# Tenn. Code Ann. § 56-3-109: Dividends - Illegal division - Directors' liability to creditors

> Tennessee · Statutes · In force

URL: https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-109

## Section

- **Citation:** Tenn. Code Ann. § 56-3-109
- **Heading:** Dividends - Illegal division - Directors' liability to creditors
- **Jurisdiction:** Tennessee
- **Kind:** Statutes
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** TN Code / Title 56 / Chapter 3 / Section 56-3-109

## Text

Moneys received as premiums upon risks undetermined and outstanding, at the time of declaring any dividend, shall not be considered as profits, earned and divided as such; and if any loss should happen impairing the capital stock, no dividend shall be declared until the capital stock is made good; and if a dividend is declared, contrary to this prohibition, the directors consenting to the dividend shall be liable to make good to the creditors of the company, if their claims cannot otherwise be satisfied, the amount of dividends thus illegally divided. Acts 1875, ch. 142, § 10; Shan., § 2266; Code 1932, § 3978; T.C.A. (orig. ed.), §§ 56-235, 56-330.
Moneys received as premiums upon risks undetermined and outstanding, at the time of declaring any dividend, shall not be considered as profits, earned and divided as such; and if any loss should happen impairing the capital stock, no dividend shall be declared until the capital stock is made good; and if a dividend is declared, contrary to this prohibition, the directors consenting to the dividend shall be liable to make good to the creditors of the company, if their claims cannot otherwise be satisfied, the amount of dividends thus illegally divided.
Acts 1875, ch. 142, § 10; Shan., § 2266; Code 1932, § 3978; T.C.A. (orig. ed.), §§ 56-235, 56-330.

## Nearby sections

- [Tenn. Code Ann. § 56-3-101 Investments of insurance companies organized after May 11, 1895](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-101.md)
- [Tenn. Code Ann. § 56-3-102 [Repealed]](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-102.md)
- [Tenn. Code Ann. § 56-3-103 Officers must not be pecuniarily interested in investment or disposition of funds of domestic company](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-103.md)
- [Tenn. Code Ann. § 56-3-104 Investments of domestic company in which officers pecuniarily interested not to be allowed as an admitted asset](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-104.md)
- [Tenn. Code Ann. § 56-3-105 Regulation of compensation of officers, agents and employees of life insurance companies and fraternal benefit societies](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-105.md)
- [Tenn. Code Ann. § 56-3-106 Pensions to officers, directors, or trustees, or to members of their families prohibited to domestic stock or mutual life insurance companies or fraternal benefit societies - Employees' retirement plans permitted](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-106.md)
- [Tenn. Code Ann. § 56-3-107 Disbursements by life insurance companies to be upon vouchers or affidavits](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-107.md)
- [Tenn. Code Ann. § 56-3-108 Dividends - Unauthorized payment - Penalty](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-108.md)
- [Tenn. Code Ann. § 56-3-109 Dividends - Illegal division - Directors' liability to creditors](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-109.md)
- [Tenn. Code Ann. § 56-3-110 Unclaimed dividends - Publication](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-110.md)
- [Tenn. Code Ann. § 56-3-111 Certain insurance companies to report settlement or judgment in health care liability claims](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-111.md)
- [Tenn. Code Ann. § 56-3-112 [Repealed]](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-112.md)
- [Tenn. Code Ann. § 56-3-113 Valuation of bonds](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-113.md)
- [Tenn. Code Ann. § 56-3-114 Valuation of securities](https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-114.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/STATE_TN_T56_C3_S56-3-109. Check the current official text before relying on it. Not legal advice.