Corporate Director and Shareholder Liability for Unlawful Distributions in Georgia

At a glance

Requirements one by one

Director conduct and recoverable amount

O.C.G.A. § 14-2-832(a) makes a voting or assenting director personally liable to the corporation for the amount exceeding what could have been distributed under § 14-2-640 or the articles, if the director failed the § 14-2-830 duty standard. The same subsection preserves ordinary director defenses. Section 14-2-830 requires good faith and ordinary-prudent-person care and addresses reliance on specified corporate and professional sources.

Section 14-2-640(c) bars a distribution if, afterward, the corporation could not pay debts as due or assets would fall below liabilities plus superior dissolution preferences unless the articles permit otherwise. Whether the facts satisfy those tests is not determined here.

Contribution

A director held liable may seek contribution from every other director who could be liable (§ 14-2-832(b)(1)). The director may also seek from each shareholder the amount that shareholder accepted knowing the payment violated § 14-2-640 or the articles (§ 14-2-832(b)(2)). The provision does not make receipt alone the same thing as director assent.

Time limit

Section 14-2-832(c) bars a proceeding under that section unless it begins within two years after the date the distribution's effect was measured under § 14-2-640(e) or (g). Section 14-2-640(e) uses different measurement dates for own-share acquisitions, distributions of indebtedness, and other payments; the ordinary payment rule uses authorization when paid within 120 days and payment if later.

What trips people up

The deadline starts from the statute's measurement event, which can precede or follow the date someone receives cash. The § 14-2-640(e) branches must be read before selecting a date for a specific distribution.

Common questions

Are all director defenses lost once a distribution is prohibited?

No. Section 14-2-832(a) expressly preserves ordinary director defenses and conditions liability on failure to comply with § 14-2-830. This page does not decide whether a defense succeeds.

Does the recipient's knowledge matter?

For the contribution route in § 14-2-832(b)(2), yes: the shareholder must have accepted the amount knowing of the violation. Whether that knowledge existed depends on the record.

Statutes and sources

• O.C.G.A. § 14-2-640, accessed September 27, 2026: subsection (c) sets the post-distribution limits; subsections (e) and (g) govern measurement.
• O.C.G.A. § 14-2-830, accessed September 27, 2026: a director must act “in good faith and with the degree of care an ordinarily prudent person in a like position would exercise under similar circumstances.”
• O.C.G.A. § 14-2-832, accessed September 27, 2026: a qualifying director “is personally liable to the corporation” for the excess; subsection (c) bars a late proceeding.