Shares and Distributions

KRS tit. XXIII, ch. 271B, subtit. 6

in effect

KRS 271B.6-010 Authorized shares

271B.6-010. Authorized shares (1) The articles of incorporation shall prescribe the classes of shares and series of shares within a class and the number of shares of each class and series that the corporation is authorized to issue. If more than one (1) class or series of shares is authorized, the articles of incorporation shall prescribe a distinguishing designation for each class or series, and, prior to the issuance of shares of a class or series, the preferences, limitations, and relative rights of that class or series must be described in the articles of incorporation. All shares of a class shall have preferences, limitations, and relative rights identical with those of other shares of the same class except to the extent otherwise permitted by KRS 271B.6-020. (2) The articles of incorporation shall authorize: (a) One (1) or more classes or series of shares that together have unlimited voting rights; and (b) One (1) or more classes or series of shares which may be the same class or classes as those with voting rights, that together are entitled to receive the net assets of the corporation upon dissolution. (3) The articles of incorporation may authorize one (1) or more classes or series of shares that: (a) Have special, conditional, or limited voting rights, or no right to vote, except to the extent otherwise provided by this chapter; (b) Are redeemable or convertible as specified in the articles of incorporation: 1. At the option of the corporation, the shareholder, or another person or upon the occurrence of a designated event; 2. For cash, indebtedness, securities, or other property; or 3. In a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events; (c) Entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative, or partially cumulative; or (d) Have preference over any other class or series of shares with respect to distributions, including dividends and distributions upon the dissolution of the corporation. (4) Terms of shares may be made dependent upon facts objectively ascertainable outside the articles of incorporation in accordance with KRS 271B.1-200(2). (5) The description of the designations, preferences, limitations, and relative rights of share classes in subsection (3) of this section shall not be considered exhaustive. Effective: January 1, 2011 History: Repealed and reenacted 2010 Ky. Acts ch. 51, sec. 60, effective July 15, 2010; and amended ch. 151, sec. 121, effective January 1, 2011. -- Amended 2007 Ky. Acts ch. 137, sec. 60, effective June 26, 2007. -- Created 1988 Ky. Acts ch. 23, sec. 33, effective January 1, 1989. Legislative Research Commission Note (1/1/2011). This section was amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear in conflict, therefore, they have been codified together. Legislative Research Commission Note (7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, "The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section."

KRS 271B.6-020 Terms of class or series determined by board of directors -- Articles of amendment

271B.6-020. Terms of class or series determined by board of directors -- Articles of amendment (1) If the articles of incorporation so provide, the board of directors may determine, in whole or in part, the preferences, limitations, and relative rights, within the limits set forth in KRS 271B.6-010, of: (a) Any class of shares before the issuance of any shares of that class; or (b) One (1) or more series within a class before the issuance of any shares of that series. (2) Each series of a class shall be given a distinguishing designation. (3) All shares of a series shall have preferences, limitations, and relative rights identical with those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those of other series of the same class. (4) Before issuing any shares of a class or series created under this section, the corporation shall deliver to the Secretary of State for filing articles of amendment, which are effective without shareholder action, that set forth: (a) The name of the corporation; (b) The text of the amendment determining the terms of the class or series of shares; (c) The date it was adopted; and (d) A statement that the amendment was duly adopted by the board of directors. (5) The board of directors may adopt articles of amendment without shareholder action to make any of the following changes to a class or series created under this section: (a) Increase the number of shares of a series but not above the total number of authorized and unissued shares of the class; (b) Decrease the number of shares of a series but not below the number of shares of the series then issued and outstanding; (c) Amend the designation, preferences, limitations, or relative rights of the shares of a class or series if no shares of the class or series are then issued or outstanding; or (d) Eliminate the designation of, and all references to, a series from the articles of incorporation if no shares of the series are then issued and outstanding. (6) If an amendment reduces the number of shares of a series, or eliminates a series, the shares previously subject to issuance in the series shall return to the status they had before the creation of the series. (7) Articles of amendment adopted pursuant to subsection (5) of this section shall be delivered to the Secretary of State for filing and shall state: (a) The name of the corporation; (b) The designation of the class or series subject to the amendment; (c) The text of the amendment changing the class or series; (d) The date the amendment was adopted; and (e) A statement that the amendment was duly adopted by the board of directors. Effective: July 15, 2002 History: Amended 2002 Ky. Acts ch. 102, sec. 8, effective July 15, 2002. -- Created 1988 Ky. Acts ch. 23, sec. 34, effective January 1, 1989.

