• Corporate Dividend Changes: California AB 571
  • January 11, 2012 | Author: Cameron L. Hess
  • Law Firm: Wagner Kirkman Blaine Klomparens & Youmans LLP - Mather Office
  • California corporations are limited as to how much they may pay out in any one year to its shareholders. In particular, California Corporations Code Sections 500 -­- 506 limit the amount of dividends/distributions that may be paid out. They further provide creditor protection and recovery for excess distributions in certain situations. AB 571, effective January 1, 2012, has changed the limits. It has also modified some of the other provisions. The most significant change is that AB 571 now unifies two former alternate tests into a two-­-prong, single test. The second prong of that test is substantially simplified.