16-16-1007 - Limitations on distributions.
16-16-1007. Limitations on distributions.
(1) A limited cooperative association may not make a distribution if, after thedistribution:
(a) the association would not be able to pay its debts as they become due in the ordinarycourse of the association's activities; or
(b) the association's assets would be less than the sum of its total liabilities.
(2) A limited cooperative association may base a determination that a distribution is notprohibited under Subsection (1) on financial statements prepared on the basis of accountingpractices and principles that are reasonable in the circumstances or on a fair valuation or othermethod that is reasonable in the circumstances.
(3) Except as otherwise provided in Subsection (4), the effect of a distribution allowedunder Subsection (2) is measured:
(a) in the case of distribution by purchase, redemption, or other acquisition of financialrights in the limited cooperative association, as of the date money or other property is transferredor debt is incurred by the association; and
(b) in all other cases, as of the date:
(i) the distribution is authorized, if the payment occurs not later than 120 days after thatdate; or
(ii) the payment is made, if payment occurs more than 120 days after the distribution isauthorized.
(4) If indebtedness is issued as a distribution, each payment of principal or interest on theindebtedness is treated as a distribution, the effect of which is measured on the date the paymentis made.
(5) For purposes of this section, "distribution" does not include reasonable amounts paidto a member in the ordinary course of business as payment or compensation for commodities,goods, past or present services, or reasonable payments made in the ordinary course of businessunder a bona fide retirement or other benefits program.
Enacted by Chapter 363, 2008 General Session