Corporate Dividend and Distribution Requirements in Georgia
At a glance
| Governing law, entity, distribution, and scope | O.C.G.A. §§ 14-2-140, -601, -604, -623, -640, -707, -732, -801, -825, -830, -1405; ordinary domestic for-profit corporation. Distribution covers money/property, debt, dividends, purchases/redemptions, and other acquisitions, but excludes the corporation's own shares/rights as transferred property |
|---|---|
| Board, committee, shareholder, and charter authority | Board authorizes subject to articles (§ 14-2-640(a)); delegated committee may exercise board power because § 14-2-825 has no distribution carve-out. A unanimous § 14-2-732 agreement may govern authorization or disproportionate distributions but remains subject to § 14-2-640 |
| Cash, property, shares, debt, repurchase, and redemption forms | Direct/indirect money or property transfer, incurred debt, dividend declaration/payment, purchase, redemption, other share acquisition, or distributed indebtedness (§§ 14-2-140(6), -640(e)). Own-share dividends excluded from distribution definition and governed by § 14-2-623; fractions/scrip under § 14-2-604 |
| Surplus, net-profit, equity, and capital-source test | No separate surplus, stated-capital, retained-earnings, or net-profit source test in § 14-2-640; Georgia uses only its dual post-distribution limits |
| Liquidity, balance-sheet, liability, and preference test | After distribution: corporation must be able to pay debts as due, and total assets must be ≥ total liabilities plus amount needed for superior dissolution preferences unless articles permit otherwise (§ 14-2-640(c)) |
| Financial statements, valuation, reserves, and reliance | Board may use reasonable-under-circumstances accounting statements, fair valuation, or another reasonable method (§ 14-2-640(d)); § 14-2-830(b) permits qualified reliance on reliable officers/employees/agents and competent professional sources; no special reserve rule |
| Record date, measurement date, payment delay, and revocation | Bylaws may set method or board may fix record date ≤70 days before action; default for ordinary distribution/share dividend is authorization date (§§ 14-2-707, -623(c), -640(b)). Acquisition: earlier of transfer/debt or status end; debt: distribution date; other payment ≤120 days: authorization, later: payment. No express revocation rule |
| Class, series, equal treatment, stock distribution, and fractions | Articles set class/series preferences and identical-within-class/series terms (§ 14-2-601). Share dividends pro rata by default; cross-class issue needs articles, issued-class majority, or no outstanding issued-class shares (§ 14-2-623). Fractions, cash value, disposition, or scrip allowed (§ 14-2-604) |
| Distribution debt, priority, liquidation, insolvency, and boundaries | Compliant distribution debt is at parity with general unsecured debt unless subordinated or secured. Conditional debt may be excluded from liabilities and each payment retested (§ 14-2-640(f)-(g)). Winding up separately discharges/provides liabilities before remaining-property distribution (§ 14-2-1405) |
Requirements one by one
Governing law, forms, and authority
Section § 14-2-140(4), (6), (24) confines this page to a domestic for-profit corporation and defines distribution broadly. It reaches direct or indirect money and property transfers, incurred debt, dividends, purchases, redemptions, and other share acquisitions, while excluding the corporation's own shares and rights to acquire them as the property being distributed.
The board authorizes under § 14-2-640(a)-(d), subject to the articles and the two financial tests. Section § 14-2-801(a)-(b) supplies the ordinary board-management rule, and § 14-2-825(a), (c)-(e) permits a committee to exercise delegated board power. Georgia's current committee statute lists four nondelegable categories but no longer reserves distribution authorization to the full board.
Shareholder agreements can alter authority, not the financial floor
A compliant agreement under § 14-2-732(a)-(b), (d) may govern distribution authorization and may permit a distribution disproportionate to share ownership. It requires unanimous current-holder approval or signatures under the stated articles, bylaws, or written-agreement routes, has a 20-year maximum term subject to unanimous renewal, and ends when shares become exchange-listed or regularly dealer/broker traded. It remains expressly subject to § 14-2-640.
No surplus or net-profit source test
Georgia does not make surplus, stated capital, retained earnings, or recent net profits a separate source for an ordinary distribution. Section 14-2-640(c) instead asks only the following post-distribution liquidity and balance-sheet questions.
