Corporate Dividend and Distribution Requirements in Florida
At a glance
| Governing law, entity, distribution, and scope | Fla. Stat. §§ 607.01401(13), (18), 607.06401; ordinary domestic for-profit corporation. Distribution covers direct/indirect money or property, debt, dividends, purchases/redemptions/acquisitions, and liquidation, but excludes own shares; § 607.06401 excludes liquidation distributions |
|---|---|
| Board, committee, shareholder, and charter authority | Board authorizes, subject to articles and § 607.06401(3). A § 607.0732 unanimous shareholder agreement may govern authorization/making but cannot evade § 607.06401. Committee may exercise board powers, but reacquisition must follow board-prescribed formula, method, or limits (§ 607.0825) |
| Cash, property, shares, debt, repurchase, and redemption forms | Direct or indirect money/other property, incurred debt, declared/paid dividends, purchases, redemptions, other share acquisitions, liquidation, or otherwise (§ 607.01401(18)); corporation's own shares are excluded and share dividends follow § 607.0623 |
| Surplus, net-profit, equity, and capital-source test | No separate surplus, retained-earnings, net-profit, or stated-capital source test in § 607.06401; lawful amount is constrained by the two post-distribution tests and governing records |
| Liquidity, balance-sheet, liability, and preference test | After distribution: able to pay debts as due, and total assets ≥ total liabilities plus amount needed for superior dissolution preferences unless articles permit otherwise (§ 607.06401(3)) |
| Financial statements, valuation, reserves, and reliance | Reasonable-under-circumstances accounting statements, fair valuation, or another reasonable method; current-valuation distributions require identification and per-share disclosure. Articles may permit cash from depletion/similar reserves with matching disclosure. Director reliance follows § 607.0830(3)-(5) |
| Record date, measurement date, payment delay, and revocation | Board-set record date cannot be retroactive; default is authorization date except share acquisitions (§ 607.06401(2)). Acquisition: earlier of transfer/debt or status end; debt distribution: distribution date; other payment ≤120 days: authorization date, later payment: payment date. No express general revocation rule |
| Class, series, equal treatment, stock distribution, and fractions | Articles define class/series preferences and identical terms (§ 607.0601). Share dividends are pro rata by default; cross-class issue needs articles, majority vote of issued class/series, or no outstanding issued-class shares (§ 607.0623). Fractions, fair-value cash, arrangements, or scrip allowed (§ 607.0604) |
| Distribution debt, priority, liquidation, insolvency, and boundaries | Compliant distribution debt ranks equally with general unsecured debt unless agreement provides otherwise and may be secured if other law permits. Conditional debt may be excluded from liabilities; each payment is retested (§ 607.06401(7)-(8)). Liquidation distributions excluded by subsection (9) |
Requirements one by one
Governing law and covered transactions
Section § 607.01401(13), (18) limits this page to a domestic for-profit corporation and defines distribution broadly. It reaches direct or indirect money or property transfers, incurred indebtedness, dividends, purchases, redemptions, other share acquisitions, and liquidation. The definition excludes the corporation's own shares, and § 607.06401(9) sends liquidation distributions to the separate liquidation statutes.
Board, committee, shareholder, and article authority
Under § 607.06401(1)-(3), the board authorizes a distribution subject to the articles and the two statutory financial limits. Sections §§ 607.0801, 607.0825(1), (4) permit a board committee to exercise delegated board powers, but a committee may approve a share reacquisition only under a board-prescribed formula, method, or set of limits.
A compliant unanimous shareholder agreement may govern authorization or making, including a disproportionate distribution, under § 607.0732(1)-(2). The agreement remains expressly subject to § 607.06401, so it cannot contract around the financial limits.
No surplus or net-profit source test
Florida does not make surplus, retained earnings, stated capital, or current or preceding-year net profits a separate lawful source. Section 607.06401 instead asks two post-distribution questions: whether debts can be paid when due and whether total assets cover liabilities plus the applicable superior preference amount.
Liquidity, assets, liabilities, and preferences
Section 607.06401(3)(a) bars a distribution if the corporation would be unable to pay debts as they become due in the usual course. Paragraph (b) separately requires total assets to remain at least equal to total liabilities plus the amount needed on a hypothetical winding up to satisfy superior shareholder preferences. The articles may permit omission of that preference add-on, but not the underlying liabilities.
Class and series preferences are established in § 607.0601(1), (3). Shares within a class or series ordinarily have identical terms, and the articles may create cumulative or other distribution rights and priorities over another class or series.
