Soon It Will Be Easier For California Corporations To Make Distributions To Shareholders

Chapter 5 of the Corporations Code establishes various limitations on distributions by California corporations. The term “distributions to its shareholders” is itself defined in Section 166. The question of appropriate limitations on dividends and other corporate distributions is not new. Even Samuel Clemens (aka Mark Twain) wrote about “cooked dividends” and got into a great deal of trouble for his efforts (A topic that I covered last year in “‘Cooked Dividends’ Leads to Bloody Massacre“).

When the legislature enacted Chapter 5, it abolished the antiquated concepts of “legal capital” and “surplus”. In general, the legislature’s approach was to use accounting concepts (albeit with some adjustments). Last week, the legislature took a big step in loosening some of the constraints on distributions imposed by Chapter 5 by enacting AB 571 (Hagman). This bill was sponsored by the Corporations Committee of the Business Law Section of the California State Bar.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins Leck Gamble Mallory & Natsis LLP | Attorney Advertising

Written by:

more+
less-

Allen Matkins Leck Gamble Mallory & Natsis LLP on:

JD Supra Readers' Choice 2016 Awards
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
×
Loading...
×
×