Hi AK,
Have sent copies of the following posts several times. It would be great to have a sticky of them. Every time I post them in the other board they are deleted.
It would be a real long legal battle to sue investors to return the divi. The expected outcome is that they can't do anything even in the event of fraud by the company.
In short, investors can keep the divi if they received it in good faith (if not in collusion with a fraudulent company management). And don't think it was a fraudulent divi.
Check the following two posts from Jep2343.
I recommend you to keep a copy of those posts. Results of similar cases create precedent in the event of a lawsuit. Nobody can prevent anybody form suing, but that's where everything ends.
1 - Post 34712 (was deleted)
jep2343
Saturday, 09/12/15 05:33:37 PM
Re: onemessageonly post# 34671
Post # of 34712
Here is a summary of common legal principles for one jurisdiction relating to fraudulent dividends and director/shareholder liability. Note that laws differ based on jurisdiction but this is a good summary of what we are dealing with here. Ill summarize it for you (director are liable, shareholders are liable if they they had knowledge of the fraud but are not liable if they received the dividend in good faith).
The statutory provisions creating director and shareholder liability for illegal distributions are found not in chapter 3 but in chapter 5 of the Act. Under section 551, directors who vote for or concur in a distribution to shareholders in violation of the Act are jointly and severally liable to the corporation for the benefit of its creditors or shareholders to the extent such persons suffer legally recoverable injury, but the director liability may not exceed the difference between the amount distributed and that which lawfully could have been paid.128 A director, however, is not liable if he has complied with section 541a,129 which requires a director to discharge his or her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances and in a manner reasonably believed to be in the corporation's best interests.A director's obligation to exercise due care in the course of authorizing a distribution is particularly significant since section 209, which essentially authorizes corporations to adopt articles provisions protecting directors against damage suits stemming from breach of duty of care, does not apply to actions brought under section 551.130Should directors be found liable for authorizing an improper distribution, the statute entitles them to contribution from other directors who voted for or concurred in the distribution,131 and to be subrogated to the corporation's rights against shareholders who received the distribution.132 The corporation's rights against recipient shareholders are, however, limited to recovery against those who accepted the distribution with knowledge of facts indicating its impropriety, and the corporation may recover only the excess of the amount a shareholder received over that holder's share of the amount that lawfully could have been paid.133 Thus, shareholders who innocently receive an excessive distribution may retain the sums received. A provision adopted in the 1989 Amendments specifically prohibited the application of the Uniform Fraudulent Conveyance Act to distributions to shareholders.134 Previous decisions under Michigan law holding that distributions to shareholders could constitute fraudulent conveyances135 appeared to be “overruled” by statute.136 This provision did not affect the operation of § 548 of the Bankruptcy Code, which applies to transfers made within one year before the date of filing under the Code.137 In 1998, the Uniform Fraudulent Conveyance Act was repealed, and the Uniform Fraudulent Transfer Act adopted.137a Since there was no mention of the Business Corporation Act exclusion in the new statute, distributions again were subject to a statutory restriction on fraudulent transfers. The 2001 Amendments changed the reference in § 122(3) from the Uniform Fraudulent Conveyance Act to the Uniform Fraudulent Transfer Act and, therefore, reinstated the exclusion.
§ 3.17 LIABILITIES OF DIRECTORS AND SHAREHOLDERS FOR ILLEGAL DISTRIBUTIONS, MICLP s 3.17
2 - post 34720 (still in the board)
jep2343
Saturday, 09/12/15 06:06:20 PM
Re: nwar post# 34716
Post # of 34720
My post was accidentally deleted because I waited too long while editing it but here is a legal treaties on the subject.
