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HomeCorporations CodeCh. 4Art. 2§ 5420 Distribution Liability Recovery

§ 5420 Distribution Liability Recovery

Corporations Code·California
AI Summary·Official Text·Related Statutes·References
AI SummaryVerified

§ 5420 Distribution Liability Recovery

Key Takeaways

  • •If someone gets money from a company they shouldn't have, they have to pay it back with interest.
  • •People like bosses, owners, or even regular people who helped take money unfairly can be sued to give it back.
  • •If someone is sued, they can ask others involved to help pay back the money if they weren't trying to trick the company.
  • •This rule doesn't change other laws about unfair money moves, like hiding money to avoid paying debts.

Example

A company gives out extra money to its owners even though the company is struggling and owes money to others.

The owners who took the money have to give it back with interest. If they knew the company was in trouble and took the money anyway, they might also have to pay extra as punishment.

AI-generated — May contain errors. Not legal advice. Always verify source.

Official Source
View on CA.gov

§ 5420 Distribution Liability Recovery

(a) Any person who receives any distribution is liable to the corporation for the amount so received by such person with interest thereon at the legal rate on judgments until paid. (b) Suit may be brought in the name of a corporation by a creditor, a director, the Attorney General, or, subject to meeting the requirements of Section 5710, a member. In any such action in addition to the remedy provided in subdivision (a), the court may award punitive damages for the benefit of the corporation against any director, officer, member or other person who with intent to defraud the corporation caused, received or aided and abetted in the making of any distribution. (c) Any person sued under this section may implead all other persons liable under this section and may in the absence of fraud by a moving party compel contribution, either in that action or in an independent action against persons not joined in the action. (d) This section shall not affect any liability which any person may have under the Uniform Voidable Transactions Act (Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of Division 4 of the Civil Code). (Amended by Stats. 2015, Ch. 44, Sec. 19. (SB 161) Effective January 1, 2016.)

Last verified: January 23, 2026

Related Statutes

  • § 12455 Prohibited Distribution Liability
  • § 28210 Licensee Governing Body Requirements
  • § 28211 Annual Licensee Board Meetings
  • § 28212 Investment Advisor Contract Approval
  • § 7420 Improper Distribution Liability

References

  • Official text at leginfo.legislature.ca.gov
  • California Legislature. Corporations Code. Section 5420.
View Official Source