---
title: "Prepare a dividend decision note against the statutory payment tests"
url: "https://ailawframework.com/practice/commercial-and-corporate-advisory/prepare-a-dividend-decision-note-against-the-statutory-payment-tests/united-states"
type: "task_jurisdiction_version"
site: "AI Law Framework"
id: "A1-JU20261022-1-US"
practice_area: "Commercial & Corporate Advisory (contracts, company law, governance)"
tier: "yellow"
lawyer_review: "required"
jurisdictions: ["US"]
last_reviewed: "2026-10-22"
---

# Prepare a dividend decision note against the statutory payment tests

> From the accounts the lawyer supplies, set out the § 170 tests against the figures: whether the dividend is declared out of surplus, as §§ 154 and 244 define it, or, if there is no surplus, out of net profits for the…

Canonical page: https://ailawframework.com/practice/commercial-and-corporate-advisory/prepare-a-dividend-decision-note-against-the-statutory-payment-tests/united-states  
Last reviewed: 2026-10-22

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

| Fact | Value |
| --- | --- |
| Practice area | [Commercial & Corporate Advisory (contracts, company law, governance)](https://ailawframework.com/practice/commercial-and-corporate-advisory.md) |
| Human involvement | Yellow: Lawyer and AI draft together |
| How AI is used | From the accounts the lawyer supplies, set out the § 170 tests against the figures: whether the dividend is declared out of surplus, as §§ 154 and 244 define it, or, if there is no surplus, out of net profits for the fiscal year of the declaration and/or the preceding fiscal year, and whether a preference-capital deficiency would bar a net-profits dividend. Do not say that the tests are met. |
| What the lawyer must review | For a Delaware corporation, the lawyer tests the figures, decides whether § 170(a) of the General Corporation Law is met, and writes the recommendation the directors consider. Section 173 requires that dividends be paid only in accordance with the chapter, in cash, property or shares. Section 174 makes directors jointly and severally liable for a wilful or negligent violation of § 160 or § 173, for six years. Section 172 protects a director who relies in good faith on records and on information from a person reasonably believed to be competent. |
| Written for | United States |
| Applies to | [Prepare a dividend decision note against the statutory payment tests](https://ailawframework.com/practice/commercial-and-corporate-advisory/prepare-a-dividend-decision-note-against-the-statutory-payment-tests.md) |

## Checking plan

- What the AI does: From the accounts the lawyer supplies, set out the § 170 tests against the figures: whether the dividend is declared out of surplus, as §§ 154 and 244 define it, or, if there is no surplus, out of net profits for the fiscal year of the declaration and/or the preceding fiscal year, and whether a preference-capital deficiency would bar a net-profits dividend. Do not say that the tests are met.
- Basis: Checked against the linked sources on 22 October 2026. Confirm the current instrument before reliance.

## Notes

- Section 170 is not an assets-over-liabilities, fairness and creditor-prejudice test. Surplus is defined in §§ 154 and 244, which the dividend section incorporates.
- The certificate may restrict dividends. Read it before the note is used. Another state may use a different fund.

## Sources

- [Delaware General Corporation Law, Subchapter V, including §§ 170, 172, 173 and 174](https://delcode.delaware.gov/title8/c001/sc05/index.html) (checked 2026-10-22)
- [ABA Model Rule 1.1, Comment 8](https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/rule_1_1_competence/comment_on_rule_1_1/) (checked 2026-10-22)

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*