Guam § 28616 - Distributions to Shareholders.

§ 28616. Distributions to Shareholders.

(a) 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).

(b) 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 is the date the

board of directors authorizes the distribution.

(c) No distribution may be made if, after giving it effect:

(1) the corporation would not be able to pay its debts as they

become due in the usual course of business; or

(2) the corporation’s total assets would be less than the sum of its

total liabilities plus 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.

(d) The board of directors may base a determination that a distribution

is not prohibited under subsection (c) 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.

(e) Except as provided in subsection (g), the effect of a distribution

under subsection (c) is measured:

(1) in the case of distribution by purchase, redemption, or other

acquisition of the corporation’s shares, as of the earlier of:

(A) the date money or other property is transferred or debt

incurred by the corporation or

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(B) the date the shareholder ceases to be a shareholder with

respect to the acquired shares;

(2) in the case of any other distribution of indebtedness, as of the

date the indebtedness is distributed; and

(3) in all other cases, as of:

(A) the date the distribution is authorized if the payment

occurs within 120 days after the date of authorization or

(B) the date the payment is made if it occurs more than 120

days after the date of authorization.

(f) 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 subordinated by agreement.

(g) Indebtedness of a corporation, including indebtedness issued as a

distribution, is not considered a liability for purposes of determination under

subsection (c) 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 is treated as a distribution,

the effect of which is measured on the date the payment is actually made.

(h) This section shall not apply to distributions in liquidation under

Article 14.

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ARTICLE 7

SHAREHOLDERS