Abstract
By eliminating earned and capital surplus, the new Model Business Corporation Act may be perceived as providing directors with some additional flexibility regarding distributions to shareholders. As a practical matter however, the statute does not dramatically enlarge the ambit of their discretion. Directors have always had the flexibility to make distributions from both earned or capital surplus. The distributions are still tempered, as they were under the old statute, by the notion of equity solvency. On the other hand, the Comment to new section 45 provides the board of directors with substantial guidance of the proper methodology to use in making the equity solvency determination. It is a highly significant improvement over the Comment to the old statute. Unfortunately, there is more guidance regarding relatively clear matters, and no guidance regarding the more critical issues.
Document Type
Article
Publication Date
1981
Recommended Citation
Daniel T. Murphy, Equity Insolvency and the New Model Business Corporation Act, 15 U. Rich. L. Rev. 839 (1981)