How are the corporation’s assets distributed upon dissolution?

In the process of winding up the corporation’s business as part of dissolution, the board must first determine that all of the corporation’s known debts and liabilities have been paid or adequately provided for. Cal. Corp. Code §§ 2004, 2005 (means of providing for the payment of a debt or liability, even if the whereabouts of the creditor is unknown). Only after making that determination can the board distribute all of the corporation’s remaining assets among the shareholders according to their respective rights and preferences. The distribution to shareholders must be made as soon as reasonably consistent with the beneficial liquidation of the corporation’s assets, and may be made either in money or in property or securities and either in installments or as a whole. Cal. Corp. Code § 2006. If assets are distributed without making prior payment of, or adequate provision for, the corporation’s known debts and liabilities, then the corporation, or one or more creditors suing in the corporation’s name, may bring suit to recover any amount improperly distributed to any shareholder. Cal. Corp. Code §§ 2009, 2011. The shareholder’s total liability in such an action may not exceed the amount of the corporation’s assets distributed to the shareholder upon dissolution. Cal. Corp. Code § 2011(a)(1)(B). In addition, the corporation’s directors who approved a distribution of assets to shareholders without first paying or adequately providing for the corporation’s known debts and liabilities may be held jointly and severally liable to the corporation for the benefit of its creditors or shareholders. Cal. Corp. Code § 316(a)(2).