Corporate Director and Shareholder Liability for Unlawful Distributions in Kansas

At a glance

Requirements one by one

Director conduct, claimants, and amount

K.S.A. § 17-6424(a) reaches a willful or negligent violation of the stock-acquisition limits in § 17-6410 or dividend rule in § 17-6423. Directors under whose administration it occurred are jointly and severally liable to the corporation. On dissolution or insolvency, its creditors may claim. The measure is the full unlawfully paid amount, plus interest from when liability accrued. Section 17-6422 separately protects directors and committee members who rely in good faith on specified corporate records, personnel, committees, or carefully selected experts concerning assets, liabilities, profits, or surplus.

Recipients, contribution, and dissent

A director against whom a claim succeeds can seek contribution from other directors who voted for or concurred in the unlawful payment (§ 17-6424(b)). To the amount that director paid, subsection (c) subrogates the director to corporate rights against recipients who knew facts indicating unlawfulness, allocated by amounts received. An absent or dissenting director can obtain exoneration by entering dissent in the minutes when the action occurred or immediately after learning of it (§ 17-6424(a)).

Filing period

Section 17-6424(a) places the director claim within three years after the unlawful dividend, stock purchase, or redemption payment. It does not state a separate contribution or subrogation filing period.

What trips people up

The trigger is not every financial distribution. Section 17-6424(a) points specifically to §§ 17-6410 and 17-6423. Section 17-6410 restricts share purchases and redemptions that impair capital and gives a narrow retirement exception; § 17-6423 says dividends must accord with the Act. The applicable financial figures and governing records require a separate review.

Common questions

Must a recipient know the legal conclusion that the payment was unlawful?

Section 17-6424(c) speaks of knowledge of facts indicating unlawfulness. It grants subrogation to a director who paid a successful claim; it does not state a direct recipient claim in the director-liability subsection.

Are creditors always direct claimants?

Section 17-6424(a) names corporate creditors only in the event of dissolution or insolvency. The statute’s claimant language therefore depends on the corporation’s status.

Statutes and sources

• K.S.A. § 17-6424, accessed September 27, 2026: states willful-or-negligent liability, claimant rights, full-payment measure, interest, dissent, contribution, subrogation, and the three-year period.
• K.S.A. § 17-6410, accessed September 27, 2026: limits purchases and redemptions involving impaired capital and sets specified exceptions.
• K.S.A. § 17-6423, accessed September 27, 2026: directs that dividends comply with the Act.
• K.S.A. § 17-6422, accessed September 27, 2026: protects qualified good-faith reliance.