KRS 271B.6-030 Issued and outstanding shares

271B.6-030. Issued and outstanding shares (1) A corporation may issue the number of shares of each class or series authorized by the articles of incorporation. Shares that are issued shall be outstanding shares until they are reacquired, redeemed, converted, or canceled. (2) The reacquisition, redemption, or conversion of outstanding shares shall be subject to the limitations of subsection (3) of this section and to KRS 271B.6-400. (3) At all times that shares of the corporation are outstanding, one (1) or more shares that together have unlimited voting rights and one (1) or more shares that together are entitled to receive the net assets of the corporation upon dissolution shall be outstanding. Effective: January 1, 1989 History: Created 1988 Ky. Acts ch. 23, sec. 35, effective January 1, 1989.

KRS 271B.6-040 Fractional shares

271B.6-040. Fractional shares (1) A corporation may: (a) Issue fractions of a share or pay in money the value of fractions of a share; (b) Arrange for disposition of fractional shares by the shareholders; and (c) Issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share. (2) Each certificate representing scrip shall be conspicuously labeled "scrip" and shall contain the information required by subsection (2) of KRS 271B.6-250. (3) The holder of a fractional share shall be entitled to exercise the rights of a shareholder, including the right to vote, to receive dividends, and to participate in the assets of the corporation upon liquidation. The holder of scrip shall not be entitled to any of these rights unless the scrip provides for them. (4) The board of directors may authorize the issuance of scrip subject to any condition considered desirable, including: (a) That the scrip will become void if not exchanged for full shares before a specified date; and (b) That the shares for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders. Effective: January 1, 1989 History: Created 1988 Ky. Acts ch. 23, sec. 36, effective January 1, 1989.

KRS 271B.6-200 Subscription of shares before incorporation

271B.6-200. Subscription of shares before incorporation (1) A subscription for shares entered into before incorporation shall be irrevocable for six (6) months, unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation. (2) The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors shall be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise. (3) Shares issued pursuant to subscriptions entered into before incorporation shall be fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement. (4) If a subscriber defaults in payment of money or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the shares if the debt remains unpaid more than twenty (20) days after the corporation sends written demand for payment to the subscriber. (5) A subscription agreement entered into after incorporation shall be a contract between the subscriber and the corporation subject to KRS 271B.6-210. Effective: January 1, 1989 History: Created 1988 Ky. Acts ch. 23, sec. 37, effective January 1, 1989.

