Corporate Dividend and Distribution Requirements in Kansas

At a glance

Requirements one by one

Governing law, entity, distribution, and scope

Kansas does not use one Model Act-style definition and limit for every shareholder distribution. K.S.A. §§ 17-6420 to 17-6423 govern dividends, while § 17-6410 separately governs purchases, redemptions, exchanges, and other dealings in the corporation's shares. This page concerns an ordinary domestic stock corporation and its voluntary nonliquidating transactions; liquidation is outside its scope.

Director, committee, stockholder, and article authority

K.S.A. § 17-6420 assigns declaration and payment to directors, subject to the articles. Committee authority under § 17-6301(c) depends on statutory vintage. A corporation formed on or after July 1, 2004—and an earlier corporation whose whole board elects the newer rule—may delegate general board powers by its board resolution or bylaws, subject to two listed committee prohibitions that do not include declaring a dividend.

An earlier corporation still using subsection (c)(2) must expressly confer dividend authority in its committee resolution, bylaws, or articles. K.S.A. § 17-7214 separately protects a statutory close corporation's written stockholder agreement, articles, or bylaws concerning dividend declaration and payment or another division of profits from invalidity merely for using a partnership-like arrangement.

Cash, property, stock, debt, purchase, and redemption forms

K.S.A. § 17-6423 permits a dividend in cash, property, or the corporation's shares. Section 17-6420 recognizes a note, debenture, or other obligation paid as a dividend. Section 17-6410 separately permits a corporation to purchase, redeem, exchange, or otherwise acquire and deal in its own shares, subject to capital, redemption-price, and articles limits.

Surplus, net profits, capital, and wasting assets

Under K.S.A. § 17-6420(a), the first lawful source is surplus. K.S.A. § 17-6404 defines surplus as net assets above capital and net assets as total assets above total liabilities, without treating capital or surplus themselves as liabilities.

When no surplus exists, § 17-6420 permits current-fiscal-year or preceding- fiscal-year net profits, or both. If losses, depreciation, or another cause has reduced capital below the capital represented by outstanding classes with an asset-distribution preference, that net-profit route stays closed until the deficiency is repaired. A wasting-assets corporation may calculate the covered profits or proceeds without counting depletion from time, consumption, liquidation, or exploitation.

No Model Act dual solvency test

The current Kansas dividend sections state no separate ability-to-pay-debts test and no Model Act comparison of total assets against liabilities plus a superior- preference amount. Kansas instead uses the surplus-or-net-profits source rule and the preferred-capital repair overlay. For a share purchase or redemption, K.S.A. § 17-6410 separately bars capital impairment, subject to its retirement- and-capital-reduction exception.

Records, advisers, and reserves

K.S.A. § 17-6422 protects a director or committee member who relies in good faith on corporate records or information, opinions, reports, and statements from carefully selected officers, employees, committees, or professionals about assets, liabilities, net profits, surplus, dividend funds, or stock-purchase funds. K.S.A. § 17-6421 also permits the board to set aside dividend-available funds as a reserve for any proper purpose and later abolish it.

The Code states no Model Act menu expressly naming fair valuation or another reasonable method. This page does not select a valuation or decide whether reliance, selection, a reserve, or a stated financial amount is proper.

Record date, debt-delivery date, delay, and revocation

Under K.S.A. § 17-6503(c), the board may fix a dividend or other distribution record date no earlier than the adopting resolution and no more than 60 days before the action. Without one, the default is close of business on the day the board adopts the related resolution.

K.S.A. § 17-6420 tests a dividend note, debenture, or other obligation when the corporation delivers it. Section 17-6410 uses the same delivery focus for an obligation given for a share purchase, redemption, or exchange. The surveyed sections state no general authorization-to-payment interval or ordinary dividend-revocation rule.

Class preferences, stock dividends, partly paid shares, and fractions

K.S.A. § 17-6401 places a class or series's dividend rate, conditions, timing, priority, and cumulative or noncumulative character in the articles or an articles-authorized board resolution. Section 17-6423 requires a board resolution to designate stated capital for a dividend paid in previously unissued shares, with a distinct rule for par and no-par shares. A stock split or division is exempt from that designation rule.

K.S.A. § 17-6406 gives partly paid shares of the same class a dividend based only on the percentage of consideration actually paid when fully paid shares receive one. K.S.A. § 17-6405 permits fractional shares or, instead, disposition, fair-value cash, scrip, or warrants. A fraction carries stockholder rights; scrip or warrants do not unless their terms provide otherwise.

Dividend and acquisition debt; boundaries

K.S.A. § 17-6420 preserves a note, debenture, or other dividend obligation and payments on it when the corporation had a lawful surplus or net-profit source at delivery. K.S.A. § 17-6410 similarly preserves an acquisition obligation when capital was not impaired and delivery did not impair it. The surveyed sections state no special priority against general unsecured debt and no conditional- payment exclusion from liabilities.

Dissolution distributions, director or stockholder liability, creditor recovery, fraudulent transfer, bankruptcy, covenants, fiduciary duties, tax, accounting, and transaction advice remain outside this survey.

What trips people up

Kansas is not a dual-solvency-test state. The operative dividend question is lawful surplus or, when none exists, specified net profits with the preferred- capital repair rule. Importing a Model Act liquidity test would change the statutory architecture.

Committee authority depends on vintage or election. The older subsection (c)(2) route needs an express dividend delegation; the newer subsection (c)(3) route gives the committee delegated board powers except for its listed barred matters. The corporation's formation date, board election, resolution, bylaws, and articles all matter.

Partly paid shares use their paid percentage. A dividend on fully paid shares triggers a same-class dividend on partly paid shares, but § 17-6406 scales it to consideration actually paid.

Common questions

Can a Kansas corporation pay a dividend in its own stock?

Yes. K.S.A. § 17-6423 permits it and requires the board to designate stated capital when previously unissued shares pay the dividend. A stock split follows the section's separate exception.

Does Kansas cap the dividend record-date window?

Yes. K.S.A. § 17-6503(c) makes the date nonretroactive and places it no more than 60 days before the dividend, distribution, right, or other action. Without a fixed date, the board-resolution day is the default.

Does giving a dividend note avoid the source rule?

No. K.S.A. § 17-6420 preserves the obligation only when lawful surplus or net profits existed when the corporation delivered it. The note form does not create a new source of dividend funds.

Statutes and sources

• K.S.A. §§ 17-6301, 17-6401, 17-6404 to -6406, 17-6410, 17-6420 to -6423, 17-6503, and 17-7214 — board and committee authority, classes, capital, fractions, partly paid shares, acquisitions, dividend source and forms, wasting assets, reserves, reliance, record dates, debt, and the close- corporation overlay. Current official Kansas Revisor pages linked in the source entries above, accessed September 4, 2026.