Corporate Director and Shareholder Liability for Unlawful Distributions in Michigan

At a glance

Requirements one by one

Director liability and measure

Mich. Comp. Laws § 450.1551(1)(a) reaches a share dividend or distribution contrary to the Business Corporation Act or the articles. Subsection (1)(b) also reaches a post-dissolution shareholder distribution made without paying or providing for debts, obligations, and liabilities as § 450.1855a requires. The directors who vote for or concur in the listed actions are jointly and severally liable to the corporation for injured creditors or shareholders. Recovery is limited to legally recoverable injury and cannot exceed the difference between what was paid and what lawfully could have been paid.

Section 450.1345(3) provides the ordinary post-distribution debt-payment and asset tests. Section 450.1551(2) removes liability if the director complied with § 450.1541a; that section requires good faith, ordinarily prudent care, and a reasonable belief in the corporation's best interests, and regulates reliance on information supplied by others.

Recipient liability and director recovery

A shareholder who accepts or receives a share dividend or distribution knowing facts that indicate impropriety is directly liable to the corporation for the excess over that shareholder's lawful share (§ 450.1551(3)). A director against whom a claim succeeds may seek contribution from other directors who voted for or concurred in the action (§ 450.1552(1)). After payment, § 450.1552(2) also gives the director specified subrogation or rescission routes against recipients, including a seller-knowledge condition for an improper share purchase.

Dissent and timing

Section 450.1553 presumes concurrence for directors present at, or absent from, a meeting taking a § 450.1551 action unless they use the section's timely minute or written-dissent route. A director who voted in favor cannot use that right. Section 450.1551 states no standalone filing period. Section 450.1541a(4) separately limits an action for failure to perform duties imposed by that section to the earlier of three years after accrual or two years after actual or reasonably discoverable discovery; its application to a particular § 450.1551 claim requires a separate legal analysis.

What trips people up

The director and recipient measures are different. Section 450.1551(1) caps director recovery by injured creditor or shareholder loss and the paid-versus-lawful difference. Subsection (3) measures a knowing recipient's direct obligation by what that shareholder received above the lawful share. Neither number can be inferred merely from a board resolution.

Common questions

Does a dissolved corporation have to provide for future claims?

Section 450.1855a requires payment or provision for debts, obligations, and liabilities before distributing dissolution assets, including reasonably estimable anticipated liabilities under its conditions. Section 450.1551(1)(b) links director recovery to that provision.

Can a recipient raise rights after an improper distribution is challenged?

Section 450.1345(9) says a recipient may assert rescission or other legal or equitable rights when recovery is sought or the distribution prohibition is raised as a defense. It does not establish that any particular right succeeds.

Statutes and sources

• Mich. Comp. Laws § 450.1345, accessed September 27, 2026: subsections (3), (5), and (9) address limits, measurement, and preserved recipient rights.
• Mich. Comp. Laws § 450.1541a, accessed September 27, 2026: sets director performance and reliance rules and the separate duty-claim period.
• Mich. Comp. Laws § 450.1551, accessed September 27, 2026: voting or concurring directors are “jointly and severally liable to the corporation for the benefit of its creditors or shareholders”; knowing recipients have a separate subsection (3) obligation.
• Mich. Comp. Laws § 450.1552, accessed September 27, 2026: provides director contribution, subrogation, and share-purchase recovery routes.
• Mich. Comp. Laws § 450.1553, accessed September 27, 2026: states attendance and absence concurrence presumptions and dissent procedures.
• Mich. Comp. Laws § 450.1855a, accessed September 27, 2026: requires provision for debts, obligations, and liabilities before dissolution asset distribution.