Title 2. Corporations in General -- Formation, Organization, and Operation — Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
Statutes in effect as of October 1, 2026.
Md. Code Ann., Corps. & Ass'ns § 2-301 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–301LinkCopy Citation
(a)
(1)
In this subtitle, “distribution” means:
(i)
A direct or indirect transfer of money or other property of the corporation in respect of any of its shares; or
(ii)
An incurrence or forgiveness of indebtedness by a corporation to or for the benefit of the corporation’s stockholders in respect of any of its shares.
(2)
“Distribution” does not include a stock dividend or stock split authorized in accordance with § 2-309(c) of this subtitle.
(b)
A distribution may be in the form of:
(1)
A declaration or payment of a dividend;
(2)
A purchase, redemption, whether or not at the option of the corporation or the stockholders, or other acquisition of shares; or
(3)
An issuance of evidence of indebtedness.
Md. Code Ann., Corps. & Ass'ns § 2-302 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–302LinkCopy Citation
(a)
Each corporation shall keep its books in a manner which shows:
(1)
The amount and nature of the money or other consideration it receives for the stock which it issues, including:
(i)
The number of shares of stock of each class issued for the consideration; and
(ii)
The stated capital attributable to the issued shares of stock of each class; and
(2)
The amount and nature of the money or other consideration it receives for the convertible securities which it issues.
(b)
If stock with par value and stock without par value are issued together for a particular consideration, the amount by which the consideration exceeds the aggregate par value of the stock with par value constitutes the consideration received for the stock without par value.
Md. Code Ann., Corps. & Ass'ns § 2-303 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–303LinkCopy Citation
(a)
(1)
The entire consideration received by a corporation for issuing stock with par value constitutes stated capital to the extent of the aggregate par value of the stock.
(2)
Any consideration received in excess of the aggregate par value constitutes capital surplus.
(b)
(1)
Except as permitted by paragraph (2) of this subsection, the entire consideration received by a corporation for issuing stock without par value constitutes stated capital.
(2)
Before issuing stock without par value, the board of directors may allocate any portion of the consideration to capital surplus. However, if the stock has a preference in the assets of the corporation in the event of involuntary liquidation, the board may allocate to capital surplus only a portion which does not exceed the amount by which the consideration exceeds the aggregate amount of the preference.
(c)
Subsections (a)(2) and (b) of this section do not affect a good faith allocation of amounts to retained earnings, earned surplus, or a similar account if:
(1)
Stock is issued in a consolidation, merger, or acquisition of all or substantially all of the stock or assets of another corporation; and
(2)
Immediately after the transaction, the aggregate retained earnings, earned surplus, or similar account of the corporation which issued the stock does not exceed the aggregate of the corresponding accounts of the corporations parties to the transaction as they existed immediately before the transaction.
Md. Code Ann., Corps. & Ass'ns § 2-304 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–304LinkCopy Citation
(a)
By resolution of its board of directors, a corporation may apply any part of its capital surplus for:
(1)
The reduction or elimination of a corporate deficit arising from a loss, however incurred, or from diminution in the value of its assets, but only after earned surplus is exhausted; or
(2)
Any other proper corporate purpose.
(b)
An application of capital surplus under subsection (a) of this section shall be disclosed to the stockholders of the corporation in its next annual report.
Md. Code Ann., Corps. & Ass'ns § 2-305 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–305LinkCopy Citation
The corporation may pay or allow out of the consideration received by it for its stock, the reasonable charges and expenses of its organization or reorganization and the reasonable compensation for the sale or underwriting of its stock, without rendering the stock not full paid and nonassessable and without impairing the stated capital.
Md. Code Ann., Corps. & Ass'ns § 2-306 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–306LinkCopy Citation
(a)
Unless the charter provides otherwise, if stated capital is reduced by retiring stock held by the corporation, the board of directors may approve the reduction without stockholder action.
(b)
(1)
Except as provided in subsection (a) of this section or in § 2-605 of this title, a reduction of stated capital of a corporation, whether to be effected with or without a charter amendment, shall be approved in the manner provided in this subsection.
