Distributions prohibited

Except as provided in Code Section 14-3-1302 and Article 14 of this chapter, a corporation shall not make any distributions. (Code 1981, § 14-3-1301, enacted by Ga. L. 1991, p. 465, § 1.) COMMENT This section is based on the Model Act. It continues the prohibition of former law on the payment of the income of a nonprofit corporation to its members, directors or officers. See section 14-3-112 of former law. The term ‘‘distribution’’ is defined in 732 14-3-1302 section 14-3-140(9) as ‘‘the payment of a dividend or any part of the income or profit of a corporation to its members, directors, or officers.’’ Excluded from the definition are such payments as indemnification and reasonable fees, compensation and expenses. Charitable-type corporations typically use their income to further their purposes. Corporations organized for social or other non-charitable purposes may use any net income to improve their facilities. While members of such nonprofits may receive a benefit from the improved facilities, such an indirect benefit is not a dividend or a prohibited distribution because it conforms with the corporation’s purposes. Distributions upon dissolution of a corporation are governed by this section and article 14. 14-3-1302. Exceptions to prohibition against distributions.