Corporate Director and Shareholder Liability for Unlawful Distributions in Massachusetts

At a glance

Requirements one by one

Director liability and underlying limits

Mass. Gen. Laws ch. 156D, § 6.41(a) expressly includes a liquidation distribution. A director who votes for or assents to a payment that violates the chapter or articles may owe the corporation the excess if the director failed the § 8.30 standard. That standard requires good faith, care reasonably believed appropriate by a person in a like position, and a reasonable belief in the corporation's best interests. Section 6.41(a) preserves a director's ordinary defenses.

Section 6.40(c) bars a going-concern payment that leaves the corporation unable to meet existing and reasonably foreseeable obligations as due or below the asset, liability, and superior-preference threshold. Subsection (h) separately requires adequate provision for obligations and preferred rights before liquidation payments. The liability amount depends on what could lawfully have been paid; this page does not calculate it.

Shareholders and a director who pays

Under § 6.41(c), a shareholder who knows a distribution violates the chapter or articles owes the corporation the excess received. A narrower rule in subsection (d) reaches a recipient who did not know: when an improper liquidation distribution is made before three years after dissolution under Part 14, that recipient may owe a pro rata part of a claim against the corporation existing at the end of that period. Subsection (e) caps a shareholder's total liability for all liquidation claims under § 6.41 at the assets distributed to that shareholder in liquidation.

A director who pays the corporation under subsection (a) may seek contribution from other potentially liable directors, reimbursement of the excess from knowing recipients, and court-determined reimbursement from recipients who lacked knowledge (§ 6.41(b)).

Distinct filing clocks

Section 6.41(f) sets a two-year measurement-date cutoff for a nonliquidation proceeding by or for the corporation. For liquidation during dissolution under Part 14, the cutoff is the later of that time and six months after the three-year period in subsection (d). For liquidation outside dissolution, it is three years after the effect was measured under § 6.40(e) or (g). Section 6.41(g) separately gives a paying director until the later of two years after measurement or six months after payment to bring contribution or reimbursement proceedings. H.3323 proposes to rewrite the two liquidation clauses of subsection (f); it remains pending.

What trips people up

Knowledge is decisive for the recipient rule in § 6.41(c), but it is not an absolute shield in the special dissolved-corporation rule of subsection (d). The ordinary two-year period and the liquidation extensions also use different starting events; treating all shareholder payments as ordinary dividends would miss those rules.

Common questions

Can an unaware shareholder ever face recovery?

Yes, but § 6.41(d) confines that direct rule to the described improper liquidation payment during the post-dissolution period and a claim existing at the end of the three-year period. Separately, § 6.41(b)(3) lets a paying director seek reimbursement to the extent a court considers appropriate.

Does a paying director have a separate deadline to seek reimbursement?

Yes. Section 6.41(g) uses the later of two years after the distribution-effect measurement or six months after the director pays the corporation on account of liability.

Statutes and sources

• Mass. Gen. Laws ch. 156D, § 6.40, accessed September 27, 2026: ordinary and liquidation limits and distribution-effect dates.
• Mass. Gen. Laws ch. 156D, § 8.30, accessed September 27, 2026: director conduct and reliance.
• Mass. Gen. Laws ch. 156D, § 6.41, accessed September 27, 2026: director and recipient liability, reimbursement, caps, and periods.
• MA H.3323, checked September 27, 2026: pending proposal affecting § 6.41(f)(2)–(3); official bill text.