§ 35-14-832 — Director's Liability For Unlawful Distributions

35-14-832 . Director's liability for unlawful distributions. (1) A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to 35-14-640 (1) or 35-14-1409 (1) is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating 35-14-640 (1) or 35-14-1409 (1) if the party asserting liability establishes that when taking the action the director did not comply with 35-14-830 .
(2) A director held liable under subsection (1) for an unlawful distribution is entitled to:
(a) contribution from every other director who could be held liable under subsection (1) for the unlawful distribution; and
(b) recoupment from each shareholder of the pro rata portion of the amount of the unlawful distribution the shareholder accepted knowing the distribution was made in violation of 35-14-640 (1) or 35-14-1409 (1).
(3) A proceeding to enforce:
(a) the liability of a director under subsection (1) is barred unless it is commenced within 2 years after the date:
(i) on which the effect of the distribution was measured under 35-14-640 (5) or (7);
(ii) as of which the violation of 35-14-640 (1) occurred as the consequence of disregard of a restriction in the articles of incorporation; or
(iii) on which the distribution of assets to shareholders under 35-14-1409 (1) was made; or
(b) contribution or recoupment under subsection (2) is barred unless it is commenced within 1 year after the liability of the claimant has been finally adjudicated under subsection (1).

Legislative History

En. Sec. 113, Ch. 271, L. 2019.