Corporate Director and Shareholder Liability for Unlawful Distributions in South Carolina

At a glance

Requirements one by one

Distribution limit and director conduct

S.C. Code Ann. § 33-1-400(7) defines a distribution to include a dividend, purchase or redemption of shares, distribution of debt, or another transfer to shareholders in respect of shares. Section 33-6-400(a), (c) permits board authorization subject to the articles and bars a payment that would leave the corporation unable to pay debts as due or below the stated assets, liabilities, and superior-preference threshold. Section 33-8-330(a) uses a violation of § 33-6-400 or the articles as its liability trigger.

A director must vote for or assent to that distribution and be shown to have failed § 33-8-300’s conduct standard before § 33-8-330(a) imposes liability. That standard requires good faith, ordinarily prudent care, and a reasonable belief in the best interests of the corporation and its shareholders. Section 33-8-300(b)–(c) allows reliance on specified information and advisers unless the director has knowledge making reliance unwarranted. Section 33-8-330(a) also preserves defenses ordinarily available to a director.

Excess recovery and contribution

Section 33-8-330(a) measures the corporation’s claim by the amount above what could have been distributed under § 33-6-400 and the articles. A director held liable may seek contribution from every other director who could also be liable and from each shareholder for the amount the shareholder accepted knowing the distribution violated § 33-6-400 or the articles (§ 33-8-330(b)). The recipient provision is a contribution right of the liable director; it is distinct from the director’s vote-or-assent test.

Filing period

Section 33-8-330 itself does not state a filing period for its distribution claim or contribution. Section 33-8-300(e) states that an action against a director for failure to perform the duties imposed by that section must start within three years after accrual or two years after actual or reasonably discoverable discovery, whichever occurs sooner, and excludes fraudulently concealed duty breaches from that period. Whether that duty-action provision controls a particular § 33-8-330 claim requires analysis beyond the text of § 33-8-330; this page does not supply a categorical deadline for such a claim.

What trips people up

Section 33-8-330(a) makes the corporation the beneficiary of its director claim. The section does not itself name creditors as direct claimants and does not set a separate interest or joint-and-several formula. Those omissions do not resolve remedies under other law.

Common questions

Does every unlawful payment make a director personally liable?

No. Section 33-8-330(a) also requires the director’s vote or assent and an established failure to perform duties in compliance with § 33-8-300.

Must a recipient shareholder have known of the violation?

For the director’s contribution right, yes. Section 33-8-330(b)(2) requires that the shareholder accepted the amount knowing the distribution violated § 33-6-400 or the articles.

Statutes and sources

• S.C. Code Ann. § 33-1-400, accessed September 27, 2026: corporation and distribution definitions.
• S.C. Code Ann. § 33-6-400, accessed September 27, 2026: authorization and prohibited-distribution tests.
• S.C. Code Ann. §§ 33-8-300 and 33-8-330, accessed September 27, 2026: director duties, duty-action period, distribution liability, and contribution.