Corporate Director and Shareholder Liability for Unlawful Distributions in South Dakota

At a glance

Requirements one by one

Director conduct and excess recovery

S.D. Codified Laws § 47-1A-833 makes a director who voted for or assented to a distribution beyond § 47-1A-640 or § 47-1A-1409 liable to the corporation for the excess if the claimant proves the director failed § 47-1A-830 and § 47-1A-830.1 when acting. The two conduct sections require good faith, a reasonable belief in corporate interests, appropriate care, and allow reliance on specified people and financial information when the director lacks knowledge making reliance unwarranted. The rule in § 47-1A-640.1 supplies the ordinary post-distribution financial limits.

Contribution, recoupment, and dissent

S.D. Codified Laws § 47-1A-833.1 allows a liable director to seek contribution from every other director who could be liable and a pro-rata recoupment from a shareholder who accepted the unlawful amount knowing it violated § 47-1A-640 or § 47-1A-1409. Under § 47-1A-824.1, a present director avoids presumed assent by timely objection, recorded dissent or abstention, or written notice before or immediately after adjournment. A director voting in favor cannot dissent.

Separate periods for primary and follow-on claims

The primary claim has two years from the applicable § 47-1A-640.2 or § 47-1A-640.4 measurement event, articles-violation date, or liquidation payment date (§ 47-1A-833). Section 47-1A-640.2 distinguishes share acquisitions, distribution debt, and other payments; for the last category, authorization controls if payment follows within 120 days, otherwise payment controls. Section 47-1A-640.4 measures payments on qualifying conditional distribution debt when actually made. Section 47-1A-833.1 gives contribution and recoupment one year after final adjudication of the claimant director's liability.

What trips people up

The ordinary financial limits in §§ 47-1A-640 to -640.4 do not govern liquidation distributions (§ 47-1A-640.5). Section 47-1A-1409 instead requires payment or reasonable provision for claims before distributing assets to shareholders, and protects directors regarding claims barred or satisfied through its specified claims procedures.

Common questions

Is a recipient liable merely for accepting a payment?

Section 47-1A-833.1 gives a liable director recoupment only from a shareholder who accepted the unlawful amount knowing of the cited violation.

Is every director's presence at the meeting assent?

Section 47-1A-824.1 supplies specific objection and dissent routes that can rebut presumed assent; a favorable vote cannot be reclassified as dissent.

Statutes and sources

• S.D. Codified Laws § 47-1A-140, accessed September 27, 2026: corporation and distribution definitions.
• S.D. Codified Laws §§ 47-1A-640 to -640.5, accessed September 27, 2026: ordinary limits, measurement, and liquidation exclusion; individual section URLs are listed in the quoted statute entries above.
• S.D. Codified Laws § 47-1A-824.1, accessed September 27, 2026: presumed assent and dissent.
• S.D. Codified Laws §§ 47-1A-830 to -830.1, accessed September 27, 2026: director conduct and reliance.
• S.D. Codified Laws §§ 47-1A-833 to -833.1, accessed September 27, 2026: liability, contribution, recoupment, and periods.
• S.D. Codified Laws § 47-1A-1409, accessed September 27, 2026: dissolved-corporation duty.