Corporate Director and Shareholder Liability for Unlawful Distributions in North Dakota

At a glance

Requirements one by one

Director conduct, shared liability, and amount

N.D.C.C. § 10-19.1-95(1) reaches a director present who votes for or fails to vote against an illegal distribution, or consents in writing, if the director also failed § 10-19.1-50. It excepts a director prohibited by § 10-19.1-51 from voting. The director owes the corporation, receiver, or other winding-up agent the excess above the amount properly payable under § 10-19.1-92, jointly and severally with other liable directors. Section 10-19.1-92(2) bars liability under § 10-19.1-95 when the specified reasonable determination and conduct requirements were met.

Recipient liability and same-action contribution

Section 10-19.1-94(1) separately makes a shareholder who knew or should have known of a § 10-19.1-92 violation liable for the excess received. The corporation, receiver, winding-up agent, or qualifying director can recover. A director sued under § 10-19.1-95(2)-(3) may bring recipients and other directors into that same action and compel pro rata contribution as specified. This is different from an automatic claim against every shareholder who received a payment.

Filing periods and winding-up creditor claims

Sections 10-19.1-94(2) and 10-19.1-95(4) each bar a new shareholder or director action more than two years from the distribution. N.D.C.C. § 10-19.1-124(3) separately gives an unpaid creditor of a known contractual winding-up obligation a remedy against responsible officers and directors who failed to pay or provide for it before distributing assets; that subsection excludes court-supervised dissolution. Its creditor remedy is narrower than the general corporation/receiver claims in §§ 10-19.1-94 to -95.

What trips people up

Section 10-19.1-50(4) presumes a present director assented to an approved action unless the director voted against it or fits a specified meeting-objection or voting-prohibition exception. Section 10-19.1-50(5) also says the articles cannot eliminate § 10-19.1-95 liability. The distribution definition in § 10-19.1-01(19) expressly includes liquidation, but a case-specific claim still depends on the exact § 10-19.1-92 or governing-record violation.

Common questions

Must the corporation prove the shareholder actually knew the distribution was illegal?

No. Section 10-19.1-94(1) also reaches a shareholder who should have known of the § 10-19.1-92 violation.

Can a director wait until after judgment to seek statutory contribution?

Sections 10-19.1-95(2)-(3) expressly provide impleader and pro rata contribution in the action brought against the director; they do not supply a separate postjudgment clock.

Statutes and sources

• N.D.C.C. §§ 10-19.1-01, -50, -92, -94, -95, -124, accessed September 27, 2026: current official chapter PDF supplies the quoted definition, conduct, distribution, recipient, director, and winding-up creditor provisions.