Corporate Dividend and Distribution Requirements in South Carolina
At a glance
| Governing law, entity, distribution, and scope | South Carolina Business Corporation Act of 1988, S.C. Code tit. 33, chs. 1–20; ordinary domestic for-profit corporation. Distribution includes direct/indirect money or property except own shares, debt, dividends, purchases, redemptions, and other acquisitions; share dividends separately governed (§§ 33-1-101, 33-1-400, 33-6-230, 33-6-400) |
|---|---|
| Board, committee, shareholder, and charter authority | Board authorizes subject to articles and § 33-6-400(c). Committee may not authorize distributions; it may approve reacquisition only by board- prescribed formula/method. No general shareholder approval; articles may restrict (§§ 33-6-400, 33-8-250) |
| Cash, property, shares, debt, repurchase, and redemption forms | Direct/indirect money or property except own shares, incurred debt, dividend declaration/payment, purchase, redemption, other acquisition, debt, or other distribution (§ 33-1-400(7)); share dividends under § 33-6-230; redeemable shares may use cash, debt, securities, or property (§ 33-6-101(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 § 33-6-400; South Carolina uses the dual post- distribution limits plus articles and class/series terms |
| Liquidity, balance-sheet, liability, and preference test | After distribution: corporation must be able to pay debts as due, and assets must be ≥ liabilities plus amount needed for superior dissolution preferences unless articles permit otherwise (§ 33-6-400(c)) |
| Financial statements, valuation, reserves, and reliance | Board may use reasonable-in-circumstances accounting statements, fair valuation, or another reasonable method (§ 33-6-400(d)); qualified reliance on reliable officers/employees, competent experts, or trusted committee (§ 33-8-300(b)–(c)); no distribution-specific reserve formula |
| Record date, measurement date, payment delay, and revocation | Board-set record date; default is authorization except repurchase/ reacquisition. Acquisition: earlier transfer/debt or status end; other debt: distribution; other payments: authorization if ≤120 days, payment if later (§ 33-6-400(b), (e)); no general revocation rule or stated record-date maximum |
| Class, series, equal treatment, stock distribution, and fractions | Same-class/series rights identical subject to permitted series terms; articles set preferences (§§ 33-6-101–102). Share dividends pro rata; cross- class issue needs articles, issuing-class majority, or no outstanding shares (§ 33-6-230). Fractions, value cash, disposition, or scrip (§ 33-6-104) |
| Distribution debt, priority, liquidation, insolvency, and boundaries | Compliant distribution debt is at parity with general unsecured debt unless subordinated (§ 33-6-400(f)). Section states no security treatment, conditional-debt liability exclusion, or payment retest. Liquidation, liability, creditor, bankruptcy, covenant, tax, valuation, and advice issues outside scope |
Requirements one by one
Governing law, entity, distribution, and scope
S.C. Code §§ 33-1-101, 33-1-400, and 33-6-400 apply the South Carolina Business Corporation Act to an ordinary domestic for-profit 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 distributions are named forms.
Own shares are excluded from the property branch and handled as share dividends under S.C. Code § 33-6-230.
Board, committee, shareholder, and charter authority
S.C. Code § 33-6-400(a) assigns authorization to the board, subject to articles restrictions and the financial tests. The surveyed provisions state no general shareholder-approval step.
S.C. Code § 33-8-250(e) bars a committee from authorizing distributions. A committee may authorize or approve a reacquisition only according to a formula or method the board prescribed. That limited exception does not permit an ordinary dividend declaration.
Cash, property, shares, debt, repurchase, and redemption forms
S.C. Code § 33-1-400(7) reaches money, property, incurred debt, dividend declarations and payments, purchases, redemptions, other acquisitions, debt distributions, and other distributions. Section 33-6-101(c)(2) also allows articles to make a class redeemable for cash, indebtedness, securities, or other property.
The corporation's own shares follow the separate § 33-6-230 share-dividend rules, and § 33-6-310 governs acquired-share status.