3 Treatise on the Law of Corporations § 20:25 (3d)
Treatise on the Law of Corporations
Database updated December 2014
James D. Cox and Thomas Lee Hazen
Chapter 20. Dividend Distributions: Rights, Restrictions, and Liabilities
Part C. LIABILITIES OF DIRECTORS AND SHAREHOLDERS
§ 20:25. Shareholders' liability to return illegal dividends
It has already been pointed out that a dividend distribution in violation of statutory restrictions is primarily a wrong done by the directors who declare it.1 The liability most frequently imposed by specific statutes is placed on the directors who declare the dividend rather than on the shareholders who receive it, although the directors may seek contribution against the shareholders who received the illegal dividend with knowledge.2 The shareholders may be liable at common law as well as by statute, even if the directors are also liable.3 Where directors and shareholders are concurrently liable, their respective liability can be asserted in the same action.4 The shareholders, if they are innocent recipients of the improper dividend, are not parties to the commission of the wrong.
Nevertheless, there is a conflict of authority as to whether, in the absence of a statute, innocent shareholders will be held liable for an improper dividend. If a corporation was insolvent or has been rendered insolvent by the dividend, the common law has held that recovery may be had for the benefit of creditors regardless of the good faith of the shareholders.5 This liability of the innocent shareholder is commonly based on the ground that a shareholder is a mere donee who has parted with nothing in return for the dividend received, and as a donee he receives the payment subject to a constructive trust in favor of creditors. However, because a dividend purports to be a return on the capital invested, a shareholder is not a mere donee. Another theory of recovery is to hold the payment invalid as a conveyance fraudulent against creditors.5.50 The law of fraudulent conveyances does not always fit perfectly;6 especially in the case of preferred shares, the line between the status of a preferred shareholder and a creditor may be hard to draw.7 If shareholders have no reason to suppose that the dividend has rendered the corporation insolvent or has increased its insolvency, is it just to give the creditor a remedy against them? If shareholders receive dividends in good faith, the question is whether there is sufficient ground to impose liability on their part to restore capital, and especially whether considerations of policy favor the imposition of such a liability.8 The true basis of such liability is neither the trust fund theory nor a fraudulent conveyance theory, but the enforcement of the statutory policy of dividend restrictions and the question of what remedies are practical and just for the purpose of protecting all parties concerned.9 The eminent authority on fraudulent conveyances has suggested that innocent shareholders should not be charged with knowledge that a going concern is insolvent.10 The clear trend among statutes is not to impose liability on shareholders unless it can be shown that the dividends were received with knowledge of the company's condition. This is the position taken in the present Model Business Corporation Act, which permits directors to obtain contribution “from each shareholder for the amount the shareholder accepted knowing the distribution was made in violation” of the statute.11 There is no direct shareholder liability to the corporation provided within the Model Business Corporation Act. There is always a question, however, whether a state statute that sets forth rights against shareholders who receive unlawful distributions supplants the common law.12
If the corporation was solvent at the time of the declaration and payment of the dividend and it was received in good faith and without notice that it depleted capital, some states have nevertheless imposed liability on innocent shareholders.13 However, in a leading case this doctrine was rejected by the United States Supreme Court,14 and the majority rule at common law protects the shareholder who has innocently received unlawful dividends from a solvent corporation.15 McDonald v. Williams held that, since the assets of a solvent corporation are not a trust fund for creditors, shareholders of a corporation who in good faith receive dividends declared while the corporation is a solvent and going concern cannot be made to refund in an action by a receiver of the corporation if it becomes insolvent, even though the dividend may have been unlawfully paid out of capital.16
Some courts hold that the obligation giving rise to creditors' claims that may be asserted against a shareholder receiving improper dividends must have been incurred before the dividend was paid.17 Therefore the receiver or trustee in bankruptcy must show that at least one of the unpaid creditors of the corporation existed at the time of the dividend payment.18
Westlaw. © 2014 Thomson Reuters. No Claim to Orig. U.S. Govt. Works.
Footnotes
1
See § 20:23.
2
MBCA § 8.33 (2008); MBCA § 48 (1969).
