Corporate Director and Shareholder Liability for Unlawful Distributions in North Carolina

At a glance

Requirements one by one

Director conduct and amount

N.C. Gen. Stat. § 55-8-33(a) makes a voting or assenting director personally liable to the corporation for the amount above what § 55-6-40 or the articles would have permitted, if the director failed the § 55-8-30 duty standard. It preserves ordinary director defenses. Section 55-8-30(a) requires good faith, ordinarily prudent care, and a reasonable belief that the director acts in the corporation's best interests; subsections (b) and (c) set conditions for reliance on specified information and people.

Section 55-6-40(c) prohibits a distribution if the corporation would be unable to pay debts as due or assets would fall below liabilities plus superior dissolution preferences unless the articles permit otherwise. This table does not apply those tests to a corporation's finances.

Contribution and recipient reimbursement

A director held liable may seek contribution from every other director who could be liable (§ 55-8-33(b)(1)). Subsection (b)(2) gives the director reimbursement from each shareholder for the amount accepted knowing it violated § 55-6-40 or the articles. The recipient route is tied to a director already held liable.

Filing period

Section 55-8-33(c) bars a proceeding under subsection (a) unless begun within three years after the date the distribution's effect was measured under § 55-6-40(e) or (g). Section 55-6-40(e) uses different events for share acquisitions, distributed debt, and other payments; for ordinary payments it uses authorization if payment occurs within 120 days and payment otherwise.

What trips people up

An articles clause limiting director monetary damages does not erase this particular liability. Section 55-2-02(b)(3) expressly excludes “any liability under G.S. 55‑8‑33” from that articles-based power. A separate director defense under §§ 55-8-30 and 55-8-33 still requires its own facts.

Common questions

Does a recipient's knowledge matter?

Yes for § 55-8-33(b)(2) reimbursement: the shareholder must have accepted the payment knowing it violated the statute or articles. Whether that condition holds is factual.

Does the three-year provision say when reimbursement must be sought?

Section 55-8-33(c) names a proceeding under subsection (a). It does not state a separate period for subsection (b) contribution or reimbursement; this page does not infer one.

Statutes and sources

• N.C. Gen. Stat. § 55-2-02, accessed September 27, 2026: subsection (b)(3) excludes liability under § 55-8-33 from articles-based monetary exculpation.
• N.C. Gen. Stat. § 55-6-40, accessed September 27, 2026: subsections (c) and (e) give the distribution limits and measurement rules.
• N.C. Gen. Stat. § 55-8-30, accessed September 27, 2026: subsection (a) lists good faith, care, and reasonable best-interests belief.
• N.C. Gen. Stat. § 55-8-33, accessed September 27, 2026: subsection (a) states excess director liability; subsection (b) gives contribution and knowing-recipient reimbursement; subsection (c) sets the director-claim period.