Corporate Director and Shareholder Liability for Unlawful Distributions in West Virginia

At a glance

Requirements one by one

Director conduct and the recoverable amount

W. Va. Code § 31D-8-833(a) requires a vote or assent to a distribution beyond the amount § 31D-6-640(a) permits, and proof by the claimant that the director failed § 31D-8-830 when taking the action. The resulting claim belongs to the corporation and measures the excess, rather than automatically making a director repay the entire payment. Section 31D-8-830 requires good faith, a reasonable belief in the corporation's interests, appropriate care, and permits qualified reliance on specified information.

Contribution, recipient recoupment, and dissent

A director held liable under § 31D-8-833(b) can seek contribution from each other director who could be liable. The same director can recoup a pro rata share from a recipient shareholder who accepted the unlawful amount knowing it violated § 31D-6-640(a). W. Va. Code § 31D-8-824(d) separately presumes that a director present for board action assented unless the director timely objects, records dissent or abstention in the minutes, or delivers written notice before adjournment. A favorable voter cannot use that dissent route.

Two distinct filing clocks

W. Va. Code § 31D-8-833(c) bars the director claim unless brought within two years after the § 31D-6-640(e) or (g) measurement date, or the date an ignored articles restriction caused the violation. Section 31D-6-640(e) measures share acquisitions at the earlier transfer/debt or loss-of-shareholder-status date; other debt at distribution; and other payments at authorization if made within 120 days, otherwise at payment. Conditional distribution debt under § 31D-6-640(g) is measured when principal or interest is actually paid. Contribution or recoupment instead has one year after final adjudication of the claimant director's liability.

What trips people up

The liability section cites § 31D-6-640(a), which in turn makes distributions subject to the articles and the subsection (c) limits. Section 31D-8-833 does not name a separate liquidation-payment duty. A person assessing a payment must identify the applicable distribution and measurement date before applying its liability clock.

Common questions

Is receipt alone enough for the director to recover from a shareholder?

No. Section 31D-8-833(b)(2) requires that the shareholder accepted the unlawful amount knowing of the § 31D-6-640(a) violation.

Can a director rely on financial information?

Section 31D-8-830(d) allows reliance on specified information, including financial statements, if the director lacks knowledge that would make reliance unwarranted. Whether that standard is met depends on the facts.

Statutes and sources

• W. Va. Code § 31D-1-150, accessed September 27, 2026: domestic corporation and distribution definitions.
• W. Va. Code § 31D-6-640, accessed September 27, 2026: distribution limits and measurement dates.
• W. Va. Code § 31D-8-824, accessed September 27, 2026: presumed assent and dissent routes.
• W. Va. Code § 31D-8-830, accessed September 27, 2026: director conduct and reliance.
• W. Va. Code § 31D-8-833, accessed September 27, 2026: liability, contribution, recoupment, and filing periods.