(2)
The board of directors shall:
(i)
Adopt a resolution which declares that the charter amendment, if any, and the proposed reduction is advisable; and
(ii)
Direct that the proposed reduction and any charter amendment be submitted for consideration at either an annual or special meeting of the stockholders.
(3)
A notice which states that a purpose of the meeting will be to act on the proposed reduction and any charter amendment shall be given in the manner required by Subtitle 5 of this title to each stockholder entitled to vote on the matter.
(4)
The proposed reduction and any charter amendment shall be approved by the stockholders of the corporation by the affirmative vote of two thirds of all the votes entitled to be cast on the matter.
Md. Code Ann., Corps. & Ass'ns § 2-308 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–308LinkCopy Citation
(a)
Subject to the limitations of subsection (b) of this section, any surplus which arises from a reduction of stated capital becomes capital surplus and may be made the basis of:
(1)
A distribution or payment to stockholders; and
(2)
A reduction of the liability of stockholders whose shares of stock are not fully paid.
(b)
Except as provided in § 2–311(a)(2) of this subtitle, the net assets of the corporation which remain after a distribution, payment, or reduction of liability shall be at least equal to the aggregate preferential amount payable in the event of voluntary liquidation to the holders of all stock having rights preferred to the rights of holders who received the distribution, payment, or whose liability was reduced.
Md. Code Ann., Corps. & Ass'ns § 2-309 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–309LinkCopy Citation
(a)
In this section, “reverse stock split” means a combination of outstanding shares of stock of a corporation into a lesser number of shares of stock of the same class without any change in the aggregate amount of stated capital of the corporation, except for a change resulting from the elimination of fractional shares in accordance with § 2–214 of this title.
(b)
If authorized by its board of directors, a corporation may make distributions to its stockholders, subject to any restriction in its charter and the limitations in § 2–311 of this subtitle.
(c)
(1)
A division of issued shares into a greater number of shares of the same class without any change in the aggregate amount of stated capital is a stock split, and a division with a change in the aggregate amount of stated capital is a stock dividend within the meaning of this subsection.
(2)
If authorized by its board of directors and unless the charter provides otherwise, shares may be issued by a corporation, without consideration to the holders of one or more classes or series of stock, as a stock split or a stock dividend.
(3)
If a stock dividend is payable in a corporation’s own stock with par value, the shares shall be issued at par value and, at the time the stock dividend is paid, the corporation shall transfer from surplus to stated capital an amount at least equal to the aggregate par value of the shares to be issued.
(4)
If a stock dividend is payable in a corporation’s own stock without par value, the board of directors shall adopt at the time the stock dividend is declared a resolution which sets the aggregate amount to be attributed to stated capital with respect to the shares that constitute the stock dividend and, at the time the stock dividend is paid, the corporation shall transfer at least that amount from surplus to stated capital.
(d)
If the board of directors of a corporation has given general authorization for a distribution and provides for or establishes a method or procedure for determining the maximum amount of the distribution, the board may delegate to an officer of the corporation the power, in accordance with the general authorization, to fix the amount and other terms of the distribution.
(e)
(1)
This subsection applies to a corporation with a class of equity securities registered under the Securities Exchange Act of 1934.
(2)
Unless prohibited by the charter of a corporation by reference to this subsection or the subject matter of this subsection, the board of directors of the corporation may amend the charter, with the approval of a majority of the board of directors and without stockholder action, to effect a reverse stock split that results in a combination of shares of stock at a ratio of not more than 10 shares of stock into one share of stock in any 12–month period.
(3)
Within 20 days after the effective date of the reverse stock split, the corporation shall give written notice of the reverse stock split to each holder of record of the combined shares of stock as of the effective date.
Md. Code Ann., Corps. & Ass'ns § 2-310 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–310LinkCopy Citation
(a)
(1)
Subject to the provisions of its charter and § 2–311 of this subtitle, if authorized by its board of directors, a corporation may acquire the corporation’s own shares.
(2)
Shares acquired under paragraph (1) of this subsection constitute authorized but unissued shares.
(3)
Shares of a corporation’s own stock acquired by the corporation between the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders and the time of the meeting may be voted at the meeting by the holder of record as of the record date and shall be counted in determining the total number of outstanding shares entitled to be voted at the meeting.