3
In re Felt Mfg. Co., Inc., 371 B.R. 589 (Bankr. D.N.H. 2007) (although there was no provision in New Hampshire statute empowering creditors to recover for illegal dividends, recovery was permitted on the basis of unjust enrichment); Reilly v. Segert, 201 N.E.2d 444 (Ill. 1964) (share repurchase); Powers v. Heggie, 167 N.E. 314 (Mass. 1929); Thompson v. A. G. Nash & Co., 704 S.W.2d 822 (Tex. Ct. App. 1985). E.g., Cal. Gen. Corp. Law §§ 316, 506 (West 1990). See James J. Fuld, Recovery of Illegal and Partial Liquidating Dividends from Stockholders, 28 Va. L. Rev. 50 (1941).
4
See Ulness v. Dunnell, 237 N.W. 208, 211 (N.D. 1931); Williams v. Brewster, 93 N.W. 479 (Wis. 1903). See, e.g., Cal. Gen. Corp. Law 316 (West Supp. 2009).
5
Wood v. National City Bank, 24 F.2d 661 (2d Cir. 1928), noted in Note, Corporations—Recovery by Creditors of Dividends Paid, 38 Yale L.J. 542 (1929); Powers v. Heggie, 167 N.E. 314 (Mass. 1929); Bartlett v. Smith, 160 A. 440 (Md. 1932). See also, e.g., Me. Rev. Stat. Ann. tit. 13A, § 24 (West 1981); Fuld, supra note 3, at 51. Modern cases appear to reach this result only in instances involving a repurchase of shares and when the statute is otherwise neutral on the liability of shareholders. See In re Kettle Fried Chicken of Am., Inc., 513 F.2d 807, 813 (6th Cir. 1975) (reasoning that unlawful share repurchases are to be treated differently from cases involving unlawful dividends); Reilly v. Segert, 201 N.E.2d 444 (Ill. 1964).
5.50
See, e.g., Federal Nat. Mortg. Ass'n v. Olympia Mortg. Corp., 792 F. Supp. 2d 645 (E.D. N.Y. 2011) (distribution by insolvent corporation was a fraudulent conveyance and shareholders could not retain the benefits of the improper distributions; applying New York law).
6
See § 20:26.
7
See § 18:7. Cf. Uniform Fraudulent Conveyance Act § 1, 7A U.L.A. 427, 430 (1985) (' “creditor' is a person having any claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent”).
8
In Quintal v. Adler, 262 N.Y.S. 126 (Sup. Ct.), aff'd, 263 N.Y.S. 943 (App. Div. 1933), aff'd, 191 N.E. 509 (N.Y. 1934), innocent shareholders were held not liable to the corporation's trustee in bankruptcy to repay dividends declared out of capital before the corporation became insolvent. The court pointed out that it would be intolerable if shareholders who receive dividends in good faith from a going concern could not rely on the action of the board of directors: “such a condition would tend to destroy confidence in corporate investments and disorganize business.” See also, Territory of U.S. Virgin Islands v. Goldman Sachs & Co., 937 A.2d 760 (Del. Ch. 2007) (mere acknowledgement in proxy statement of dissolving corporation that shareholders might be liable for distribution does not create a contractual obligation to repay the sums when corporate assets later are insufficient to satisfy creditor claims).
9
See 2 Glenn, Fraudulent Conveyances, supra § 20:16 note 7, §§ 596, 604; David A. Witz, Shareholder's Liability for Dividends Improperly Declared and Paid, 1 Tex. L. & Legis. (Sw. L.J.) 220, 222–235 (1947); Jerome J. Dick, Comment, Corporations—Receivers—Rights of Creditor or Receiver to Raise an Objection to Corporate Action Which Would Be Open to Shareholders, 38 Mich. L. Rev. 689 (1940); Note, Actions Against Stockholders to Recover Illegal Dividends, 33 Colum. L. Rev. 481, 491–492 (1933); Note, Shareholders' Responsibility for Improper Dividends, 81 U. Pa. L. Rev. 314, 320 (1933).