KRS 271B.6-210 Issuance of shares

271B.6-210. Issuance of shares (1) The powers granted in this section to the board of directors may be reserved to the shareholders by the articles of incorporation. (2) The board of directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation. (3) Before the corporation issues shares, the board of directors shall determine that the consideration received or to be received for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid, and nonassessable. (4) When the corporation receives the consideration for which the board of directors authorized the issuance of shares in accordance with this section, the shares issued therefor are fully paid and nonassessable. When, and to the extent, consideration for the issuance of shares consists of a promissory note or contract for services or other benefits, the shares shall be fully paid and nonassessable at the time the note is issued or the contract is entered into. (5) The board of directors, or a committee of the board of directors, may authorize one (1) or more officers of the corporation to approve the issuance, sale, or contract for sale of shares or to determine the designation and relative rights, preferences, and limitations of a class or series of shares, all within limits specifically prescribed by the board of directors or the committee. Effective: November 15, 2002 History: Amended 2002 Ky. Acts ch. 102, sec. 10, effective November 15, 2002. -- Created 1988 Ky. Acts ch. 23, sec. 38, effective January 1, 1989. Legislative Research Commission Note (6/26/2007). 2007 Ky. Acts ch. 137, sec. 179, effective June 26, 2007 provided: The General Assembly finds and declares that the amendment of KRS 271B.6-210, 271B.6-230, 271B.7-040, 271B.7-280, and 271B.8- 080, as provided for in 2002 Ky. Acts ch. 102, secs. 10, 11, 15, 18, and 19, respectively, are and were effective as of November 15, 2002. Legislative Research Commission Note (11/15/02). 2002 Ky. Acts ch. 102, sec. 22, provides that this section "shall take effect November 15, 2002, if a constitutional amendment proposing to amend Sections 190, 191, 192, 193, 194, 195, 198, 200, 202, 203, 205, 207, and 208 of the Constitution of Kentucky relating to corporations is enacted by the General Assembly and approved by the voters in the November, 2002 general elections. Otherwise, [this section] shall be void." A constitutional amendment proposing to amend 11 of those 13 sections of the Constitution was enacted by the General Assembly and approved by the voters. During the 2002 Regular Session, the General Assembly enacted 2002 Ky. Acts ch. 341, which proposed to amend Sections 190, 191, 192, 193, 194, 198, 200, 202, 203, 207, and 208 of the Constitution of Kentucky. The voters approved that amendment in the November, 2002 general elections.

KRS 271B.6-220 Liability of shareholders

271B.6-220. Liability of shareholders (1) A purchaser from a corporation of its own shares shall not be liable to the corporation or its creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued or specified in the subscription agreement. (2) Unless otherwise provided in the articles of incorporation, a shareholder of a corporation shall not be personally liable for the acts or debts of the corporation except that he or she may become personally liable by reason of his own acts or conduct. (3) That a corporation has a single shareholder is not a basis for setting aside the rule recited in subsection (2) of this section. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 81, sec. 88, effective July 12, 2012. -- Created 1988 Ky. Acts ch. 23, sec. 39, effective January 1, 1989.

KRS 271B.6-230 Share dividends

271B.6-230. Share dividends (1) Unless the articles of incorporation provide otherwise, shares may be issued pro rata and without consideration to the corporation's shareholders or to the shareholders of one (1) or more classes or series. An issuance of shares under this subsection shall be considered a share dividend. (2) Shares of one (1) class or series may not be issued as a share dividend in respect of shares of another class or series unless: (a) The articles of incorporation so authorize; (b) A majority of the votes entitled to be cast by the class or series to be issued approve the issue; or (c) There are no outstanding shares of the class or series to be issued. (3) If the board of directors does not fix the record date for determining shareholders entitled to a share dividend, it shall be the date the board of directors authorizes the share dividend. Effective: November 15, 2002 History: Amended 2002 Ky. Acts ch. 102, sec. 11, effective November 15, 2002. -- Created 1988 Ky. Acts ch. 23, sec. 40, effective January 1, 1989. Legislative Research Commission Note (6/26/2007). 2007 Ky. Acts ch. 137, sec. 179, effective June 26, 2007 provided: The General Assembly finds and declares that the amendment of KRS 271B.6-210, 271B.6-230, 271B.7-040, 271B.7-280, and 271B.8- 080, as provided for in 2002 Ky. Acts ch. 102, secs. 10, 11, 15, 18, and 19, respectively, are and were effective as of November 15, 2002. Legislative Research Commission Note (11/15/02). 2002 Ky. Acts ch. 102, sec. 22, provides that this section "shall take effect November 15, 2002, if a constitutional amendment proposing to amend Sections 190, 191, 192, 193, 194, 195, 198, 200, 202, 203, 205, 207, and 208 of the Constitution of Kentucky relating to corporations is enacted by the General Assembly and approved by the voters in the November, 2002 general elections. Otherwise, [this section] shall be void." A constitutional amendment proposing to amend 11 of those 13 sections of the Constitution was enacted by the General Assembly and approved by the voters. During the 2002 Regular Session, the General Assembly enacted 2002 Ky. Acts ch. 341, which proposed to amend Sections 190, 191, 192, 193, 194, 198, 200, 202, 203, 207, and 208 of the Constitution of Kentucky. The voters approved that amendment in the November, 2002 general elections.

