Corporate Director and Shareholder Liability for Unlawful Distributions in Wyoming
At a glance
| Law, transactions, and persons | Wyo. Stat. §§ 17-16-640, -833; ordinary and post-dissolution distributions; voting/assenting directors and knowing recipient shareholders. |
|---|---|
| Underlying prohibited distribution | Excess beyond § 17-16-640 or post-dissolution § 17-16-1409(a), including articles restriction under § 17-16-640(a) (§ 17-16-833(a)). |
| Director conduct and defenses | Vote or assent plus claimant proof of failure to comply with § 17-16-830; good faith, corporate-interest belief, appropriate care, and qualified reliance. |
| Amount, interest, and shared liability | Personally liable to corporation for excess above lawful amount; § 17-16-833 states no separate interest or joint-and-several formula. |
| Who may enforce | Director liability runs to corporation; § 17-16-833(a) assigns proof to party asserting liability and gives no express direct creditor route. |
| Recipient shareholder recovery | Liable director may recoup each shareholder’s pro-rata portion of unlawful amount accepted knowingly (§ 17-16-833(b)(ii)). |
| Contribution and dissent | Contribution from every other director who could be liable; § 17-16-833(a) requires vote/assent and § 17-16-830 noncompliance. |
| Filing periods | Director proceeding: 2 years from § 17-16-640(e)/(g) measurement, articles violation, or post-dissolution payment; contribution/recoupment: 1 year after final adjudication (§ 17-16-833(c)). |
| Related remedies and limits of this comparison | Ordinary § 17-16-640 rule excludes article 14 liquidation; § 17-16-1409(a) supplies the dissolved-corporation route. Other remedies require separate analysis. |
Requirements one by one
Director conduct and recovery amount
Wyo. Stat. § 17-16-833(a) reaches a director who votes for or assents to a payment beyond what § 17-16-640 or § 17-16-1409(a) permits. The party asserting liability must establish that the director failed to comply with § 17-16-830 when acting. That section requires good faith, a reasonable belief in or at least not opposed to the corporation's interests, and appropriate care; subsections (d)-(f) allow qualified reliance. The corporation's recovery is the excess over a lawful distribution, not automatically the whole payment.
Other directors and knowing recipients
A liable director can seek contribution from each other director who could be liable under § 17-16-833(a). Under subsection (b)(ii), the director may also recoup from each shareholder the pro-rata portion of the unlawful amount the shareholder accepted knowing it violated § 17-16-640 or § 17-16-1409(a).
Two filing periods
Section 17-16-833(c)(i) bars a director claim unless started within two years after the § 17-16-640(e) or (g) measurement date, the date an articles restriction was disregarded, or the post-dissolution asset payment date. Contribution and recoupment claims have a separate one-year period after the claimant's liability is finally adjudicated under subsection (a).
What trips people up
Section 17-16-640(h) excludes article 14 liquidation from the ordinary financial rule. Section 17-16-1409(a) instead requires a dissolved corporation's directors to pay or reasonably provide for claims before distributing assets to shareholders; subsection (b) addresses claims disposed of under the listed procedures. The primary two-year clock in § 17-16-833(c)(i) accounts for both ordinary and post-dissolution payments.
Common questions
Does every recipient have to repay the director?
No. Section 17-16-833(b)(ii) conditions recoupment on the shareholder's knowledge that the accepted distribution violated the cited rule.
Does an excessive payment automatically make a director liable?
Section 17-16-833(a) requires the vote or assent and proof of failure to meet § 17-16-830, even when the excess is established.
Statutes and sources
- Wyo. Stat. §§ 17-16-640, -830, -833, and -1409, official Title 17 PDF, accessed September 27, 2026.
Source links
Every statute quoted above, linked, with the date we checked it.
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