10
2 Glenn, Fraudulent Conveyances, supra § 20:16 note 7, § 604.
11
MBCA § 8.33(b)(2) (2008) (emphasis added).
12
See Reilly v. Segert, 201 N.E.2d 444 (Ill. 1964) (statute imposing liability on directors for unlawful distributions with a right of contribution from knowing shareholders does not preclude suit by receiver against shareholders).
13
Detroit Trust Co. v. Goodrich, 141 N.W. 882 (Mich. 1913); American Steel & Wire Co. v. Eddy, 89 N.W. 952 (Mich. 1902), s.c. 101 N.W. 578 (Mich. 1904); both of these over-relied on a statute; Mackall v. Pocock, 161 N.W. 228 (Minn. 1917). Statutes in a few states apparently provide for recovery of dividends even against innocent shareholders. See La. Rev. Stat. § 12.93D (1994); Minn. Stat. Ann. § 302A.559, subdiv. 2 (West 2004).
14
McDonald v. Williams, 174 U.S. 397 (1899).
15
McDonald v. Williams, 174 U.S. 397 (1899).
16
But cf. In re Kettle Fried Chicken of Am., Inc., 513 F.2d 807, 808 (6th Cir. 1975) (same considerations do not apply to corporation's repurchase of shares from innocent shareholder, which, unlike a dividend, is not in usual or ordinary course of business). See §§ 21:3, 21:4.
17
Credit Managers Ass'n of S. Cal. v. Federal Co., 629 F.Supp. 175 (D. Cal. 1985).
18
Wood v. National City Bank, 24 F.2d 661 (2d Cir. 1928); Ratcliffe v. Clendenin, 232 F. 61 (8th Cir. 1916); Montgomery v. Whitehead, 90 P. 509 (Colo. 1907).
Have sent copies of the following posts several times. It would be great to have a sticky of them. Every time I post them in the other board they are deleted.
It would be a real long legal battle to sue investors to return the divi. The expected outcome is that they can't do anything even in the event of fraud by the company.
In short, investors can keep the divi if they received it in good faith (if not in collusion with a fraudulent company management). And don't think it was a fraudulent divi.
Check the following two posts from Jep2343.
I recommend you to keep a copy of those posts. Results of similar cases create precedent in the event of a lawsuit. Nobody can prevent anybody form suing, but that's where everything ends.
1 - Post 34712 (was deleted)
jep2343
Saturday, 09/12/15 05:33:37 PM
Re: onemessageonly post# 34671
Post # of 34712
Here is a summary of common legal principles for one jurisdiction relating to fraudulent dividends and director/shareholder liability. Note that laws differ based on jurisdiction but this is a good summary of what we are dealing with here. Ill summarize it for you (director are liable, shareholders are liable if they they had knowledge of the fraud but are not liable if they received the dividend in good faith).