Surplus, net-profit, equity, and capital-source test
S.C. Code § 33-6-400 states no separate surplus, retained-earnings, net-profit, stated-capital, or other source test. South Carolina instead uses the two post- distribution limits in subsection (c), together with articles restrictions and class or series preferences.
This reports the statutory test without applying it to a corporation's numbers.
Liquidity, balance-sheet, liability, and preference test
S.C. Code § 33-6-400(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 articles 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
S.C. Code § 33-6-400(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 S.C. Code § 33-8-300(b)–(c), qualified reliance may extend to reliable and competent officers or employees, appropriate professionals, or a trusted board committee. Knowledge making reliance unwarranted defeats that route.
Record date, measurement date, payment delay, and revocation
S.C. Code § 33-6-400(b) makes the authorization date the default record date for a non-repurchase or non-reacquisition distribution unless the board fixes a different date. The subsection states no maximum interval.
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
S.C. Code § 33-6-101 makes same-class rights identical subject to permitted series terms, and S.C. Code § 33-6-102 makes same-series rights identical. Articles may establish cumulative or noncumulative dividends, redemption terms, and distribution or dissolution preferences.
Under S.C. Code § 33-6-230, share dividends are pro rata and without consideration. A cross-class or cross-series dividend requires articles authorization, majority approval by the class or series to be issued, or no outstanding shares of that class or series. S.C. Code § 33-6-104 permits fractions, value cash, shareholder disposition, or scrip; fractions carry dividend rights, while scrip does so only if its terms provide.
Distribution debt, priority, liquidation, insolvency, and boundaries
S.C. Code § 33-6-400(f) places compliant distribution debt at parity with general unsecured debt unless subordinated by agreement. Unlike many Model Act versions, South Carolina's section states no rule for a securing interest and no conditional-debt liability exclusion or payment-date retest.
The hypothetical-dissolution preference calculation does not resolve an actual liquidation. Liability, recovery, fraudulent transfer, bankruptcy, covenants, fiduciary duties, tax, accounting, and valuation advice remain outside scope.
What trips people up
- The committee exception is narrow. A board-formula reacquisition does not permit the committee to declare an ordinary dividend.
- Distribution debt lacks the conditional-debt rule found elsewhere. The section gives parity treatment but no liability exclusion or later payment retest.
- Record-date timing and financial-test timing differ. Authorization can be the recipient record date while the financial test shifts to payment after 120 days.
- Own shares are handled separately. The definition excludes them from the property branch, while § 33-6-230 supplies the share-dividend rules.
Common questions
Does South Carolina require surplus or current net profits?
No separate source test appears in S.C. Code § 33-6-400. The operative limits are the debts-as-due and assets-versus-liabilities-plus-preferences tests.
May the articles remove both financial tests?
No. The articles exception reaches the superior-preference add-on, not the debts-as-due requirement or the basic assets-versus-liabilities comparison.
May a committee declare an ordinary dividend?
No. S.C. Code § 33-8-250 expressly withholds distribution authorization from a committee and permits only a board-formula or board-method reacquisition.
Statutes and sources
- S.C. Code §§ 33-1-101 and 33-1-400(4), (7) — Act title, domestic corporation, and distribution definition. Official South Carolina Code Title 33, Chapter 1 (accessed 2026-09-03).
- S.C. Code §§ 33-6-101–104 — classes, series, preferences, redemption forms, and fractions. Official Title 33, Chapter 6 (accessed 2026-09-03).
- S.C. Code § 33-6-230 — share dividends and record dates. Official Chapter 6 (accessed 2026-09-03).
- S.C. Code § 33-6-400 — board authority, solvency tests, valuation, timing, and distribution debt. Official Chapter 6 (accessed 2026-09-03).
- S.C. Code §§ 33-8-250 and 33-8-300 — committee limits and qualified reliance. Official Title 33, Chapter 8 (accessed 2026-09-03).
Source links
Every statute quoted above, linked, with the date we checked it.
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