COMMENT

This section is based on the Model Act. It continues the prohibition of former law on the payment of the income of a nonprofit corporation to its members, directors or officers. See section 14-3-112 of former law. The term "distribution" is defined in section 14-3-140(9) as "the payment of a dividend or any part of the income or profit of a corporation to its members, directors, or officers." Excluded from the definition are such payments as indemnification and reasonable fees, compensation and expenses.

Charitable-type corporations typically use their income to further their purposes. Corporations organized for social or other non-charitable purposes may use any net income to improve their facilities. While members of such nonprofits may receive a benefit from the improved facilities, such an indirect benefit is not a dividend or a prohibited distribution because it conforms with the corporation's purposes.

Distributions upon dissolution of a corporation are governed by this section and article 14.