The statutory provisions creating director and shareholder liability for illegal distributions are found not in chapter 3 but in chapter 5 of the Act. Under section 551, directors who vote for or concur in a distribution to shareholders in violation of the Act are jointly and severally liable to the corporation for the benefit of its creditors or shareholders to the extent such persons suffer legally recoverable injury, but the director liability may not exceed the difference between the amount distributed and that which lawfully could have been paid.128 A director, however, is not liable if he has complied with section 541a,129 which requires a director to discharge his or her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances and in a manner reasonably believed to be in the corporation's best interests.A director's obligation to exercise due care in the course of authorizing a distribution is particularly significant since section 209, which essentially authorizes corporations to adopt articles provisions protecting directors against damage suits stemming from breach of duty of care, does not apply to actions brought under section 551.130Should directors be found liable for authorizing an improper distribution, the statute entitles them to contribution from other directors who voted for or concurred in the distribution,131 and to be subrogated to the corporation's rights against shareholders who received the distribution.132 The corporation's rights against recipient shareholders are, however, limited to recovery against those who accepted the distribution with knowledge of facts indicating its impropriety, and the corporation may recover only the excess of the amount a shareholder received over that holder's share of the amount that lawfully could have been paid.133 Thus, shareholders who innocently receive an excessive distribution may retain the sums received. A provision adopted in the 1989 Amendments specifically prohibited the application of the Uniform Fraudulent Conveyance Act to distributions to shareholders.134 Previous decisions under Michigan law holding that distributions to shareholders could constitute fraudulent conveyances135 appeared to be “overruled” by statute.136 This provision did not affect the operation of § 548 of the Bankruptcy Code, which applies to transfers made within one year before the date of filing under the Code.137 In 1998, the Uniform Fraudulent Conveyance Act was repealed, and the Uniform Fraudulent Transfer Act adopted.137a Since there was no mention of the Business Corporation Act exclusion in the new statute, distributions again were subject to a statutory restriction on fraudulent transfers. The 2001 Amendments changed the reference in § 122(3) from the Uniform Fraudulent Conveyance Act to the Uniform Fraudulent Transfer Act and, therefore, reinstated the exclusion.
§ 3.17 LIABILITIES OF DIRECTORS AND SHAREHOLDERS FOR ILLEGAL DISTRIBUTIONS, MICLP s 3.17
2 - post 34720 (still in the board)
jep2343
Saturday, 09/12/15 06:06:20 PM
Re: nwar post# 34716
Post # of 34720
My post was accidentally deleted because I waited too long while editing it but here is a legal treaties on the subject.
3 Treatise on the Law of Corporations § 20:25 (3d)
Treatise on the Law of Corporations
Database updated December 2014
James D. Cox and Thomas Lee Hazen
Chapter 20. Dividend Distributions: Rights, Restrictions, and Liabilities
Part C. LIABILITIES OF DIRECTORS AND SHAREHOLDERS
§ 20:25. Shareholders' liability to return illegal dividends
It has already been pointed out that a dividend distribution in violation of statutory restrictions is primarily a wrong done by the directors who declare it.1 The liability most frequently imposed by specific statutes is placed on the directors who declare the dividend rather than on the shareholders who receive it, although the directors may seek contribution against the shareholders who received the illegal dividend with knowledge.2 The shareholders may be liable at common law as well as by statute, even if the directors are also liable.3 Where directors and shareholders are concurrently liable, their respective liability can be asserted in the same action.4 The shareholders, if they are innocent recipients of the improper dividend, are not parties to the commission of the wrong.
