Minnesota Statutes

Minn. Stat. § 302A.551 (2026)

Distributions

✓ current as of May 2026

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Subdivision 1.When permitted.

(a) The board may authorize and cause the corporation to make a distribution only if the board determines, in accordance with subdivision 2, that the corporation will be able to pay its debts in the ordinary course of business after making the distribution and the board does not know before the distribution is made that the determination was or has become erroneous.

(b) The corporation may make the distribution if it is able to pay its debts in the ordinary course of business after making the distribution.

(c) The effect of a distribution on the ability of the corporation to pay its debts in the ordinary course of business after making the distribution shall be measured in accordance with subdivision 3.

(d) The right of the board to authorize, and the corporation to make, distributions may be prohibited, limited, or restricted by, or the rights and priorities of persons to receive distributions may be established by, the articles or bylaws or an agreement.

Subd. 2.Determination presumed proper.

A determination that the corporation will be able to pay its debts in the ordinary course of business after the distribution is presumed to be proper if the determination is made in compliance with the standard of conduct provided in section 302A.251 on the basis of financial information prepared in accordance with accounting methods, or a fair valuation or other method, reasonable in the circumstances. No liability under section 302A.251 or 302A.559 will accrue if the requirements of this subdivision have been met.

Subd. 3.Effect measured.

(a) In the case of a distribution made by a corporation in connection with a purchase, redemption, or other acquisition of its shares, the effect of the distribution shall be measured as of the date on which money or other property is transferred, or indebtedness payable in installments or otherwise is incurred, by the corporation, or as of the date on which the shareholder ceases to be a shareholder of the corporation with respect to the shares, whichever is the earliest.

(b) The effect of any other distribution shall be measured as of the date of its authorization if payment occurs 120 days or less following the date of authorization, or as of the date of payment if payment occurs more than 120 days following the date of authorization.

(c) Indebtedness of a corporation incurred or issued in a distribution in accordance with this section to a shareholder who as a result of the transaction is no longer a shareholder is on a parity with the indebtedness of the corporation to its general unsecured creditors, except to the extent subordinated, agreed to, or secured by a pledge of any assets of the corporation or a related organization, or subject to any other agreement between the corporation and the shareholder.

(d) Sections 302A.551 to 302A.559 supersede all other statutes of this state with respect to distributions, and the provisions of sections 513.41 to 513.51 do not apply to distributions made by a corporation governed by this chapter.

Subd. 4.Restrictions.

(a) A distribution may be made to the holders of a class or series of shares only if:

(1) All amounts payable to the holders of shares having a preference for the payment of that kind of distribution, other than those holders who give notice to the corporation of their agreement to waive their rights to that payment, are paid; and

(2) The payment of the distribution does not reduce the remaining net assets of the corporation below the aggregate preferential amount payable in the event of liquidation to the holders of shares having preferential rights, unless the distribution is made to those shareholders in the order and to the extent of their respective priorities or the holders of shares who do not receive distributions in that order give notice to the corporation of their agreement to waive their rights to that distribution.

A determination that the payment of the distribution does not reduce the remaining net assets of the corporation below the aggregate preferential amount payable in the event of liquidation to the holders of shares having preferential rights is presumed to be proper if the determination is made in compliance with the standard of conduct provided in section 302A.251 on the basis of financial information prepared in accordance with accounting methods, or a fair valuation, or other methods, reasonable in the circumstances. Liability under section 302A.251 or 302A.559 will not arise if the requirements of this paragraph are met.

(b) If the money or property available for distribution is insufficient to satisfy all preferences, the distributions shall be made pro rata according to the order of priority of preferences by classes and by series within those classes unless those holders who do not receive distributions in that order give notice to the corporation of their agreement to waive their rights to that distribution.

Notes of Decisions

Cited in 12 cases (1 in the last 5 years), 1987–2023 · leading case: Wessin v. Archives Corp., 592 N.W.2d 460 (Minn. 1999).

