Corporate Director and Shareholder Liability for Unlawful Distributions in Arkansas

At a glance

Requirements one by one

Director conduct and the recoverable amount

Ark. Code § 4-27-833(a) makes a director who votes for or assents to an Act- or articles-violating distribution liable to the corporation if the director did not meet the § 4-27-830 standards. The amount is what exceeds the distribution permitted by the Act and articles. Section 4-27-830 requires good faith, ordinary prudent-person care in a like position, and a reasonable belief that the act serves the corporation’s best interests; it also permits qualified reliance on specified corporate personnel, experts, and board committees.

Contribution from directors and recipients

Section 4-27-833(b) lets a director held liable seek contribution from other voting or assenting directors who failed the conduct standard. The same subsection reaches each shareholder only for the amount that shareholder accepted knowing the payment violated the Act or the articles. The statute gives the shareholder recovery right to the liable director, while subsection (a) makes that director liable to the corporation.

What trips people up

Section 4-27-824(d) deems a director present when board or committee action is taken to have assented unless the director objects to the meeting, has dissent or abstention entered in the minutes, or delivers written dissent or abstention to the presiding officer before adjournment or the corporation immediately after. A director who voted for the action cannot use the dissent route.

Common questions

Is an unlawful payment automatically a claim for its full amount?

No. Section 4-27-833(a) measures liability by the amount above what could have been distributed without violating the Act or the articles. Section 4-27-640(c) supplies debt-payment and asset limits for ordinary distributions; the actual figures need separate analysis.

Does § 4-27-833 state a deadline or a creditor claim?

Section 4-27-833 names the corporation as the director’s claimant and gives no filing period in its text. Other law may affect who can sue or when, so this comparison makes no general limitations prediction.

Statutes and sources

• Ark. Code § 4-27-140, accessed September 27, 2026: enacted as Act 958 § 64-114, defining the corporation and distribution.
• Ark. Code § 4-27-640, accessed September 27, 2026: enacted as Act 958 § 64-616, giving authorization and distribution limits.
• Ark. Code § 4-27-824, accessed September 27, 2026: enacted as Act 958 § 64-816, stating meeting-presence assent exceptions.
• Ark. Code § 4-27-830, accessed September 27, 2026: enacted as Act 958 § 64-818, stating director conduct and reliance standards.
• Ark. Code § 4-27-833, accessed September 27, 2026: enacted as Act 958 § 64-821, providing excess-payment recovery and contribution.