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 limitations in subsection (3).

(2) The board of directors may fix the record date for determining shareholders entitled to a distribution, but the date may not be retroactive. 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), the record date is the date the board of directors authorizes the distribution.

(3) No distribution may 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 the corporation’s activities and affairs; 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 and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up 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) on:

(a) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances; or

(b) A fair valuation or other method that is reasonable under the circumstances. In the case of any distribution based upon such a valuation, each such distribution shall be identified as a distribution based upon a current valuation of assets, and the amount per share paid on the basis of such valuation shall be disclosed to the shareholders concurrent with their receipt of the distribution.

(5) If the articles of incorporation of a corporation engaged in the business of exploiting natural resources or other wasting assets so provide, distributions may be paid in cash out of depletion or similar reserves; and each such distribution shall be identified as a distribution based upon such reserves, and the amount per share paid on the basis of such reserves shall be disclosed to the shareholders concurrent with their receipt of the distribution.

(6) Except as provided in subsection (8), the effect of a distribution under subsection (3) is measured:

(a) In the case of a distribution by purchase, redemption, or other acquisition of the corporation’s shares, as of the earlier of the date on which:

1. Money or other property is transferred or the debt to a shareholder is incurred by the corporation, or

2. The shareholder ceases to be a shareholder with respect to the acquired shares;

(b) In the case of a distribution of indebtedness, as of the date on which the indebtedness is distributed;

(c) In all other cases, as of the date on which:

1. The distribution is authorized if the payment occurs within 120 days after that date; or

2. The payment is made if the payment occurs more than 120 days after the date the distribution is authorized.

(7) A corporation’s indebtedness to a shareholder incurred by reason of a distribution made in accordance with this section is at parity with the corporation’s indebtedness to its general, unsecured creditors except to the extent provided otherwise by agreement. The obligation to pay such indebtedness may be secured by a lien on assets of the corporation if not prohibited by a law other than this chapter.

(8) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (3) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that a distribution to shareholders could then be made under this section. If such indebtedness is issued as a distribution, and by its terms provides that the payments of principal or interest are made only to the extent a distribution could be made under this section, then each payment of principal and interest of that indebtedness is treated as a distribution, the effect of which is measured on the date the payment is actually made.

(9) This section does not apply to distributions in liquidation under ss. 607.1401-607.14401.