Corporate Dividend and Distribution Requirements in New Hampshire

At a glance

Requirements one by one

Governing law, entity, distribution, and scope

N.H. Rev. Stat. Ann. § 293-A:1.40 defines the covered corporation as a domestic for-profit corporation and a distribution as a direct or indirect transfer of money or property, other than its own shares, or an incurrence of debt for shareholders with respect to shares. It expressly includes declared and paid dividends, purchases, redemptions, other share acquisitions, and distributed debt.

N.H. Rev. Stat. Ann. § 293-A:6.40(h) excludes liquidation distributions under the specified dissolution provisions. This page addresses the nonliquidating branch.

Board, committee, shareholder, and article authority

N.H. Rev. Stat. Ann. § 293-A:6.40(a) assigns authorization to the board, subject to the articles and the statutory financial tests. Under § 293-A:8.25, a committee may authorize or approve a distribution only according to a formula or method or within limits prescribed by the board.

A compliant agreement under § 293-A:7.32 may govern authorization or making of distributions, including distributions not proportional to share ownership. It requires all current shareholders when made and remains expressly subject to § 293-A:6.40, so it does not eliminate the financial limits.

Cash, property, shares, debt, repurchase, and redemption forms

The § 293-A:1.40(6) definition reaches direct and indirect money or property, incurred indebtedness, declared and paid dividends, purchases, redemptions, and other share acquisitions. The corporation's own shares are excluded from the property branch and instead follow N.H. Rev. Stat. Ann. § 293-A:6.23.

No surplus or net-profit source test

N.H. Rev. Stat. Ann. § 293-A:6.40 states no separate lawful-source test based on surplus, retained earnings, stated capital, or current or preceding-year net profits. It instead uses the two post-distribution limits in subsection (c), subject also to the articles and any class or series terms. This page does not apply those tests to a corporation's accounts.

Liquidity, assets, liabilities, and preferences

Section 293-A:6.40(c) bars a distribution if the corporation would be unable to pay debts as they become due in the usual course. It separately requires total assets to remain at least equal to total liabilities plus the amount needed on an immediate hypothetical dissolution to satisfy shareholder preferences superior to those receiving the distribution. The articles may permit omission of that preference add-on, but not the underlying liabilities.

N.H. Rev. Stat. Ann. § 293-A:6.01 places class and series terms in the articles. Those terms can define redemption forms, dividend calculations, and distribution priorities.

Statements, valuation, and reliance

Under § 293-A:6.40(d), the board may use financial statements prepared on accounting practices and principles reasonable in the circumstances, a fair valuation, or another reasonable method. N.H. Rev. Stat. Ann. § 293-A:8.30 separately permits qualified reliance on delegated performance, corporate records, officers, employees, retained professionals, and another board committee when its stated conditions are met.

The distribution section adds no depletion-reserve formula or current-valuation disclosure. This page does not determine which method, value, or reliance is reasonable for a particular corporation.

Record date, measurement, delayed payment, and revocation

N.H. Rev. Stat. Ann. § 293-A:6.40(b), (e) allows a board-set distribution record date and uses authorization as the default when the board does not fix one, except for a share purchase, redemption, or other acquisition. A share acquisition is measured at the earlier of the transfer or debt-incurrence date and the date the holder ceases to be a shareholder for the acquired shares. Other distributed debt is measured when distributed.

An ordinary payment uses authorization when it occurs within 120 days and the payment date when it occurs later. Section 293-A:6.40 states no general power to revoke an authorized distribution.

Share dividends, class terms, escrowed shares, and fractions

N.H. Rev. Stat. Ann. § 293-A:6.01 ordinarily makes terms identical within a class or series, but it lets the articles expressly vary terms among holders of the same class or series. N.H. Rev. Stat. Ann. § 293-A:6.23 makes a share dividend pro rata and without consideration unless the articles provide otherwise. A cross-class issuance requires articles authority, majority approval by the class or series being issued, or no outstanding shares of that issued class or series.

N.H. Rev. Stat. Ann. § 293-A:6.04 permits an actual fractional share, money equal to its value, a shareholder disposition arrangement, or registered or bearer scrip. A fractional share carries shareholder rights; scrip carries none unless its terms say otherwise. Under § 293-A:6.21(f), distributions on escrowed shares may be credited against the purchase price and canceled if the promised service, benefit, or note payment does not arrive.

Distribution debt, conditional payments, and liquidation

N.H. Rev. Stat. Ann. § 293-A:6.40(f)-(h) puts compliant distribution indebtedness at parity with general unsecured debt unless an agreement subordinates it. Debt payable only if and to the extent a distribution could then be made is excluded from liabilities for the balance-sheet test. Each principal or interest payment on debt issued as a distribution is itself tested as a distribution when paid.

Subsection (h) directs liquidation distributions to the dissolution statutes. 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

A shareholder agreement does not erase the financial limits. RSA 293-A:7.32 can shift authority and permit a disproportionate distribution, but its own text preserves RSA 293-A:6.40.

Same-class terms are not invariably identical. RSA 293-A:6.01 allows holder-level variations when the articles expressly set them out. The current articles must be checked before assuming equal distribution terms.

The 120-day line changes the measurement date. An ordinary payment within the line uses authorization; a later payment uses payment. The original test does not remain the statutory measurement indefinitely.

Common questions

Can a New Hampshire board committee approve a dividend?

Only within a formula, method, or limits prescribed by the board under RSA 293-A:8.25. The committee does not receive unrestricted distribution authority merely because it has general delegated board powers.

Can a New Hampshire corporation issue its own shares as a dividend?

Yes, through RSA 293-A:6.23 rather than the ordinary property-distribution branch. Its pro rata default, cross-class alternatives, and record-date rule must be checked against the articles and outstanding share structure.

Does issuing a conditional note avoid future testing?

No. Qualifying conditional debt may be excluded from liabilities for the initial test, but every principal or interest payment on debt issued as a distribution is tested when actually made.

Statutes and sources

• N.H. Rev. Stat. Ann. §§ 293-A:1.40, 293-A:6.01 to 6.04, 293-A:6.21, 293-A:6.23, 293-A:6.40, 293-A:7.32, 293-A:8.25, and 293-A:8.30 — definitions, class terms, fractions, escrowed shares, share dividends, authority, financial tests, valuation, timing, shareholder agreements, committee limits, reliance, distribution debt, and liquidation boundary. Current official New Hampshire General Court Chapter 293-A, accessed September 4, 2026.