KRS 271B.6-240 Share options

271B.6-240. Share options (1) A corporation may issue rights, options, or warrants for the purchase of shares of the corporation. The board of directors shall determine the terms upon which the rights, options, or warrants are issued, their form and content, and the terms and conditions upon which and the consideration for which the shares are to be issued. (2) (a) The board of directors may, by a resolution adopted by the board, authorize one (1) or more officers of the corporation to do one (1) or more of the following: 1. Designate officers and employees of the corporation or of any of its subsidiaries to receive rights, options, or warrants to be issued by the corporation; 2. Determine the number of rights, options, or warrants to be issued to each recipient; and 3. Determine the time or times at or during which rights, options, or warrants may be exercised. (b) Any resolution adopted pursuant to paragraph (a) of this subsection shall specify the total number of rights, options, or warrants the officer or officers may award. (c) The board of directors shall not authorize an officer to designate himself or herself as a recipient of any rights, options, or warrants. Effective: July 15, 2002 History: Amended 2002 Ky. Acts ch. 102, sec. 12, effective July 15, 2002. -- Created 1988 Ky. Acts ch. 23, sec. 41, effective January 1, 1989.

KRS 271B.6-250 Form and content of certificate

271B.6-250. Form and content of certificate (1) Shares may but need not be represented by certificates. Unless this chapter or another statute expressly provides otherwise, the rights and obligations of shareholders shall be identical whether or not their shares are represented by certificates. (2) At a minimum each share certificate shall state on its face: (a) The name of the issuing corporation and that it is organized under the law of this state; (b) The name of the person to whom issued; and (c) The number and class of shares and the designation of the series, if any, the certificate represents. (3) If the issuing corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the board of directors to determine variations for future series) shall be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge. (4) Each share certificate: (a) Must be signed (either manually or in facsimile) by two (2) officers designated in the bylaws or by the board of directors; and (b) May bear the corporate seal or its facsimile. (5) If the person who signed (either manually or in facsimile) a share certificate no longer holds office when the certificate is issued, the certificate shall nevertheless be valid. Effective: January 1, 1989 History: Created 1988 Ky. Acts ch. 23, sec. 42, effective January 1, 1989.

KRS 271B.6-260 Shares without certificates -- Shares of a public benefit corporation

271B.6-260. Shares without certificates -- Shares of a public benefit corporation (1) Unless the articles of incorporation or bylaws provide otherwise, the board of directors of a corporation may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. The authorization shall not affect shares already represented by certificates until they are surrendered to the corporation. (2) Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates by subsections (2) and (3) of KRS 271B.6-250 and, if applicable, KRS 271B.6-270. (3) Any stock certificate issued by a public benefit corporation shall note conspicuously that the corporation is a public benefit corporation. Effective:June 29, 2017 History: Amended 2017 Ky. Acts ch. 28, sec. 5, effective June 29, 2017. -- Created 1988 Ky. Acts ch. 23, sec. 43, effective January 1, 1989.

KRS 271B.6-270 Restrictions on transfer or registration of shares or other securities

