Revised Code of Washington

Wash. Rev. Code § 23B.06.400 (2026)

Distributions to shareholders

✓ current as of May 2026

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(1) A board of directors may approve and the corporation may make distributions to its shareholders subject to restriction by the articles of incorporation and the limitation in subsection (3) of this section.

(2) The board of directors may fix the record date for determining shareholders entitled to a distribution, which date may not precede the date on which the resolution fixing the record date is approved by the board of directors. If the board of directors does not fix a 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 liabilities as they become due in the usual course of business; 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 at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.

(4) For purposes of determinations under subsection (3) of this section:

(a) The board of directors may base a determination that a distribution is not prohibited under subsection (3) of this section either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances; and

(b) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to shareholders could then be made under this section.

(5) The effect of a distribution under subsection (3) of this section is measured:

(a) In the case of a distribution of indebtedness, the terms of which provide that payment of principal and interest are made only if and to the extent that payment of a distribution to shareholders could then be made under this section, 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; or

(b) In the case of any other distribution:

(i) If the distribution is by purchase, redemption, or other acquisition of the corporation's shares, the effect of the distribution is measured as of the earlier of the date any money or other property is transferred or debt incurred by the corporation, or the date the shareholder ceases to be a shareholder with respect to the acquired shares;

(ii) If the distribution is of indebtedness other than that described in (a) and (b)(i) of this subsection, the effect of the distribution is measured as of the date the indebtedness is distributed; and

(iii) In all other cases, the effect of the distribution is measured as of the date the distribution is approved if payment occurs within one hundred twenty days after the date of approval, or the date the payment is made if it occurs more than one hundred twenty days after the date of approval.

(6) 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.

(7) In circumstances to which this section and related sections of this title are applicable, such provisions supersede the applicability of any other statutes of this state with respect to the legality of distributions.

(8) A transfer of the assets of a dissolved corporation to a trust or other successor entity of the type described in RCW 23B.14.030(4) constitutes a distribution subject to subsection (3) of this section only when and to the extent that the trust or successor entity distributes assets to shareholders.

[ 2022 c 42 s 103; 2009 c 189 s 12; 2006 c 52 s 2; 1990 c 178 s 10; 1989 c 165 s 59.]

Notes:

Effective date—1990 c 178: See note following RCW 23B.01.220.

Notes of Decisions

Cited in 12 cases, 1995–2020 · leading case: Saviano v. Westport Amusements, Inc., 180 P.3d 874 (Wash. Ct. App. 2008).

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Saviano v. Westport Amusements, Inc., 180 P.3d 874 (Wash. Ct. App. 2008). “" Ex. 11 at 3. Saviano thus argues that because he was the sole director and had authority to incur debt and to execute the promissory note in 2006, the note was valid and had to be paid on dissolution of the corporation.”

Saviano v. Westport Amusements, Inc., 144 Wash. App. 72 (Wash. Ct. App. 2008). “Saviano thus argues that because he was the sole director and had authority to incur debt and to execute the promissory note in 2006, the note was valid and had to be paid on dissolution of the corporation.”

McCormick v. Dunn & Black, PS, 167 P.3d 610 (Wash. Ct. App. 2007). “(2) The reacquisition, redemption, or conversion of outstanding shares is subject to the limitations of subsection (4) of this section and to RCW 23B.06.400. (3) Redeemable shares are deemed to have been redeemed and not entitled to vote after notice of redemption is delivered…”

McCormick v. Dunn & Black, PS, 140 Wash. App. 873 (Wash. Ct. App. 2007). “(2) The reacquisition, redemption, or conversion of outstanding shares is subject to the limitations of subsection (4) of this section and to RCW 23B.06.400. (3) Redeemable shares are deemed to have been redeemed and not entitled to vote after notice of redemption is delivered…”

Spokane Concrete Prods., Inc. v. U.S. Bank, 892 P.2d 98 (Wash. 1995). “While the extent of the tangible benefit received by Spokane Concrete is not clear from the record, it is clear there was at *279 least some benefit received.”

Buckrey v. Comm'r, 2017 T.C. Memo. 138 (Tax Ct. 2017). “400(6) (West 2013). The U.S. Bankruptcy Court for the Eastern District of Washington held that this provision deprives a plaintiff of a cause of action under Washington's fraudulent-transfer laws when the transfer is a corporate distribution governed by that state's corporation…”

Metro. Mortg. & Sec. Co. v. Quinn (In re Metro. Mortg. & Sec. Co.), 347 B.R. 406 (Bankr. E.D. Wash. 2006). · cites it 18× “, been superseded by the provisions of RCW 23B.06.400? RCW 23B.06 AND .08 In 1989, the Washington legislature replaced the state statutory scheme relating to business corporations previously codified as RCW 23A with a new scheme codified as RCW 23B, and titled, ‘Washington…”

Maple Valley Park Place Llc v. Tax Resource Centers, Inc. (Wash. Ct. App. 2020). · cites it 6× “This is so, MVPP asserts, because (1) the trial court improperly refused to consider whether Harris’s violations of RCW 23B.06.400 and RCW 19.40.051 established the necessity of piercing the corporate veil and (2) substantial evidence established the necessity of piercing the…”

ABC Sun Control, Inc. v. McMahon-Jones (In re McMahon-Jones), 461 B.R. 835 (Bankr. W.D. Wash. 2011). “se subject to applicable liens and security interests as well as any applicable contractual restrictions on the disposition of its properties; (c) Satisfying or making reasonable provision for satisfying its liabilities, in accordance with their priorities as established by law,…”

Joon Kim, Et Ano. v. Albert D. Rosellini, Jr., Et Ux (Wash. Ct. App. 2014). · cites it 2× “rs that the superior court determined that the first element of the corporate disregard doctrine was satisfied based on four independent grounds: (1) Fortune Oil and the Rosellinis were alter egos because they "functioned as one entity," (2) Fortune Oil breached a fiduciary duty…”

Roy Brooks Stoddard v. S & N Logging, Inc. (Wash. Ct. App. 2018). “S&N Logging (d) Subject to the limitations imposed by RCW 23B.06.400, distributing its remaining property among its shareholders according to their interests; and (e) Doing every other act necessary to wind up and liquidate its business and affairs.”

Devault, 2004 T.C. Summary Opinion 122 (1970). · cites it 2× “sec. 23B.06.400(1) , (4)(b)(i) (West 2001), or by seeking judicial dissolution of the corporation, Wash.”

— Wash. Rev. Code § 23B.06.400(2) — 1 case

Metro. Mortg. & Sec. Co. v. Quinn (In re Metro. Mortg. & Sec. Co.), 347 B.R. 406 (Bankr. E.D. Wash. 2006). “, been superseded by the provisions of RCW 23B.06.400? RCW 23B.06 AND .08 In 1989, the Washington legislature replaced the state statutory scheme relating to business corporations previously codified as RCW 23A with a new scheme codified as RCW 23B, and titled, ‘Washington…”

— Wash. Rev. Code § 23B.06.400(2)(a) — 1 case

Maple Valley Park Place Llc v. Tax Resource Centers, Inc. (Wash. Ct. App. 2020). “This is so, MVPP asserts, because (1) the trial court improperly refused to consider whether Harris’s violations of RCW 23B.06.400 and RCW 19.40.051 established the necessity of piercing the corporate veil and (2) substantial evidence established the necessity of piercing the…”

— Wash. Rev. Code § 23B.06.400(6) — 1 case

— Wash. Rev. Code § 23B.06.400(a) — 1 case

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