Corporate Dividend and Distribution Requirements in Connecticut
At a glance
| Governing law, entity, distribution, and scope | Connecticut Business Corporation Act, Conn. Gen. Stat. §§ 33-600 to 33-998; ordinary domestic stock corporation. Distribution includes direct/indirect money or property except own shares, debt, dividends, purchases, redemptions, and other acquisitions; dissolution distributions excluded (§§ 33-602(6), (8), 33-687(h)) |
|---|---|
| Board, committee, shareholder, and charter authority | Board authorizes subject to certificate and § 33-687(c). Committee may act only by board-prescribed formula, method, or limits. Qualifying all- shareholder agreement may eliminate/restrict board or govern distributions, including nonproportionately, subject to § 33-687 (§§ 33-687, 33-717, 33-753) |
| Cash, property, shares, debt, repurchase, and redemption forms | Direct/indirect money or other property except own shares, incurred debt, dividend declaration/payment, purchase, redemption, other acquisition, debt, or otherwise (§ 33-602(8)); share dividends under § 33-674; redemption may use cash, debt, securities, or property (§ 33-665(c)(2)) |
| Surplus, net-profit, equity, and capital-source test | No separate surplus, retained-earnings, net-profit, stated-capital, or other capital-source test in § 33-687; Connecticut uses the dual post-distribution limits plus certificate, class/series, and qualifying shareholder-agreement terms |
| Liquidity, balance-sheet, liability, and preference test | After distribution: corporation must be able to pay debts as due, and assets must be at least liabilities plus amount needed for superior dissolution preferences unless certificate permits otherwise (§ 33-687(c)) |
| Financial statements, valuation, reserves, and reliance | Board may use reasonable-in-circumstances accounting statements, fair valuation, or another reasonable method (§ 33-687(d)); qualified reliance on reliable officers/employees, retained experts, or trusted committee absent contrary knowledge (§ 33-756(d)-(f)); no reserve formula |
| Record date, measurement date, payment delay, and revocation | Board-set record date; default is authorization except acquisitions. Acquisition: earlier transfer/debt or shareholder-status end; other debt: distribution; other payments: authorization if within 120 days, payment if later (§ 33-687(b), (e)); no general revocation rule or stated record-date maximum |
| Class, series, equal treatment, stock distribution, and fractions | Same-class/series terms identical except certificate may expressly vary among holders; certificate sets preferences (§ 33-665). Share dividends pro rata; cross-class issue needs certificate, issuing-class majority, or no outstanding shares (§ 33-674). Fractions, value cash, disposition, or registered/bearer scrip (§ 33-668); qualifying agreement may vary proportion |
| Distribution debt, priority, liquidation, insolvency, and boundaries | Compliant distribution debt is at parity with general unsecured creditors unless subordinated. Conditional debt may be excluded from liabilities, with principal/interest retested when paid (§ 33-687(f)-(g)); dissolution-course distributions excluded; liability, creditor, bankruptcy, covenant, tax, valuation, and advice issues outside scope |
Requirements one by one
Governing law, entity, distribution, and scope
Conn. Gen. Stat. §§ 33-600 and 33-602 apply the Connecticut Business Corporation Act to an ordinary domestic stock corporation. A distribution includes a direct or indirect transfer of money or property other than the corporation's own shares, or incurred debt, to or for shareholders with respect to shares. Dividends, purchases, redemptions, other acquisitions, debt, and other forms are expressly listed.
Conn. Gen. Stat. § 33-687(h) excludes distributions in the course of dissolution under the listed dissolution sections. This page covers the nonliquidating branch.
Board, committee, shareholder, and charter authority
Conn. Gen. Stat. § 33-687(a) assigns authorization to the board, subject to certificate restrictions and the financial tests. Under Conn. Gen. Stat. § 33-753(a), (e)-(f), a committee may authorize or approve a distribution only according to a formula or method, or within limits, prescribed by the board.
A qualifying agreement under Conn. Gen. Stat. § 33-717(a)-(b), (d) can eliminate or restrict the board, transfer corporate authority, or govern distributions whether or not proportional. All current shareholders must approve or sign the specified record, the § 33-687 financial limits remain, and the agreement ends when the corporation becomes public.
Cash, property, shares, debt, repurchase, and redemption forms
Conn. Gen. Stat. § 33-602(8) reaches money, other property, incurred debt, dividend declarations and payments, purchases, redemptions, other acquisitions, debt distributions, and other forms. Section 33-665(c)(2) also permits the certificate to make a class or series redeemable for cash, indebtedness, securities, or other property.
The corporation's own shares are excluded from the definition's property branch and follow the separate § 33-674 share-dividend rules.
Surplus, net-profit, equity, and capital-source test
Conn. Gen. Stat. § 33-687 states no separate surplus, retained-earnings, net- profit, stated-capital, or other source test. Connecticut instead uses the two post-distribution limits in Subsection (c), together with certificate, class or series, and any qualifying shareholder-agreement terms.
