KRS 272A.10-070: Limitations on distributions.

(1) A limited cooperative association may not make a distribution if, after the

distribution:

(a) The association would not be able to pay its debts as they become due in the

ordinary course of the association's activities;

(b) The association's assets would be less than the sum of its total liabilities; or

(c) The distribution violates the organic rules.

(2) A limited cooperative association may base a determination that a distribution is not

prohibited under subsection (1) of this section on financial stateme nts prepared on

the basis of accounting practices and principles that are reasonable in the

circumstances or on a fair valuation or other method that is reasonable in the

circumstances.

(3) Except as otherwise provided in subsection (4) of this section, th e effect of a

distribution allowed under subsection (2) of this section is measured:

(a) In the case of distribution by purchase, redemption, or other acquisition of

financial rights in the limited cooperative association, as of the date money or

other property is transferred or debt is incurred by the association; and

(b) In all other cases, as of the date:

1. The distribution is authorized, if the payment occurs not later than one

hundred twenty (120) days after that date; or

2. The payment is made, if pa yment occurs more than one hundred twenty

(120) days after the distribution is authorized.

(4) If indebtedness is issued as a distribution, each payment of principal or interest on

the indebtedness is treated as a distribution, the effect of which is measu red on the

date the payment is made.

(5) For purposes of this section, "distribution" does not include reasonable amounts

paid to a member in the ordinary course of business as payment or compensation for

commodities, goods, past or present services, or re asonable payments made in the

ordinary course of business under a bona fide retirement or other benefits program.