Idaho Code 30-29-1405 specifies the default record date for determining shareholders entitled to receive a distribution during the liquidation of a corporation, particularly when the board of directors has not explicitly set such a date.
Understanding the Key Provision
The core of Idaho Code 30-29-1405 establishes a default rule for the record date in the context of corporate liquidations. If the board of directors does not fix a record date for determining shareholders entitled to a distribution in liquidation, the record date is the date the board of directors authorizes the distribution in liquidation. This provision ensures clarity and prevents ambiguity regarding who is eligible to receive distributions, even if an explicit record date is not established by the board.
Why a Record Date Matters in Liquidation
A record date is crucial in corporate finance because it determines which shareholders are entitled to receive certain corporate actions, such as dividends, voting rights, or, in this case, distributions of assets during a liquidation. For a corporation undergoing liquidation, accurately identifying the eligible shareholders is vital for the equitable and orderly distribution of remaining assets.
Key Concepts Explained:
| Term | Explanation |
|---|---|
| Record Date | A specific date set by a corporation to identify which shareholders of record are eligible to participate in certain corporate actions, such as receiving distributions. |
| Distribution in Liquidation | The process where a dissolving corporation distributes its remaining assets or proceeds from asset sales to its shareholders after all debts and obligations are settled. |
| Board of Directors | The governing body elected by shareholders that oversees the management of a corporation and makes key decisions, including authorizing distributions. |
Practical Implications for Corporations and Shareholders
This Idaho statute provides a clear fallback mechanism, which has several practical implications:
- For Corporations:
- Ensures Orderly Liquidation: It prevents delays or disputes in asset distribution by providing a clear date for eligibility even without a board-set record date.
- Reduces Administrative Burden: If the board overlooks setting a record date, this default rule simplifies the process rather than requiring corrective action.
- Compliance: Corporations must be aware of this default rule to ensure their liquidation processes adhere to state law.
- For Shareholders:
- Clarity on Eligibility: Shareholders can understand their eligibility for liquidation distributions based on the date the board authorized the distribution, even if no separate record date was announced.
- Protects Rights: It ensures that shareholders' rights to receive distributions are protected, preventing situations where a lack of a formal record date might disenfranchise them.
Understanding this specific section of the Idaho Code is essential for corporations undergoing dissolution and for shareholders monitoring the liquidation of their investments within the state. For more detailed information, you can refer to the official Idaho State Legislature statutes regarding corporations.
