Florida Statutes
Fla. Stat. § 607.06401 (2025)
Distributions to shareholders.
✓ 2025 Florida Statutes — current through the 2025 Regular Session
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607.06401 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.
Note.—Former s. 607.0640.
Notes of Decisions
Cited in 13
cases (3 in the last 5 years), 1994–2025 · leading case: Zold v. Zold, 911 So. 2d 1222 (Fla. 2005).
Zold v. Zold, 911 So. 2d 1222 (Fla. 2005). “Subchapter S Revision Act of 1982 and Section 607.06401, Florida Statutes (2004) The Subchapter S Revision Act of 1982 (the "Act") allows a small business corporation to elect to have all of the corporation's income, deductions, losses, and credits pass through to the…”
Off. Comm. of Unsecured Creditors of Toy King Distributors, Inc. v. Liberty Sav. Bank, FSB (In Re Toy King Distributors, Inc.), 256 B.R. 1 (Bankr. M.D. Fla. 2000). “The unsecured creditors committee seeks to recover damages from Morrow, Angle, and King on a theory that, in violation of Section 607.06401, Florida Statutes, the debtor made impermissible dividend distributions disguised as guaranty fees and interest upcharges to its…”
Cox Enter., Inc. v. Pension Benefit Guarantee Corp., 666 F.3d 697 (11th Cir. 2012). “We interpret Florida’s election-to-purchase statute to require that any payment made as a result of a corporation’s share repurchase decision comply with the distribution requirements of Fla. Stat. § 607.06401 , which prohibits the distribution of corporate assets to a…”
Bair v. Bair, 214 So. 3d 750 (Fla. 2d DCA 2017). “In Florida, an S corporation’s authority to make distributions to shareholders is limited by the corporation’s articles of incorporation and section 607.06401, Florida Statutes (2004).”
Cox Enter., Inc. v. News-Journal Corp., 794 F.3d 1259 (11th Cir. 2015). “Fla. Stat. § 607.06401 (8) (emphasis added).”
In Re Se. Banking Corp., 855 F. Supp. 353 (S.D. Fla. 1994). “ARATION AND PAYMENT OF CERTAIN DIVIDENDS STATE A CAUSE OF ACTION Paragraphs 51 through 53 of the Second Amended Complaint allege that the Defendants consciously disregarded the best interests of Southeast by authorizing the payment of certain dividends at a time when the holding…”
Wamsley v. Wamsley, 957 So. 2d 89 (Fla. 2d DCA 2007). “To determine whether the shareholder-spouse has met this burden, the trial court should consider: (1) the extent to which a shareholder-spouse has access to or control over "pass-through" income retained by the corporation, (2) the limitations set forth in section 607.06401(3)…”
Elissa Miller v. Bhc Interim Funding II, 635 F. App'x 355 (9th Cir. 2015). “The district court did not clearly err in finding that the payment BHC obtained through an asset-backed guaranty (the “Guaranty”) from Paradigm was not a “distribution” under Fla. Stat. § 607.06401 . See, e.g., Goldstein v.”
Kusterer v. Kusterer, 933 So. 2d 542 (Fla. 1st DCA 2006). “See § 607.06401(1) & (3), Fla. Stat. (2004) (acknowledging limiting effect of articles of incorporation on Florida Subchapter S corporation’s authority to make distributions, and prohibiting such corporation from making distributions under certain circumstances); Zold, 911 So.”
Brandt v. Bassett, 855 F. Supp. 353 (S.D. Fla. 1994). “The Defendants strenuously argue that there can be no liability where the payment of dividends complied with Fla.Stat. § 607.06401(3). A similar argument was made with respect to corresponding Delaware law in Ivanhoe Partners v.”
Sam's West, Inc. v. Sydney Silverman (11th Cir. 2024). “See Fla. Stat. § 607.06401 (3)(a). When a shareholder knows a company has dissolved and continues to move corporate money around, the shareholder, by default, is using the corporate form for the improper purpose of violating Florida’s Rule of Prior- ities.”
W.P. Prods., Inc. v. Tramontina U.S.A., Inc. (S.D. Fla. 2023). “Further, by blatantly skirting the requirements of Florida Statute § 607.064011 and 1 This Florida statute provides when distributions may be made to shareholders and states that “No distribution may be made if, after giving it effect: (a) The corporation would not be able to…”
— 607.06401(1) — 1 case
Kusterer v. Kusterer, 933 So. 2d 542 (Fla. 1st DCA 2006). “See § 607.06401(1) & (3), Fla. Stat. (2004) (acknowledging limiting effect of articles of incorporation on Florida Subchapter S corporation’s authority to make distributions, and prohibiting such corporation from making distributions under certain circumstances); Zold, 911 So.”
— 607.06401(3) — 9 cases
Zold v. Zold, 911 So. 2d 1222 (Fla. 2005). “Subchapter S Revision Act of 1982 and Section 607.06401, Florida Statutes (2004) The Subchapter S Revision Act of 1982 (the "Act") allows a small business corporation to elect to have all of the corporation's income, deductions, losses, and credits pass through to the…”
Bair v. Bair, 214 So. 3d 750 (Fla. 2d DCA 2017). “In Florida, an S corporation’s authority to make distributions to shareholders is limited by the corporation’s articles of incorporation and section 607.06401, Florida Statutes (2004).”
Off. Comm. of Unsecured Creditors of Toy King Distributors, Inc. v. Liberty Sav. Bank, FSB (In Re Toy King Distributors, Inc.), 256 B.R. 1 (Bankr. M.D. Fla. 2000). “The unsecured creditors committee seeks to recover damages from Morrow, Angle, and King on a theory that, in violation of Section 607.06401, Florida Statutes, the debtor made impermissible dividend distributions disguised as guaranty fees and interest upcharges to its…”
In Re Se. Banking Corp., 855 F. Supp. 353 (S.D. Fla. 1994). “ARATION AND PAYMENT OF CERTAIN DIVIDENDS STATE A CAUSE OF ACTION Paragraphs 51 through 53 of the Second Amended Complaint allege that the Defendants consciously disregarded the best interests of Southeast by authorizing the payment of certain dividends at a time when the holding…”
Wamsley v. Wamsley, 957 So. 2d 89 (Fla. 2d DCA 2007). “To determine whether the shareholder-spouse has met this burden, the trial court should consider: (1) the extent to which a shareholder-spouse has access to or control over "pass-through" income retained by the corporation, (2) the limitations set forth in section 607.06401(3)…”
— 607.06401(3)(a) — 1 case
Wamsley v. Wamsley, 957 So. 2d 89 (Fla. 2d DCA 2007). “To determine whether the shareholder-spouse has met this burden, the trial court should consider: (1) the extent to which a shareholder-spouse has access to or control over "pass-through" income retained by the corporation, (2) the limitations set forth in section 607.06401(3)…”
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