Iowa Code 490.832 – Directors’ liability for unlawful distributions
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1. A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to section 490.640, subsection 1, or section 490.1409, subsection 1, is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating section 490.640, subsection 1, or section 490.1409, subsection 1, if the party asserting liability establishes that when taking the action the director did not comply with section 490.830.
Terms Used In Iowa Code 490.832
- Articles of incorporation: means the articles of incorporation described in section 490. See Iowa Code 490.140
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Distribution: means a direct or indirect transfer of cash or other property, except a corporation's own shares, or incurrence of indebtedness by a corporation to or for the benefit of its shareholders in respect of any of its shares. See Iowa Code 490.140
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Proceeding: includes a civil suit and criminal, administrative, and investigatory action. See Iowa Code 490.140
- Shareholder: means a record shareholder. See Iowa Code 490.140
- year: means twelve consecutive months. See Iowa Code 4.1
2. A director held liable under subsection 1 for an unlawful distribution is entitled to all of the following:
a. Contribution from every other director who could be held liable under subsection 1 for the unlawful distribution.
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 section 490.640, subsection 1, or section 490.1409, subsection 1.
3. a. A proceeding to enforce the liability of a director under subsection 1 is barred unless it is commenced within two years after any of the following:
(1) The date on which the effect of the distribution was measured under section 490.640, subsection 5 or 8.
(2) The date as of which the violation of section 490.640, subsection 1, occurred as the consequence of disregard of a restriction in the articles of incorporation.
(3) The date on which the distribution of assets to shareholders under section 490.1409, subsection 1, was made.
b. A proceeding to enforce contribution or recoupment under subsection 2 is barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under subsection 1.