General Laws of Massachusetts - Chapter 170 Co-operative Banks - Section 20 Distribution of net profits

Section 20. The board of directors, at each distribution date which shall be monthly, quarterly, semiannually or annually on a bank day, shall distribute the net profits in the following manner:

(a) Dividends and interest shall be distributed to the various classes of shares and accounts referred to in chapter one hundred and sixty-seven D then existing, at such dividend and interest rates respectively applicable to each class as shall be determined by the directors. Such distributions to each class of shares shall be made on the basis of their value at that time and shall be computed on the basis of a single share fully paid to the date of distribution. Distributions to paid-up shares, as to each holder thereof, shall be credited or reserved for credit to a savings account, paid-up shares account, or a dividend savings account in such holder’s name, or shall be paid to such holder if such holder or the corporation so elects. Section twenty A shall apply to distributions to savings accounts and to dividend savings accounts. Distributions to club accounts shall be in accordance with the terms thereof. Any distributions which are to be credited to savings accounts, dividend savings accounts and club accounts may, at the option of the directors, be reserved for credit at a later date which shall be within three months as to savings accounts and dividend savings accounts, and within one year as to club accounts. Nothing contained in this section shall be construed as preventing any such corporation from making, within its taxable year as determined for federal income tax purposes, at least four distributions if on a quarterly basis, or at least two distributions if on a semiannual basis, or at least one distribution if on an annual basis.

(b) After such distribution or provision therefor, any balance of net profits then remaining shall be transferred to one or more of the following accounts: to the surplus account referred to in section twenty-one, to a reserve for bad debts, to other reserve accounts, to a profit and loss account, or to an undistributed earnings account; provided, however, to such appropriate adjustments of amounts so transferred during the taxable year of such corporation as may be made for federal income tax purposes prior to or as of the end of such taxable year. No supplementary or extra distribution of dividends or interest shall be made from any amounts so transferred unless, at the time of such distribution, the combined surplus account, reserve for bad debts and unallocated reserves, in the judgment of the board of directors, shall equal at least eight per cent of the share liability of such corporation, nor shall any supplementary or extra distribution of dividends or interest be made which will reduce said reserves to an amount less than eight per cent of the share liability of said corporations; unless the required transfer to reserves shall have first been made from current earnings. Upon written approval of the commissioner a supplementary or extra distribution of dividends may be made in part or in full from the surplus account.

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Last modified: September 11, 2015