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Wessin v. Archives Corp., 592 N.W.2d 460 (Minn. 1999). · cites it 3× “1(b)(2) and 1(b)(3), they are traditional derivative claims subject to the derivative pleading requirements of Rule 23.06. This conclusion is not altered by the fact that the Wessins allege that some of the excess compensation paid to the Jeromes by Archives was in the form of…”

Helm Fin. Corp., a California Corp. v. Mnva R.R., Inc. Dakota, Missouri Valley & W. R.R., Inc. Larry C. Wood Diane Wood, 212 F.3d 1076 (8th Cir. 2000). · cites it 2× “On November 21, 1994, MNVA determined that it would be able to pay its debts in the ordinary course of business after the proposed distribution of DMVW stock to MNVA shareholders (as required by Minn.Stat. § 302A.551 subd. 1) and approved the distribution of DMVW stock to the…”

Joseph P. McGraw v. Comm'r of Internal Revenue, 384 F.3d 965 (8th Cir. 2004). “The UFTA provides that a transfer is fraudulent, and therefore voidable, when the debtor made the transfer without receiving a reasonably equivalent value in exchange for the transfer,-and the debtor was insolvent at the time or became insolvent as a result of the transfer.”

Metro. Steel Fabricators, Inc. v. Michalski (In Re Metro. Steel Fabricators, Inc.), 191 B.R. 150 (Bankr. D. Minn. 1996). · cites it 3× “551(3)(d) provides: Sections 302A.551 to 302A.559 supersede all other statutes of this state with respect to dis *153 tributions, and the provisions of sections 513.”

Honn v. Coin & Stamp Gallery, Inc., 407 N.W.2d 419 (Minn. Ct. App. 1987). · cites it 2× “Minn.Stat. §§ 302A.551, .557, .559 (1984).”

John S. Drewitz v. Motorwerks, Inc., 867 N.W.2d 197 (Minn. Ct. App. 2015). · cites it 2× “Minn.Stat. § 302A.551, subd. 1(a) (2014) (noting the definition of insolvency applicable to distribution decisions under the MBCA); see also Daniels v.”

Buckrey v. Comm'r, 2017 T.C. Memo. 138 (Tax Ct. 2017). “The redemption here falls within this definition, and the parties don't dispute this.”

Abad v. Isco, Inc., 534 N.W.2d 728 (Minn. Ct. App. 1995). · cites it 4× “ment of all creditors and claimants filing a claim within the 90-day period in subdivision 2, paragraph (e), has been made or provided for; or (ii) the date on which the longest of the periods described in subdivision 3, paragraph (b), expired; (2) that the remaining property,…”

BMO Harris Bank N.A. v. Kuskie (D. Minnesota 2023). · cites it 7× “” Minn. Stat. § 302A.551, subd. 3(d). In this way, the MBCA “displaces normal rules of fraudulent transfers” when it comes to corporate distributions to shareholders.”

Comm'r, 2002 T.C. Memo. 314 (1970). · cites it 4× “551 of the Minnesota Model Business Corporation Act (MBCA), Minn.”

Helm Fin. Corp. v. MNVA R.R., Inc. (8th Cir. 2000). · cites it 2× “On November 21, 1994, MNVA determined that it would be able to pay its debts in the ordinary course of business after the proposed distribution of DMVW stock to MNVA shareholders (as required by Minn. Stat. § 302A.551 subd. 1) and approved the distribution of DMVW stock to the…”

Joseph P. McGraw v. CIR (8th Cir. 2004). “51, and the Minnesota Business Corporation Act ("MBCA"), Minn. Stat. § 302A.551, subd. 1. The UFTA provides that a transfer is fraudulent, and therefore voidable, when the debtor made the transfer without receiving a reasonably equivalent value in exchange for the transfer, and…”

— Minn. Stat. § 302A.551(3)(d) — 1 case

Metro. Steel Fabricators, Inc. v. Michalski (In Re Metro. Steel Fabricators, Inc.), 191 B.R. 150 (Bankr. D. Minn. 1996). “551(3)(d) provides: Sections 302A.551 to 302A.559 supersede all other statutes of this state with respect to dis *153 tributions, and the provisions of sections 513.”

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