Opinion ID: 1238867
Heading Depth: 3
Heading Rank: 1

Heading: Payments under the Plan Were Illegal

Text: Kake claims that payments under the plan were not dividends. Instead, it argues that the plan was a social welfare program which is permissible under ANCSA. Kake, however, points to no provision which may be read as authorizing the plan. It is true that a corporation may engage in charitable giving. AS 10.06.010(13) (a corporation has the power to donate for the public welfare or charitable, scientific or educational purposes...). The plan, however, was merely a method of distributing corporate assets to certain shareholders. No reasonable argument can be made that the plan was instead a series of charitable gifts. Indeed, the stated purpose of the plan was to provide financial security to the original shareholders of Kake. Distributions were to be made regardless of the need or financial status of the distributees. Kake also argues that the senior program was authorized under amendments to ANCSA passed in 1988. These amendments did authorize the issuance, without consideration, of a special class of stock for shareholders who had attained the age of sixty-five. 43 U.S.C.A. § 1606(g)(2) (West Supp. 1996). However, creation of such stock requires a shareholder vote or an amendment to the articles of incorporation. 43 U.S.C.A. § 1629(b) (West Supp. 1996). Kake never took these steps. Thus the senior program cannot be considered a valid exercise of the power granted by the 1988 ANCSA amendments. Because no provision of ANCSA authorizes the plan, the payments in this case were illegal. Subject to certain limited exceptions not relevant for present purposes, holders of village corporation stock have all rights of a stockholder in a business corporation organized under the laws of the State. The quoted language is drawn from section 7(h) of ANCSA (43 U.S.C.A. § 1606(h)( l ) (West Supp. 1996)), which pertains to the stock of regional corporations. Section 8 of ANCSA (43 U.S.C.A. § 1607) makes section 7(h) applicable to village corporations. One of the rights of a shareholder of a business corporation is the right to enjoy equal rights, preferences, and privileges on his or her shares. Alaska Statute 10.06.305 provides that [a]ll shares of a class shall have the same voting, conversion, and redemption rights and other rights, preferences, privileges, and restrictions. The statute thus commands that every share shall have the right to the same rights, preferences, and privileges of whatever sort. Whether or not the payments at issue were dividends as the plaintiffs maintain, they unquestionably may be characterized as preferences or privileges based on stock ownership. It is evident, therefore, that the payments violated the rights of the excluded shareholders.