Corporate Director and Shareholder Liability for Unlawful Distributions in Hawaii

At a glance

Requirements one by one

A director's conduct and the corporation's recovery

Haw. Rev. Stat. § 414-223(a) imposes liability only on a director who voted for or assented to a distribution violating § 414-111 or the articles and failed the § 414-221 duty standard. The corporation's measure is the excess above a permissible payment. Section 414-221(a), (c)-(e) supplies good-faith, care, corporate-interest, qualified-reliance, and compliant-performance rules; § 414-223(a) also preserves ordinary director defenses.

Contribution from directors and knowing recipients

Under § 414-223(b), a liable director may seek contribution from each other director who could be liable and from a shareholder for the amount knowingly accepted in violation of § 414-111 or the articles. Hawaii calls both paths contribution; the statute does not state a separate direct claim against every recipient. Section 414-215(d) gives a present director routes to avoid presumed assent by timely objection or recorded or delivered dissent or abstention, but a favorable voter cannot dissent.

The filing date follows the distribution measurement date

Section 414-223(c) bars a proceeding under that section after two years from the § 414-111(e) or (g) measurement date. For a share purchase or redemption, § 414-111(e) uses the earlier transfer/debt or loss-of-shareholder-status date. Other distribution debt is measured when distributed. Other payments are measured at authorization if paid within 120 days, otherwise at payment. Section 414-111(g) measures payments on qualifying conditional distribution debt when actually paid.

What trips people up

The special § 414-223(d) rule preserves an asset distribution authorized by the Federal Housing Commissioner for a qualifying rental-housing corporation whose principal assets are leased federal real property. Its conditions require separate review before treating it as relevant to an ordinary corporation.

Common questions

Is a shareholder's receipt by itself enough for contribution?

No. Section 414-223(b)(2) requires knowledge that the accepted amount violated § 414-111 or the articles.

Does the two-year clock always start when money arrives?

No. Section 414-111(e) sometimes measures the distribution at authorization or the end of shareholder status; § 414-111(g) supplies a payment date for conditional distribution debt.

Statutes and sources

• Haw. Rev. Stat. § 414-3, accessed September 27, 2026: corporation and distribution definitions.
• Haw. Rev. Stat. § 414-111, accessed September 27, 2026: distribution limits and measurement dates.
• Haw. Rev. Stat. § 414-215, accessed September 27, 2026: presumed assent and dissent.
• Haw. Rev. Stat. § 414-221, accessed September 27, 2026: director conduct and defenses.
• Haw. Rev. Stat. § 414-223, accessed September 27, 2026: recovery, contribution, two-year period, and housing exception.