(4)
(i)
Except as provided in subparagraph (ii) of this paragraph, and unless the charter provides otherwise, stock shall cease to be outstanding on the date of redemption or repurchase if a corporation has:
(1)
Given a notice of redemption of stock or repurchase of stock pursuant to a right of redemption set forth in the charter or a duly adopted repurchase plan binding on the stockholder; and
(2)
Paid or set aside sufficient funds for the benefit of the holder of the stock called for redemption or repurchase.
(ii)
This paragraph does not affect the right of a stockholder to receive payment of the redemption or repurchase price.
(b)
If the charter prohibits the issuance of acquired shares, the number of authorized shares is reduced by the number of shares acquired, effective upon the filing with the Department of articles supplementary which shall set forth:
(1)
The name of the corporation;
(2)
The number of outstanding shares of stock of the corporation that have been acquired by the corporation and that by their terms may not be reissued, and the class and series of the shares;
(3)
The number of authorized shares of the corporation remaining after the acquisition of outstanding shares, itemized by class and series; and
(4)
The fact that no amendment to the charter is effected by the articles supplementary, their sole purpose being to record the reduction of authorized shares resulting from the acquisition of shares that by the terms of the existing charter may not be reissued.
Md. Code Ann., Corps. & Ass'ns § 2-310.1 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–310.1LinkCopy Citation
(a)
This section applies only to a corporation registered as an open–end company under the Investment Company Act of 1940.
(b)
Subject to the provisions of § 2–311 of this subtitle, a corporation may redeem shares of its stock from any stockholder if:
(1)
The corporation’s charter expressly provides for the redemption of shares of its stock from any stockholder and the board of directors authorizes the redemption; or
(2)
(i)
The corporation’s charter does not expressly prohibit the redemption of shares of its stock;
(ii)
The aggregate net asset value of the shares to be redeemed from the stockholder is, as of the date of the redemption, $2,000 or less; and
(iii)
Written notice of the redemption to the stockholder of record:
(1)
Is mailed first–class to the stockholder’s last known address of record;
(2)
States that all of the shares will be redeemed; and
(3)
Establishes a date for the redemption which is at least 45 days from the date of the notice.
(c)
The price to be paid for shares redeemed under subsection (b)(2) of this section shall be the aggregate net asset value of the shares at the close of business on the date of the redemption.
(d)
If certificates representing the shares to be redeemed under subsection (b)(2) of this section have been issued and are not surrendered for cancellation on the date of redemption:
(1)
The corporation may withhold payment for the redeemed shares until the certificates are surrendered for cancellation; and
(2)
Except for the right to receive payment of the redemption price, the stockholder shall cease to have any rights as a stockholder of the corporation on the date of redemption.
(e)
If the aggregate net asset value of the shares to be redeemed under subsection (b)(2) of this section should increase to an amount greater than $2,000 between the date of the notice of redemption and the date of the redemption, then the notice of redemption shall have no further force or effect.
Md. Code Ann., Corps. & Ass'ns § 2-310.2 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–310.2LinkCopy Citation
(a)
In this section, “investment company” means a corporation registered under the Investment Company Act of 1940.
(b)
Unless otherwise provided in the charter of an investment company, if authorized by its board of directors, shares of any class or series of its stock acquired by an investment company using assets allocated to any other class or series of stock of the investment company may be held by the investment company in a fiduciary capacity for the benefit of the holders of shares of the other class or series of stock, and the investment company may exercise voting rights, receive distributions, and be allocated other rights to the extent determined by its board of directors.
Md. Code Ann., Corps. & Ass'ns § 2-311 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–311LinkCopy Citation
(a)
(1)
No distribution may be made if, after giving effect to the distribution:
(i)
The corporation would not be able to pay indebtedness of the corporation as the indebtedness becomes due in the usual course of business; or
(ii)
Except as provided in paragraph (2) of this subsection, the corporation’s total assets would be less than the sum of the corporation’s total liabilities plus, unless the charter permits otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on dissolution are superior to those receiving the distribution.
