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Prior to the adoption of AB 571, Chapter 5 of the California Corporations Code required corporations to satisfy a solvency test and either a retained earnings test, or a two-pronged balance sheet and liquidity test before making a distribution to its shareholders. AB 571 in effect makes the regulations governing distributions by California Corporations more similar to the regulations governing distributions by California limited liability companies (§17254 of the Beverly-Killea Limited Liability Company Act) and partnerships (§15905.08 of the Uniform Limited Partnership Act of 2008).
While the solvency test and retained earnings test remain unchanged, as of January 1, 2012 a corporation will be permitted to make a distribution so long as the corporation's Board of Directors make a good faith determination within 120 days of the distribution date that the corporation's financial statements were prepared under reasonable accounting practices and principles and show that:
AB 571 also:
Posted In: Corporate Client Bulletin
Blog Categories:Business Law Bulletin
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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.