distribution was made in violation of Section 16-6a-1301 or the articles of incorporation.

(3)

The amount of the contribution from each member under Subsection (2)(b) is the amount of the distribution to the member multiplied by the percentage of the amount of distribution to all members that exceeded what could have been distributed to members without violating Section 16-6a-1301 or the articles of incorporation.

Amended by Chapter 197, 2002 General Session

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