Sec. 109.10. Distributions prior to dissolution.

498 words·~2 min read·/il/chapter-805/act-105/109-10

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(a)The board of directors of a corporation may authorize, and the corporation may make, distributions of its money, property, or other assets, other than upon dissolution and final liquidation, subject to the limitations of subsection

(d)of this Section, only:

(1)To any person or organization who or which has made payments to the corporation for goods or services, as a fractional repayment of such payments, provided all such persons or organizations in any category are repaid on an equal pro rata basis; or

(2)To any person or organization as a repayment of his, her or its contribution of an amount not to exceed the amount of the contribution, provided that any assets held for any charitable, religious, eleemosynary, benevolent, educational or similar purpose or held upon a condition requiring return, shall continue to be so restricted. The articles of incorporation or the bylaws may provide that the membership rights of a member cease upon the repayment, in whole, of the contribution of such member.

(b)Any payment or transfer of money, property or other assets in furtherance of any of the purposes of the corporation shall not be deemed a distribution for the purposes of this Article and this Section shall not be construed as limiting the purposes and powers of a corporation as set forth in Article 3 of this Act.

(c)All distributions by a corporation permitted by this Section shall be at the option of the corporation only and at such amount or amounts, within the period or periods, and on such terms and conditions, not inconsistent with the purpose of the corporation and this Act, as are stated in, or fixed by the board of directors pursuant to authority granted by, the articles of incorporation or the bylaws.

(d)No distribution under subsection

(a)may be made if, after giving it effect:

(1)The corporation would be insolvent; or

(2)The net assets of the corporation would be less than zero; or

(3)The corporation would be rendered unable to carry on its corporate purposes.

(e)The board of directors may base a determination that a distribution may be made under subsection

(d)either 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.

(f)The effect of a distribution under subsection

(d)is measured as of the earlier of:

(1)The date of its authorization if payment occurs within 120 days after the date of authorization or the date of payment if payment occurs more than 120 days after the date of authorization; or

(2)In the case of a repayment of a contribution in which the membership rights of a member cease, the earlier of

(i)the date money or other property is transferred or debt incurred by the corporation or

(ii)the date the membership rights of the member cease.