271B.6-270. Restrictions on transfer or registration of shares or other securities (1) The articles of incorporation, bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction shall not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction. (2) A restriction on the transfer or registration of transfer of shares shall be valid and enforceable against the holder, or a transferee of the holder if the restriction is authorized by this section, and the holder or transferee has actual knowledge of the restriction or its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by KRS 271B.6- 260(2). Unless so noted or contained, a restriction is not enforceable against a person without knowledge of the restriction. (3) A restriction on the transfer or registration of transfer of shares shall be authorized: (a) To maintain the corporation's status when it is dependent on the number or identity of its shareholders; (b) To preserve exemptions under federal or state securities law; (c) In connection with shares issued by the corporation to its officers, directors, employees, or independent contractors, including as equity-based compensation under the Internal Revenue Code; or (d) For any other reasonable purpose. (4) A restriction on the transfer or registration of transfer of shares may without limitation: (a) Obligate the shareholder first to offer the corporation or other persons, separately, consecutively, or simultaneously, an opportunity to acquire the restricted shares; (b) Obligate the corporation or other persons, separately, consecutively, or simultaneously, to acquire or transfer the restricted shares; (c) Obligate a shareholder to transfer the restricted shares to the corporation or other persons for an agreed price or a price based on a valuation formula, including an obligation to transfer the shares for an amount equal to the original consideration paid for the shares; (d) Require the corporation, the holders of any class of its shares, or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable; or (e) Prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable. (5) For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares. Effective: July 15, 2010 History: Repealed and reenacted 2010 Ky. Acts ch. 51, sec. 61, effective July 15, 2010. -- Amended 2007 Ky. Acts ch. 137, sec. 61, effective June 26, 2007. -- Amended 2002 Ky. Acts ch. 102, sec. 13, effective July 15, 2002. -- Created 1988 Ky. Acts ch. 23, sec. 44, effective January 1, 1989. Legislative Research Commission Note (7/15/2010). 2010 Ky. Acts ch. 51, sec. 183, provides, "The specific textual provisions of Sections 1 to 178 of this Act which reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed effective as of June 26, 2007, and those provisions are hereby made expressly retroactive to that date, with the remainder of the text of those sections being unaffected by the provisions of this section."

KRS 271B.6-280 Expense of issue

271B.6-280. Expense of issue A corporation may pay or allow the expenses of selling or underwriting its shares or other securities, and of organizing or reorganizing the corporation, from the consideration received for shares without thereby rendering such shares or other securities not fully paid or assessable. Effective: January 1, 1989 History: Created 1988 Ky. Acts ch. 23, sec. 45, effective January 1, 1989.

KRS 271B.6-300 Shareholders' preemptive rights

271B.6-300. Shareholders' preemptive rights (1) The shareholders of a corporation shall not have a preemptive right to acquire the corporation's unissued shares except: (a) To the extent the articles of incorporation so provide; and (b) To the extent provided in subsection (4) of this section. (2) A statement included in the articles of incorporation that "the corporation elects to have preemptive rights" (or words of similar import) means that the following principles apply, except to the extent the articles of incorporation expressly provide otherwise: (a) The shareholders of the corporation shall have a preemptive right granted on uniform terms and conditions prescribed by the board of directors, to provide a fair and reasonable opportunity to exercise the right to acquire proportional amounts of the corporation's unissued shares upon the decision of the board of directors to issue them. (b) A shareholder may waive his preemptive right. A waiver evidenced by a writing shall be irrevocable even though it is not supported by consideration. (c) There shall be no preemptive right with respect to: 1. Shares issued as compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates; 2. Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates; 3. Shares authorized in articles of incorporation that are issued within six (6) months from the effective date of incorporation; and 4. Shares sold otherwise than for money. (d) Holders of shares of any class without general voting rights but with preferential rights to distributions or assets shall have no preemptive rights with respect to shares of any class. (e) Holders of shares of any class with general voting rights but without preferential rights to distributions or assets shall have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights. (f) Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person for a period of one (1) year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one (1) year shall be subject to the shareholders' preemptive rights. (3) For purposes of this section, "shares" include a security convertible into or carrying a right to subscribe for or acquire shares. (4) Except to the extent limited or denied by this subsection, shareholders of a corporation that existed on January 1, 1989, whose articles of incorporation did not on January 1, 1989, contain a provision specifically addressing preemptive rights shall have a preemptive right to acquire unissued shares or securities convertible into such shares or carrying a right to subscribe to or acquire shares. (a) No preemptive right shall exist: 1. To acquire any shares issued to directors, officers, or employees pursuant to approval by the affirmative vote of the holders of a majority of the shares entitled to vote thereon or when authorized by and consistent with a plan theretofore approved by such a vote of shareholders; or 2. To acquire any shares sold otherwise than for cash. (b) Holders of shares of any class that is preferred or limited as to dividends or assets shall not be entitled to any preemptive right. (c) Holders of shares of any class with general voting rights but without preferential rights to distributions or assets shall not be entitled to any preemptive right to shares of any class that is preferred or limited as to dividends or assets or to any obligations, unless convertible into shares of any class with general voting rights but without preferential rights to distributions or assets, or carrying a right to subscribe to or acquire shares of any class with general voting rights but without preferential rights to distributions or assets. (d) Holders of shares of any class without general voting rights shall have no preemptive rights to shares of a class which is identical as to rights except that the class has general voting rights. (e) The preemptive right shall be only an opportunity to acquire shares or other securities under such terms and conditions as the board of directors may fix for the purpose of providing a fair and reasonable opportunity to exercise such right. (f) This subsection shall not apply to any class of stock of any corporation after the corporation's articles of incorporation are amended to limit or deny the preemptive rights of any class of its stock. Effective: July 13, 1990 History: Amended 1990 Ky. Acts ch. 441, sec. 1, effective July 13, 1990. -- Created 1988 Ky. Acts ch. 23, sec. 46, effective January 1, 1989.

