Virginia Code 13.1-692: Liability for unlawful distributions.
A. A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to this chapter or the articles of incorporation is personally liable to the corporation and its creditors for the amount of the distribution that exceeds what could have been distributed without violating this chapter or the articles of incorporation if the party asserting liability establishes that when taking the action the director did not comply with § 13.1-690.
Terms Used In Virginia Code 13.1-692
- Articles of incorporation: means all documents constituting, at any particular time, the charter of a corporation. See Virginia Code 13.1-603
- 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 the 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 Virginia Code 13.1-603
B. A director held liable for an unlawful distribution under subsection A is entitled to:
1. Contribution from every other director who could be held liable under subsection A for the unlawful distribution; and
2. Recoupment from the shareholders who received the unlawful distribution in proportion to the amounts of such unlawful distribution received by them respectively.
C. No suit shall be brought against any director for any liability imposed by subsection A except within two years after the right of action shall accrue.
D. Contribution or recoupment under subsection B is barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under subsection A.
Code 1950, §§ 13-206, 13-207, 13.1-44; 1956, c. 428; 1985, c. 522; 2005, c. 765; 2019, c. 734.