GA Code § 14-2-640 (2021)
2021 Georgia Code|Title 14 - Corporations, Partnerships, and Associations|Chapter 2 - Business Corporations|Article 6 - Shares and Distributions|Part 4 - Distributions|§ 14-2-640. Distributions to Shareholders

  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 (c) of this Code section.   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 reacquisition of the corporation's shares), it is the date the board of directors authorizes the distribution.   No distribution may be made if, after giving it effect:   The corporation would not be able to pay its debts as they become due in the usual course of business; or   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.     The board of directors may base a determination that a distribution is not prohibited under subsection (c) of this Code 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.   Except as provided in subsection (g) of this Code section, the effect of a distribution under subsection (c) of this Code section is measured:   In the case of distribution by purchase, redemption, or other acquisition of the corporation's shares, as of the earlier of:   The date money or other property is transferred or debt incurred by the corporation; or   The date the shareholder ceases to be a shareholder with respect to the acquired shares;     In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and   In all other cases, as of:   The date the distribution is authorized if payment occurs within 120 days after the date of authorization; or   The date the payment is made if it occurs more than 120 days after the date of authorization.       A corporation's indebtedness to a shareholder incurred by reason of a distribution made in accordance with this Code section is at parity with the corporation's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement or except to the extent secured.   Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (c) of this Code section if its terms provide that payment of principal and interest are to be made only if and to the extent that payment of a distribution to shareholders could then be made under this Code section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made.     (Code 1981, §14-2-640, enacted by Ga. L. 1988, p. 1070, § 1.)   Cross references.   - Criminal responsibility of corporations, § 16-2-22.    Personal liability of corporate officer or employee for tax delinquency, § 48-2-52.   Law reviews.   - For article discussing distributions from capital surplus to shareholders, see 3 Ga. L. Rev. 11 (1968). For article discussing "earned" surplus and "capital" surplus concepts under Georgia Business Corporation Code, see 3 Ga. L. Rev. 11 (1968). For article discussing corporation director's liability for improper payments to shareholders, see 3 Ga. L. Rev. 11 (1968). For article discussing liability of corporate directors, officers, and shareholders under the Georgia Business Corporation Code, and as affected by provisions of the Georgia Civil Practice Act, see 7 Ga. St. B.J. 277 (1971). For note discussing effect of Georgia law on dividend restrictions, see 24 Ga. B. J. 254 (1961).   RESEARCH REFERENCES   Am. Jur. 2d.   - 18B Am. Jur. 2d, Corporations, § 1709 et seq.   C.J.S.   - 18 C.J.S., Corporations, § 360 et seq. 19 C.J.S., Corporations, §§ 571, 575, 576, 586, 637.   ALR.    - Insolvency of corporation as barring stockholder's right to rescind subscription on ground of fraud, 41 A.L.R. 674; 46 A.L.R. 484.    Reduction of capital stock and distribution of capital assets upon reduction, 44 A.L.R. 11; 35 A.L.R.2d 1149.    Trademark or tradename as asset in case of bankruptcy, insolvency, or assignment for benefit of creditors, 44 A.L.R. 706.    Right or duty of corporation to pay dividends, and liability for wrongful payment, 55 A.L.R. 8; 76 A.L.R. 885; 109 A.L.R. 1381.    Right as between seller and purchaser of stock to dividends declared thereon, 60 A.L.R. 703.    Right of pledgee of corporate stock in respect of dividends declared thereon, 67 A.L.R. 485; 103 A.L.R. 849.    Rights of holders of preferred stock in respect of dividends, 67 A.L.R. 765; 98 A.L.R. 1526; 133 A.L.R. 653.    Duty and remedy as regards deferring payment of dividends from assets of insolvent bank or other insolvent corporation while there are undetermined claims or preferences, 88 A.L.R. 1301.    Constitutionality of tax upon corporate dividends, or the transfer thereof, in respect of stock owned by nonresident, 104 A.L.R. 1491.    Failure of purchaser of stock from existing corporation, or of subscriber thereto, to pay for same as affecting his right to dividends, 122 A.L.R. 1048.    Right as between life beneficiaries and remaindermen, or successive life beneficiaries, in corporate dividends or distributions during the life interest, 130 A.L.R. 492; 44 A.L.R.2d 1277.    Validity and construction of state statutes as applied to the taxation of income derived from dividends on stock of foreign corporations, 143 A.L.R. 147.    When dividends on corporate stock become taxable as income, 143 A.L.R. 596; 158 A.L.R. 1432; 167 A.L.R. 303.   Validity of cancellation of accrued dividends on preferred corporate stock, 8 A.L.R.2d 893.   Parties defendant to stockholder's suit to compel declaration of dividend, 15 A.L.R.2d 1124.   Preferred stockholders' rights, upon liquidation or dissolution to dividends, 25 A.L.R.2d 788.   Dividend rights in surplus of new consolidated corporation resulting from reduction of capital stock of former constituent corporations, 28 A.L.R.2d 1177.   Corporation's right to interplead claimants to dividends, 46 A.L.R.2d 980.   Construction of "net profits," "earnings," or the like, in provision for profit-sharing bonus for corporate officers or employees, 49 A.L.R.2d 1129.   Negligence, nonfeasance, or ratification of wrongdoing as excusing demand on directors as prerequisite to bringing of stockholder's derivative action on behalf of corporation, 99 A.L.R.3d 1034.