(2)
A corporation may make a distribution from:
(i)
The net earnings of the corporation for the fiscal year in which the distribution is made;
(ii)
The net earnings of the corporation for the preceding fiscal year; or
(iii)
The sum of the net earnings of the corporation for the preceding eight fiscal quarters.
(b)
The board of directors may base a determination that a distribution is not prohibited under subsection (a) of this section either on:
(1)
Financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances; or
(2)
A fair valuation or other method that is reasonable in the circumstances.
(c)
Except as provided in subsection (e) of this section, the effect of a distribution under subsection (a) of this section is measured:
(1)
In the case of distribution by purchase, redemption, or other acquisition of the corporation’s shares, as of the earlier of:
(i)
The date money or other property is transferred or the indebtedness is incurred by the corporation; or
(ii)
The date the stockholder ceases to be a stockholder with respect to the acquired shares;
(2)
In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
(3)
In all other cases, as of:
(i)
The date the distribution is authorized if the payment occurs within 120 days after the date of authorization; or
(ii)
The date the payment is made if it occurs more than 120 days after the date of authorization.
(d)
A corporation’s indebtedness to a stockholder, incurred by reason of a distribution made in accordance with this section, is at parity with the corporation’s indebtedness to the corporation’s general, unsecured creditors, except to the extent subordinated by agreement.
(e)
(1)
If terms of the indebtedness provide that payment of principal and interest is to be made only if and to the extent that payment of a distribution to stockholders could then be made under this section, indebtedness of a corporation, including indebtedness issued as a distribution, is not a liability for purposes of determinations made under subsection (a) of this section.
(2)
If the indebtedness referred to in paragraph (1) of this subsection is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is actually made.
Md. Code Ann., Corps. & Ass'ns § 2-312 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–312LinkCopy Citation
(a)
If it is established that the director’s duties were not performed in compliance with § 2-405.1 of this title, a director who votes for or assents to a distribution made in violation of the charter or § 2-311 of this subtitle is personally liable to the corporation for the amount of the distribution that exceeds what could have been made without violating the charter or § 2-311 of this subtitle.
(b)
A director held liable under subsection (a) of this section for an unlawful distribution is entitled to contribution:
(1)
From every other director who could be held liable under subsection (a) of this section for the unlawful distribution; and
(2)
From each stockholder for the amount the stockholder accepted knowing the distribution was made in violation of the charter or § 2-311 of this subtitle.
(c)
(1)
A proceeding to enforce the liability of a director under subsection (a) of this section may not begin more than 3 years after the date on which the effect of the distribution was measured under § 2-311(c) or (e) of this subtitle.
(2)
A proceeding to enforce contribution under subsection (b) of this section may not begin more than 1 year after the liability of the director claiming contribution has been finally adjudicated under subsection (a) of this section.
(d)
The liabilities imposed by this section are in addition to any other liability imposed by law on the directors of a corporation.
Md. Code Ann., Corps. & Ass'ns § 2-313 (2026)
Title 2. Corporations in General -- Formation, Organization, and Operation
Subtitle 3. Capital Accounts, Dividends, and Retirement of Shares
§ 2–313LinkCopy Citation
(a)
The president or, if provided in the bylaws, some other executive officer of each corporation shall prepare, or cause to be prepared, annually a full and correct statement of the affairs of the corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year.
(b)
Except as provided in subsection (c) of this section, the statement of affairs shall be submitted at the annual meeting of stockholders and, within 20 days after the meeting:
(1)
Placed on file at the corporation’s principal office or at any other office or agency specified in the bylaws of the corporation, in written form; or
(2)
Otherwise maintained by or on behalf of the corporation in any other form that complies with § 2–114 of this title.
(c)
If a corporation is not required to hold an annual meeting of stockholders under a charter or bylaw provision adopted in accordance with § 2–501 of this title, within 120 days after the end of the fiscal year, the statement of affairs shall be:
(1)
Placed on file at the corporation’s principal office or at any other office or agency specified in the bylaws of the corporation in written form; or
(2)
Otherwise maintained by or on behalf of the corporation in any other form that complies with § 2–114 of this title.