Liquidity, assets, liabilities, and preferences
First, the corporation must remain able to pay debts as they become due in the usual course. Second, total assets cannot fall below total liabilities plus the amount needed on a hypothetical dissolution for superior shareholder preferences. The articles may permit omission of the preference add-on, but not the underlying liabilities or due-debt test.
Valuation and reliance
Section 14-2-640(d) allows reasonable-under-the-circumstances accounting statements, fair valuation, or another reasonable method. Section § 14-2-830(a)-(b) separately permits a director acting under its good-faith and care standard to rely on reliable and competent corporate personnel and on information, data, opinions, reports, or statements from the listed competent professional sources.
Record date and measurement timing
Under § 14-2-707(a)-(b), the bylaws may fix the record date or its method; otherwise the board may set a future date no more than 70 days before the action. If no record date is fixed for an ordinary distribution, § 14-2-640(b) makes authorization date the default.
Section § 14-2-640(e)-(g) uses different financial-test dates by form. An own-share acquisition uses the earlier of transfer or debt incurrence and the end of shareholder status. Distributed debt uses its distribution date. Other payments use authorization if made within 120 days, and actual payment date if made later.
Share dividends, class terms, and fractions
Under § 14-2-623, a share dividend is pro rata and without consideration by default. Issuing one class or series in respect of another requires article authority, approval by a majority of the votes of the class or series being issued, or no outstanding shares of that issued class or series. The authorization date is the default record date, and treasury shares participate only if the resolution says so.
Sections §§ 14-2-601(a)-(d) and 14-2-604 place class and series preferences in the articles, ordinarily require identical terms within the class or series, and allow fractions, cash value, disposition arrangements, or scrip. A fraction carries shareholder rights; scrip carries them only if its terms say so.
Distribution debt and winding up
Section 14-2-640(f) puts compliant distribution debt at parity with general unsecured debt unless it is subordinated or secured. Subsection (g) allows properly conditional debt to be omitted from the financial-test liabilities, but then retests every principal and interest payment on its actual date.
For dissolution, § 14-2-1405 supplies the separate sequence: discharge or provide for liabilities, then distribute remaining property among shareholders according to their interests.
What trips people up
A share dividend is not a property distribution under § 14-2-140(6). It has its own pro rata, cross-class, record-date, and treasury-share rules in § 14-2-623. Likewise, distributing a debt instrument is tested when the debt is distributed, while each payment on specially conditional debt is tested again when paid.
Georgia's committee rule also differs from statutes that reserve ordinary dividends to the full board. Section 14-2-825's current nondelegable list does not include distributions, but the delegation must still come from the board, articles, or bylaws and remains subject to the distribution tests.
Common questions
Can shareholders agree to authorize disproportionate distributions?
Potentially. Section 14-2-732(a)(2) permits that subject to the agreement's strict formation and private-company conditions and to § 14-2-640's financial limits.
Does Georgia require dividends to come from surplus?
No separate surplus or net-profit source appears in § 14-2-640. The board must instead apply the due-debt and assets/liabilities/preference tests after giving the distribution effect.
Can a corporation issue another class as a share dividend?
Only through one of § 14-2-623(b)'s routes: authorization in the articles, majority approval by the class or series to be issued, or no outstanding shares of that class or series.
Statutes and sources
- O.C.G.A. §§ 14-2-140, 14-2-601, 14-2-604, 14-2-623, and 14-2-640 — entity/distribution definitions, class and fraction rules, share dividends, financial tests, valuation, timing, and distribution debt. Official-code public-domain text (accessed September 3, 2026; post-release acts checked through 2026).
- O.C.G.A. §§ 14-2-707, 14-2-732, 14-2-801, 14-2-825, and 14-2-830 — record dates, shareholder agreements, board and committee authority, and reliance. Same official-code distribution (accessed September 3, 2026; post-release acts checked through 2026).
- O.C.G.A. § 14-2-1405 — winding-up distribution sequence. Same official-code distribution (accessed September 3, 2026; post-release acts checked through 2026).
Source links
Every statute quoted above, linked, with the date we checked it.
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