This reports the statutory test without applying it to a corporation's numbers.
Liquidity, balance-sheet, liability, and preference test
Conn. Gen. Stat. § 33-687(c) bars a distribution that would leave the corporation unable to pay debts as they become due in the usual course. It also bars a distribution that would leave assets below liabilities plus the amount needed for superior dissolution preferences.
The certificate may permit departure from the preference add-on, but the exception does not extend to the debts-as-due or basic assets-versus-liabilities parts.
Financial statements, valuation, reserves, and reliance
Conn. Gen. Stat. § 33-687(d) permits financial statements prepared under accounting practices and principles reasonable in the circumstances, or a fair valuation or another reasonable method. The distribution section supplies no reserve formula.
Under Conn. Gen. Stat. § 33-756(d)-(f), qualified reliance may extend to reliable and competent officers or employees, retained experts, or a trusted board committee. Knowledge making reliance unwarranted defeats that route.
Record date, measurement date, payment delay, and revocation
Conn. Gen. Stat. § 33-687(b) makes authorization the default record date for a nonacquisition distribution unless the board fixes a different date. The subsection states no forward maximum or nonretroactivity condition.
For a purchase, redemption, or other acquisition, Subsection (e) uses the earlier of property transfer or debt incurrence and the end of shareholder status. Other debt distributions are measured when distributed. Other payments use authorization when paid within 120 days and payment when later. The section states no general revocation power.
Class, series, equal treatment, stock distributions, and fractions
Conn. Gen. Stat. § 33-665 ordinarily makes terms identical within a class or series, but the certificate may expressly vary terms among holders. It may also establish cumulative or noncumulative dividends, redemption terms, and distribution or dissolution preferences.
Under Conn. Gen. Stat. § 33-674, share dividends are pro rata and without consideration. A cross-class or cross-series dividend requires certificate authorization, majority approval by the class or series to be issued, or no outstanding shares of that class or series. Conn. Gen. Stat. § 33-668 permits fractions, value cash, holder disposition, or registered or bearer scrip; fractions carry dividend rights, while scrip does so only if its terms provide. A qualifying § 33-717 agreement may separately govern nonproportionate distributions.
Distribution debt, priority, liquidation, insolvency, and boundaries
Conn. Gen. Stat. § 33-687(f) places compliant distribution debt at parity with general unsecured creditors unless subordinated by agreement. Under Subsection (g), debt payable only when a distribution could then be made is excluded from liabilities; if issued as a distribution, each principal or interest payment is retested when actually paid.
Subsection (h) excludes dissolution-course distributions. Liability, recovery, fraudulent transfer, bankruptcy, covenants, fiduciary duties, tax, accounting, and valuation advice remain outside scope.
What trips people up
- A shareholder agreement cannot waive the financial limits. Section 33-717 expressly keeps § 33-687 controlling.
- Committee authority is bounded. The committee must stay within a board- prescribed formula, method, or limit.
- Terms can vary within a class or series. They may do so only when the certificate expressly states the variations.
- Conditional debt is retested. Each actual principal or interest payment on debt issued as a distribution becomes a new distribution measured then.
Common questions
Does Connecticut require surplus or current net profits?
No separate source test appears in Conn. Gen. Stat. § 33-687. The operative limits are the debts-as-due and assets-versus-liabilities-plus-preferences tests.
May the certificate remove both financial tests?
No. The certificate exception reaches the superior-preference add-on, not the debts-as-due requirement or the basic assets-versus-liabilities comparison.
May all shareholders agree to a nonproportionate distribution?
A qualifying § 33-717 agreement may govern distributions whether or not in proportion to ownership, but it remains subject to § 33-687 and ends when the corporation becomes public.
Statutes and sources
- Conn. Gen. Stat. §§ 33-600 and 33-602(6), (8), (30) — Act, corporation, distribution, and record-date definitions. Official Connecticut General Assembly Chapter 601 text (accessed 2026-09-04).
- Conn. Gen. Stat. §§ 33-665, 33-668, and 33-674 — class/series terms, preferences, redemption forms, fractions, and share dividends. Section 33-665, § 33-668, and § 33-674 official text (accessed 2026-09-04).
- Conn. Gen. Stat. § 33-687 — authority, solvency, valuation, timing, debt, and dissolution exclusion. Official text (accessed 2026-09-04).
- Conn. Gen. Stat. § 33-717(a)-(b), (d) — qualifying shareholder-agreement authority, approval, distributions, and public-status cutoff. Official text (accessed 2026-09-04).
- Conn. Gen. Stat. §§ 33-753 and 33-756 — bounded committee authority and qualified reliance. Section 33-753 and § 33-756 official text (accessed 2026-09-04).
Source links
Every statute quoted above, linked, with the date we checked it.
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