When are dividends illegal; what, if anything, must the shareholders do with illegal dividends; and what, if any, liability will directors have regarding these illegal dividends?
Dividends are illegal if they are improperly paid from an unauthorized account or if their payment causes the corporation to become unable to pay its debts as they come due. Generally, shareholders must return illegal dividends only if they know that the dividends were illegal when the payment was received or if the dividends were paid when the corporation was unable to pay its debts as they came due. Even if dividends are illegal or improper, the board of directors can never be held personally liable for the amount of the payment.
Dividends are illegal if they are improperly paid from an unauthorized account or if their payment causes the corporation to become unable to pay its debts as they come due. Generally, shareholders must return illegal dividends only if they know that the dividends were illegal when the payment was received or if the dividends were paid when the corporation was unable to pay its debts as they came due. Whenever dividends are illegal or improper, the board of directors can be held personally liable for the amount of the payment.
Dividends are illegal if they are improperly paid from an unauthorized account or if their payment causes the corporation to become unable to pay its debts as they come due. Generally, shareholders never have to return illegal dividends, but the board of directors can be held personally liable for the amount of the payment.
Dividends are illegal if they are paid in a year when the corporation did not make a profit. Generally, shareholders must return illegal dividends only if they know that the dividends were illegal when the payment was received or if the dividends were paid when the corporation was unable to pay its debts as they came due. Whenever dividends are illegal or improper, the board of directors can be held personally liable for the amount of the payment.