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Improper Distributions to Corporate Shareholders

Improper Distributions to Corporate Shareholders

ny shareholder who is sued for receiving an improper distribution may implead all other shareholders who received a distribution with the knowledge of the facts of any such impropriety. The shareholder may proceed by filing a cross-complaint in that action or by filing an independent action.

Under the California Unifrom Fraudulent Transfer Act, a creditor can have a fraudulent distribution set aside even if the receiving shareholder has no knowledge of the impropriety. Thus an innocent shareholder might have to return payment for shares sold under a buy-sell agreement if the distribution violated the Uniform Fraudulent Transfer Act.

The sale of shares by a controlling shareholder or member of a control group at an excessive price to transfer control or permit a control group to remain in control may cause the shareholder or member to be liable to the corporation for the amount paid for the shares.

Nursing Home Abuse & Neglect Attorney Steven Peck

About the Author

Attorney Steven Peck has been practicing law since 1981. A former successful business owner, Mr. Peck initially focused his legal career on business law. Within the first three years, after some colleagues and friend’s parents endured nursing home neglect and elder abuse, he continued his education to begin practicing elder law and nursing home abuse law.


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