Skip to main content
Find a Lawyer

District of Columbia Code Division V. Local Business Affairs § 29-1206.15. Limitations on distributions.

Current as of January 01, 2024 | Updated by Findlaw Staff

(a) A statutory trust may not make a distribution, including a distribution under § 29-1208.03(b)(2), if after the distribution:

(1) The trust would not be able to pay its debts as they become due in the ordinary course of the trust's activities and affairs; or

(2) The trust's total assets would be less than the sum of its total liabilities plus, unless the governing instrument permits otherwise, the amount that would be needed, if the trust were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of beneficial owners and transferees whose preferential rights are superior to the right to receive distributions of the persons receiving the distribution.

(b) A trustee may base a determination that a distribution is not prohibited under subsection (a) of this section on:

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

(2) A fair valuation or other method that is reasonable under the circumstances.

(c) Except as otherwise provided in subsection (e) of this section, the effect of a distribution under subsection (a) of this section is measured:

(1) In the case of a distribution by purchase, redemption, or other acquisition of a beneficial interest, as of the earlier of the date:

(A) Money or other property is transferred or debt is incurred by the trust; or

(B) The person entitled to the distribution ceases to own the interest or rights being acquired by the trust in return for the distribution;

(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 the date:

(A) The distribution is authorized, if the payment occurs not later than 120 days after that date; or

(B) The payment is made, if the payment occurs more than 120 days after the distribution is authorized.

(d) A statutory trust's indebtedness to a beneficial owner or transferee incurred by reason of a distribution made in accordance with this section is at parity with the trust's indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.

(e) A statutory trust's indebtedness, including indebtedness issued as a distribution, is not a liability for purposes of subsection (a) of this section if the terms of the indebtedness provide that payment of principal and interest are made only if and to the extent that payment of a distribution could then be made under this section. If 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.

(f) In measuring the effect of a distribution under § 29-1208.03(b)(2), the debts, obligations, and other liabilities of a dissolved statutory trust do not include any claim that has been disposed of under § 29-1208.04, 29-1208.05, or 29-1208.06.

Previous Part of Code Next Part of Code
Back to Chapter List

Cite this article: FindLaw.com - District of Columbia Code Division V. Local Business Affairs § 29-1206.15. Limitations on distributions. - last updated January 01, 2024 | https://codes.findlaw.com/dc/division-v-local-business-affairs/dc-code-sect-29-1206-15/

FindLaw Codes may not reflect the most recent version of the law in your jurisdiction. Please verify the status of the code you are researching with the state legislature before relying on it for your legal needs.

Was this helpful?

Welcome to FindLaw's Cases & Codes

A free source of state and federal court opinions, state laws, and the United States Code. For more information about the legal concepts addressed by these cases and statutes, visit FindLaw’s Learn About the Law.

Go to Learn About the Law

Latest Blog Posts

For Legal Professionals

Learn About The Law

Get help with your legal needs

FindLaw’s Learn About the Law features thousands of informational articles to help you understand your options. And if you’re ready to hire an attorney, find one in your area who can help.

Go to Learn About the Law

Need to Find an Attorney?

Search our directory by legal issue

Enter information in one or both fields (Required)

Copied to clipboard