Statements, valuation, depletion reserves, and reliance
Section § 607.06401(4)-(5) permits financial statements based on reasonable accounting practices, a fair valuation, or another reasonable method. A current- valuation distribution must be identified as such and its per-share amount disclosed when shareholders receive it.
For a natural-resources or other wasting-assets corporation, the articles may authorize cash distributions from depletion or similar reserves. The corporation must identify that basis and concurrently disclose the per-share amount.
Section § 607.0830(3)-(5) separately states when a director may rely on delegated performance and on information, opinions, reports, financial data, officers, employees, professional advisers, or another board committee. This page does not decide whether reliance, a valuation, or an accounting method is reasonable in a particular case.
Record date, measurement, delayed payment, and revocation
The board may set a nonretroactive distribution record date under § 607.06401(2). If it does not, the authorization date is the default except for a purchase, redemption, or other acquisition of the corporation's shares.
Section § 607.06401(6)-(9) uses different measurement events. A share acquisition uses the earlier of the transfer or debt-incurrence date and the date shareholder status ends. Distributed debt uses its distribution date. Other distributions use authorization when paid within 120 days and payment when paid later. The section states no general power to revoke a declared distribution.
Share dividends and fractions
Under §§ 607.0604, 607.0623, a share dividend is pro rata and without consideration unless the articles provide otherwise. Issuing one class or series to holders of another requires article authority, majority approval by the issued class or series, or no outstanding shares of the issued class or series. The board-set record date cannot be retroactive; without one, authorization is the record date.
Florida permits fractional shares, fair-value cash instead, arrangements that let holders buy or sell fractional interests, and aggregating scrip. A fractional share carries voting, dividend, and liquidation rights; scrip does not unless its terms say otherwise.
Distribution debt and liquidation boundary
Subsection 607.06401(7) puts compliant distribution indebtedness at parity with general unsecured debt unless an agreement changes the ranking. A lien may secure it if another law does not prohibit the lien. Conditional debt may be left out of the balance-sheet liabilities only when principal and interest are payable solely to the extent a distribution could then be made; each payment is retested when actually made.
Liquidation distributions are outside § 607.06401 under subsection (9). Director or recipient liability, creditor recovery, fraudulent transfer, bankruptcy, covenants, fiduciary duties, tax, accounting, and transaction advice remain outside this survey.
What trips people up
Florida has two separate post-distribution tests. Ability to pay debts and the asset-liability-preference comparison are cumulative, not alternatives. A board resolution does not establish either factual result.
A fair-valuation distribution carries a disclosure rule. The corporation must identify the valuation basis and disclose the per-share amount concurrently with receipt. The same pattern applies to an article-authorized depletion-reserve distribution.
The 120-day rule changes the measurement date. Payment within that window uses authorization; payment after it uses the payment date. A delayed payment is not automatically valid merely because the original authorization satisfied a test.
Common questions
Do Florida shareholders usually approve an ordinary dividend?
Section 607.06401 assigns authorization to the board. A compliant unanimous shareholder agreement may govern the decision, and the articles or class terms may restrict it, so the corporation's current records still must be checked.
Can a Florida corporation pay a dividend with its own shares?
Yes, through the separate share-dividend rule in § 607.0623. Its pro rata default, cross-class approval options, and record-date rule differ from a cash or property distribution under § 607.06401.
Does issuing a note avoid the distribution tests?
No. Incurring or distributing indebtedness is itself within the distribution scheme. Only debt with the specific conditional-payment terms in subsection (8) is excluded from liabilities, and every later payment is tested as a distribution when made.
Statutes and sources
- Fla. Stat. § 607.01401(13), (18) — domestic-corporation and distribution definitions. Official Florida Legislature Chapter 607, accessed September 3, 2026.
- Fla. Stat. §§ 607.0601, 607.0604, and 607.0623 — class and series terms, fractional shares, and share dividends. Official Florida Legislature Chapter 607, accessed September 3, 2026.
- Fla. Stat. § 607.06401 — board authority, record date, dual financial limits, valuation, depletion reserves, measurement, debt, and liquidation exclusion. Official Florida Legislature Chapter 607, accessed September 3, 2026.
- Fla. Stat. § 607.0732 — unanimous shareholder agreements governing distributions subject to § 607.06401. Official Florida Legislature Chapter 607, accessed September 3, 2026.
- Fla. Stat. §§ 607.0801, 607.0825, and 607.0830 — board authority, committee limits, and director reliance. Official Florida Legislature Chapter 607, accessed September 3, 2026.
Source links
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