Nevertheless, there is a conflict of authority as to whether, in the absence of a statute, innocent shareholders will be held liable for an improper dividend. If a corporation was insolvent or has been rendered insolvent by the dividend, the common law has held that recovery may be had for the benefit of creditors regardless of the good faith of the shareholders.5 This liability of the innocent shareholder is commonly based on the ground that a shareholder is a mere donee who has parted with nothing in return for the dividend received, and as a donee he receives the payment subject to a constructive trust in favor of creditors. However, because a dividend purports to be a return on the capital invested, a shareholder is not a mere donee. Another theory of recovery is to hold the payment invalid as a conveyance fraudulent against creditors.5.50 The law of fraudulent conveyances does not always fit perfectly;6 especially in the case of preferred shares, the line between the status of a preferred shareholder and a creditor may be hard to draw.7 If shareholders have no reason to suppose that the dividend has rendered the corporation insolvent or has increased its insolvency, is it just to give the creditor a remedy against them? If shareholders receive dividends in good faith, the question is whether there is sufficient ground to impose liability on their part to restore capital, and especially whether considerations of policy favor the imposition of such a liability.8 The true basis of such liability is neither the trust fund theory nor a fraudulent conveyance theory, but the enforcement of the statutory policy of dividend restrictions and the question of what remedies are practical and just for the purpose of protecting all parties concerned.9 The eminent authority on fraudulent conveyances has suggested that innocent shareholders should not be charged with knowledge that a going concern is insolvent.10 The clear trend among statutes is not to impose liability on shareholders unless it can be shown that the dividends were received with knowledge of the company's condition. This is the position taken in the present Model Business Corporation Act, which permits directors to obtain contribution “from each shareholder for the amount the shareholder accepted knowing the distribution was made in violation” of the statute.11 There is no direct shareholder liability to the corporation provided within the Model Business Corporation Act. There is always a question, however, whether a state statute that sets forth rights against shareholders who receive unlawful distributions supplants the common law.12
If the corporation was solvent at the time of the declaration and payment of the dividend and it was received in good faith and without notice that it depleted capital, some states have nevertheless imposed liability on innocent shareholders.13 However, in a leading case this doctrine was rejected by the United States Supreme Court,14 and the majority rule at common law protects the shareholder who has innocently received unlawful dividends from a solvent corporation.15 McDonald v. Williams held that, since the assets of a solvent corporation are not a trust fund for creditors, shareholders of a corporation who in good faith receive dividends declared while the corporation is a solvent and going concern cannot be made to refund in an action by a receiver of the corporation if it becomes insolvent, even though the dividend may have been unlawfully paid out of capital.16
Some courts hold that the obligation giving rise to creditors' claims that may be asserted against a shareholder receiving improper dividends must have been incurred before the dividend was paid.17 Therefore the receiver or trustee in bankruptcy must show that at least one of the unpaid creditors of the corporation existed at the time of the dividend payment.18
Westlaw. © 2014 Thomson Reuters. No Claim to Orig. U.S. Govt. Works.
Footnotes
1
See § 20:23.
2
MBCA § 8.33 (2008); MBCA § 48 (1969).
3
In re Felt Mfg. Co., Inc., 371 B.R. 589 (Bankr. D.N.H. 2007) (although there was no provision in New Hampshire statute empowering creditors to recover for illegal dividends, recovery was permitted on the basis of unjust enrichment); Reilly v. Segert, 201 N.E.2d 444 (Ill. 1964) (share repurchase); Powers v. Heggie, 167 N.E. 314 (Mass. 1929); Thompson v. A. G. Nash & Co., 704 S.W.2d 822 (Tex. Ct. App. 1985). E.g., Cal. Gen. Corp. Law §§ 316, 506 (West 1990). See James J. Fuld, Recovery of Illegal and Partial Liquidating Dividends from Stockholders, 28 Va. L. Rev. 50 (1941).
4
See Ulness v. Dunnell, 237 N.W. 208, 211 (N.D. 1931); Williams v. Brewster, 93 N.W. 479 (Wis. 1903). See, e.g., Cal. Gen. Corp. Law 316 (West Supp. 2009).
5
Wood v. National City Bank, 24 F.2d 661 (2d Cir. 1928), noted in Note, Corporations—Recovery by Creditors of Dividends Paid, 38 Yale L.J. 542 (1929); Powers v. Heggie, 167 N.E. 314 (Mass. 1929); Bartlett v. Smith, 160 A. 440 (Md. 1932). See also, e.g., Me. Rev. Stat. Ann. tit. 13A, § 24 (West 1981); Fuld, supra note 3, at 51. Modern cases appear to reach this result only in instances involving a repurchase of shares and when the statute is otherwise neutral on the liability of shareholders. See In re Kettle Fried Chicken of Am., Inc., 513 F.2d 807, 813 (6th Cir. 1975) (reasoning that unlawful share repurchases are to be treated differently from cases involving unlawful dividends); Reilly v. Segert, 201 N.E.2d 444 (Ill. 1964).
5.50
See, e.g., Federal Nat. Mortg. Ass'n v. Olympia Mortg. Corp., 792 F. Supp. 2d 645 (E.D. N.Y. 2011) (distribution by insolvent corporation was a fraudulent conveyance and shareholders could not retain the benefits of the improper distributions; applying New York law).
