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Texas Business Organizations Code - BUS ORG § 22.226. Director Liability for Certain Distributions of Assets

Current as of April 14, 2021 | Updated by FindLaw Staff

(a) In addition to any other liability imposed by law on the directors of a corporation, the directors who vote for or assent to a distribution of assets other than in payment of the corporation's debts, when the corporation is insolvent or when distribution would render the corporation insolvent, or during the liquidation of the corporation, without the payment and discharge of or making adequate provisions for any known debt, obligation, or liability of the corporation, are jointly and severally liable to the corporation for the value of the assets distributed, to the extent that the debt, obligation, or liability is not paid and discharged.

(b) A director is not liable under this section if, in voting for or assenting to a distribution, the director:

(1) relied in good faith and with ordinary care on information or an opinion, report, or statement in accordance with Section 3.102;

(2) acting in good faith and with ordinary care, considered the assets of the corporation to be at least equal to their book value;  or

(3) in determining whether the corporation made adequate provision for the discharge of all of its liabilities and obligations as provided in Section 11.053, relied in good faith and with ordinary care on financial statements of, or other information concerning, a person who was or became contractually obligated to discharge some or all of those liabilities or obligations.

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Cite this article: FindLaw.com - Texas Business Organizations Code - BUS ORG § 22.226. Director Liability for Certain Distributions of Assets - last updated April 14, 2021 | https://codes.findlaw.com/tx/business-organizations-code/bus-org-sect-22-226/

Read this complete Texas Business Organizations Code - BUS ORG § 22.226. Director Liability for Certain Distributions of Assets on Westlaw

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