Gino DiCaro

New Bill Restricts Shareholder Distributions

By Gino DiCaro, VP, Communications

Capitol Update, April 21, 2006 Share this on FacebookTweet thisEmail this to a friend

AB 2122 by Johan Klehs (D – San Leandro)  would prohibit any California corporation or any of its subsidiaries from making a distribution to the corporation's shareholders if they have an outstanding pension obligation to employees. Additionally, the bill would make a shareholder who received a distribution prohibited by this provision liable to the corporation for the dividend payment, plus interest, regardless of whether he or she had knowledge of its impropriety.

Currently, federal law governs pension funding obligations. A person who believes they have been denied a pension benefit is able to sue pursuant to ERISA.

The current language of the bill does not specify whether the bill would apply to California-based companies only, or whether it would also apply to any company with a California presence. Additionally, the terms "failed to pay", "distribution", and "pension obligation" are not defined.

If you would like CMTA to take a position on the bill at the May 1st hearing in the Assembly Banking & Finance committee, contact Matt Sutton.
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