6
See § 20:26.
7
See § 18:7. Cf. Uniform Fraudulent Conveyance Act § 1, 7A U.L.A. 427, 430 (1985) (' “creditor' is a person having any claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent”).
8
In Quintal v. Adler, 262 N.Y.S. 126 (Sup. Ct.), aff'd, 263 N.Y.S. 943 (App. Div. 1933), aff'd, 191 N.E. 509 (N.Y. 1934), innocent shareholders were held not liable to the corporation's trustee in bankruptcy to repay dividends declared out of capital before the corporation became insolvent. The court pointed out that it would be intolerable if shareholders who receive dividends in good faith from a going concern could not rely on the action of the board of directors: “such a condition would tend to destroy confidence in corporate investments and disorganize business.” See also, Territory of U.S. Virgin Islands v. Goldman Sachs & Co., 937 A.2d 760 (Del. Ch. 2007) (mere acknowledgement in proxy statement of dissolving corporation that shareholders might be liable for distribution does not create a contractual obligation to repay the sums when corporate assets later are insufficient to satisfy creditor claims).
9
See 2 Glenn, Fraudulent Conveyances, supra § 20:16 note 7, §§ 596, 604; David A. Witz, Shareholder's Liability for Dividends Improperly Declared and Paid, 1 Tex. L. & Legis. (Sw. L.J.) 220, 222–235 (1947); Jerome J. Dick, Comment, Corporations—Receivers—Rights of Creditor or Receiver to Raise an Objection to Corporate Action Which Would Be Open to Shareholders, 38 Mich. L. Rev. 689 (1940); Note, Actions Against Stockholders to Recover Illegal Dividends, 33 Colum. L. Rev. 481, 491–492 (1933); Note, Shareholders' Responsibility for Improper Dividends, 81 U. Pa. L. Rev. 314, 320 (1933).
10
2 Glenn, Fraudulent Conveyances, supra § 20:16 note 7, § 604.
11
MBCA § 8.33(b)(2) (2008) (emphasis added).
12
See Reilly v. Segert, 201 N.E.2d 444 (Ill. 1964) (statute imposing liability on directors for unlawful distributions with a right of contribution from knowing shareholders does not preclude suit by receiver against shareholders).
13
Detroit Trust Co. v. Goodrich, 141 N.W. 882 (Mich. 1913); American Steel & Wire Co. v. Eddy, 89 N.W. 952 (Mich. 1902), s.c. 101 N.W. 578 (Mich. 1904); both of these over-relied on a statute; Mackall v. Pocock, 161 N.W. 228 (Minn. 1917). Statutes in a few states apparently provide for recovery of dividends even against innocent shareholders. See La. Rev. Stat. § 12.93D (1994); Minn. Stat. Ann. § 302A.559, subdiv. 2 (West 2004).
14
McDonald v. Williams, 174 U.S. 397 (1899).
15
McDonald v. Williams, 174 U.S. 397 (1899).
16
But cf. In re Kettle Fried Chicken of Am., Inc., 513 F.2d 807, 808 (6th Cir. 1975) (same considerations do not apply to corporation's repurchase of shares from innocent shareholder, which, unlike a dividend, is not in usual or ordinary course of business). See §§ 21:3, 21:4.
17
Credit Managers Ass'n of S. Cal. v. Federal Co., 629 F.Supp. 175 (D. Cal. 1985).
18
Wood v. National City Bank, 24 F.2d 661 (2d Cir. 1928); Ratcliffe v. Clendenin, 232 F. 61 (8th Cir. 1916); Montgomery v. Whitehead, 90 P. 509 (Colo. 1907).
Calissio Resources Group, Inc. (CRGP) Stock Research Links
IMHO
Always, always do you own DD. Only invest funds you can afford to lose and trust nobody but yourself.
Always, always do you own DD. Only invest funds you can afford to lose and trust nobody but yourself.