KRS 271B.6-310 Corporation's acquisition of its own shares

271B.6-310. Corporation's acquisition of its own shares (1) A corporation may acquire its own shares and shares so acquired shall constitute authorized but unissued shares. (2) If the articles of incorporation prohibit the reissue of acquired shares, the number of authorized shares shall be reduced by the number of shares acquired, effective upon amendment of the articles of incorporation. (3) Articles of amendment may be adopted by the board of directors without shareholder action, and shall be delivered to the Secretary of State for filing, and shall set forth: (a) The name of the corporation; (b) The reduction in the number of authorized shares, itemized by class and series; and (c) The total number of authorized shares, itemized by class and series, remaining after reduction of the shares. Effective: January 1, 1989 History: Created 1988 Ky. Acts ch. 23, sec. 47, effective January 1, 1989.

KRS 271B.6-400 Distributions to shareholders

271B.6-400. Distributions to shareholders (1) A board of directors may authorize and the corporation may make distributions to its shareholders subject to restriction by the articles of incorporation and the limitation in subsection (3) of this section. (2) If the board of directors does not fix the record date for determining shareholders entitled to a distribution (other than one involving a purchase, redemption or other acquisition of the corporation's shares), it shall be the date the board of directors authorizes the distribution. (3) No distribution shall be made if, after giving it effect: (a) The corporation would not be able to pay its debts as they become due in the usual course of business; or (b) The corporation's total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. (4) The board of directors may base a determination that a distribution is not prohibited under subsection (3) of this section either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances. (5) Except as provided in subsection (7) of this section, the effect of a distribution under subsection (3) of this section shall be measured: (a) In the case of distribution by purchase, redemption, or other acquisition of the corporation's shares, as of the earlier of: 1. The date money or other property is transferred or debt incurred by the corporation; or 2. The date the shareholder ceases to be a shareholder with respect to the acquired shares; (b) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and (c) In all other cases, as of: 1. The date the distribution is authorized if the payment occurs within one hundred twenty (120) days after the date of authorization; or 2. The date the payment is made if it occurs more than one hundred twenty (120) days after the date of authorization. (6) A corporation's indebtedness to a shareholder incurred by a reason of a distribution made in accordance with this section shall be at parity with the corporation's indebtedness to its general creditors except to the extent subordinated by agreement. (7) Indebtedness of a corporation, including indebtedness issued as a distribution, shall not be considered a liability for purposes of determinations under subsection (3) of this section if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest shall be treated as a distribution, the effect of which is measured on the date the payment is actually made. Effective: January 1, 1989 History: Created 1988 Ky. Acts ch. 23, sec. 48, effective January 1, 1989.

Source: Kentucky Legislative Research Commission (legislature.ky.gov)URL: https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=38527Fetched: 10/20/2026