47-1A-640.1. Distribution to shareholders prohibited if certain financial conditions result.
143 words·~1 min read·
/sd/title-47/chapter-47-1/47-1a-640-1·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
No distribution may be made if, after giving it effect:
(1)The corporation would not be able to pay its debts as they become due in the usual course of business; or
(2)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 at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
The board of directors may base a determination that a distribution is not prohibited under this section 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 under the circumstances.