Subchapter S Corporations Distributions (Dividends)

OFI BULLETIN BL-05-2003 August 18, 2003 TO: THE CHIEF EXECUTIVE OFFICER/MANAGER SUBJECT: SUBCHAPTER “S” CORPORATIONS DISTRIBUTIONS (DIVIDENDS) As a result of the increasing number of state-chartered financial institutions converting to Subchapter S Corporations, 33 as of March 31, 2003, there is a need to clarify the intent of the Louisiana Banking Law with respect to the distribution of earnings of such institutions. It is the opinion of this office that, despite the difference in terms for Subchapter S Corporations, ‘distribution of earnings’ is the same as the ‘payment of dividends.’ Therefore, the distribution of earnings to Subchapter S Corporations shareholders is subject to the dividend limits contained in LSA￾R.S. 6:263(B). Prior approval of the Commissioner is also required in order to exceed the limitation as contained therein. While such distributions (dividends) are normally considered to be automatic, they must be declared by the Board of Directors prior to payment. This bulletin will also be posted on OFI’s website www.ofi.state.la.us. If you have any questions, please contact me directly. Sidney E. Seymour Chief Examiner Louisiana Office of Financial Institutions sseymour@ofi.state.la.us 225/925-4675 OFFICE OF FINANCIAL INSTITUTIONS