§ 1007. Classification of directors

The bylaws may provide that the territory in which the association has members shall be divided into districts and that the directors shall be elected according to such districts by the members in that district. In such case, the bylaws shall specify the number of directors to be elected by each district, and the manner and method of reapportioning the directors and of redistricting the territory covered by the association.

§ 1007. Limitations on distributions

(a) A mutual benefit enterprise may not make a distribution if, after the distribution:

(1) the enterprise would not be able to pay its debts as they become due in the ordinary course of the enterprise’s activities; or

(2) the enterprise’s assets would be less than the sum of its total liabilities.

(b) A mutual benefit enterprise may base a determination that a distribution is not prohibited under subsection (a) of this section on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.

(c) Except as otherwise provided in subsection (d) of this section, the effect of a distribution allowed under subsection (b) of this section is measured:

(1) in the case of distribution by purchase, redemption, or other acquisition of financial rights in the mutual benefit enterprise, as of the date money or other property is transferred or debt is incurred by the enterprise; and

(2) in all other cases, as of the date:

(A) the distribution is authorized, if the payment occurs not later than 120 days after that date; or

(B) the payment is made, if payment occurs more than 120 days after the distribution is authorized.

(d) If indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is made.

(e) For purposes of this section, “distribution” does not include reasonable amounts paid to a member in the ordinary course of business as payment or compensation for commodities, goods, past or present services, or reasonable payments made in the ordinary course of business under a bona fide retirement or other benefits program. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)