Tex.
Bus. Orgs. Code Section 21.316
Liability of Directors for Wrongful Distributions
(a)
Subject to Subsection (c), the directors of a corporation who vote for or assent to a distribution by the corporation that is prohibited by Section 21. 303 are jointly and severally liable to the corporation for the amount by which the distribution exceeds the amount permitted by that section to be distributed.(b)
A director is not liable for all or part of the excess amount if a distribution of that amount would have been permitted by Section 21.303 (Limitations on Distributions) after the date the director authorized the distribution.(c)
A director is not jointly and severally liable under Subsection (a) if, in voting for or assenting to the distribution, the director:(1)
relies in good faith and with ordinary care on:(A)
the statements, valuations, or information described by Section 21.314 (Determination of Solvency, Net Assets, Stated Capital, and Surplus); or(B)
other information, opinions, reports, or statements, including financial statements and other financial data, concerning the corporation or another person that are prepared or presented by:(i)
one or more officers or employees of the corporation;(ii)
a legal counsel, public accountant, investment banker, or other person relating to a matter the director reasonably believes is within the person’s professional or expert competence; or(iii)
a committee of the board of directors of which the director is not a member;(2)
acting in good faith and with ordinary care, considers the assets of the corporation to be valued at least at their book value; or(3)
in determining whether the corporation made adequate provision for payment, satisfaction, or discharge of all of the corporation’s liabilities and obligations, as provided by Sections 11.053 (Property Applied to Discharge Liabilities and Obligations) and 11.356 (Limited Survival After Termination), relies in good faith and with ordinary care on financial statements of, or other information concerning, a person who was or became contractually obligated to pay, satisfy, or discharge some or all of the corporation’s liabilities or obligations.(d)
The liability imposed under Subsection (a) is the only liability of a director to the corporation or its creditors for authorizing a distribution that is prohibited by Section 21.303 (Limitations on Distributions).(e)
This section and Sections 21.317 (Statute of Limitations on Action for Wrongful Distribution) and 21.318 (Contribution from Certain Shareholders and Directors) do not limit any liability imposed under Chapter 24 (Uniform Fraudulent Transfer Act), Business & Commerce Code, or the United States Bankruptcy Code.
Source:
Section 21.316 — Liability of Directors for Wrongful Distributions, https://statutes.capitol.texas.gov/Docs/BO/htm/BO.21.htm#21.316 (accessed Jun. 5, 2024).
