16-10a-1434 - Election to purchase in lieu of dissolution.
16-10a-1434. Election to purchase in lieu of dissolution.
(1) In a proceeding under Subsection 16-10a-1430(2) to dissolve a corporation that hasno shares listed on a national securities exchange or regularly traded in a market maintained byone or more members of a national or affiliated securities association, the corporation may elect,or if it fails to elect, one or more shareholders may elect to purchase all shares of the corporationowned by the petitioning shareholder, at the fair value of the shares, determined as provided inthis section. An election pursuant to this section is irrevocable unless the court determines that itis equitable to set aside or modify the election.
(2) (a) An election to purchase pursuant to this section may be filed with the court at anytime within 90 days after the filing of the petition under Subsection 16-10a-1430(2) or at anylater time as the court in its discretion may allow. If the corporation files an election with thecourt within the 90-day period, or at any later time allowed by the court, to purchase all shares ofthe corporation owned by the petitioning shareholder, the corporation shall purchase the shares inthe manner provided in this section.
(b) If the corporation does not file an election with the court within the time period, butan election to purchase all shares of the corporation owned by the petitioning shareholder is filedby one or more shareholders within the time period, the corporation shall, within 10 days afterthe later of:
(i) the end of the time period allowed for the filing of elections to purchase under thissection; or
(ii) notification from the court of an election by shareholders to purchase all shares of thecorporation owned by the petitioning shareholder as provided in this section, give written noticeof the election to purchase to all shareholders of the corporation, other than the petitioningshareholder. The notice shall state the name and number of shares owned by the petitioningshareholder and the name and number of shares owned by each electing shareholder. The noticeshall advise any recipients who have not participated in the election of their right to join in theelection to purchase shares in accordance with this section, and of the date by which any noticeof intent to participate must be filed with the court.
(c) Shareholders who wish to participate in the purchase of shares from the petitioningshareholder shall file notice of their intention to join in the purchase by the electing shareholders,no later than 30 days after the effective date of the corporation's notice of their right to join in theelection to purchase.
(d) All shareholders who have filed with the court an election or notice of their intentionto participate in the election to purchase the shares of the corporation owned by the petitioningshareholder thereby become irrevocably obligated to participate in the purchase of shares fromthe petitioning shareholders upon the terms and conditions of this section, unless the courtotherwise directs.
(e) After an election has been filed by the corporation or one or more shareholders, theproceedings under Subsection 16-10a-1430(2) may not be discontinued or settled, nor may thepetitioning shareholder sell or otherwise dispose of any shares of the corporation, unless the courtdetermines that it would be equitable to the corporation and the shareholders, other than thepetitioning shareholders, to permit any discontinuance, settlement, sale, or other disposition.
(3) If, within 60 days after the earlier of:
(a) the corporation's filing of an election to purchase all shares of the corporation ownedby the petitioning shareholder; or
(b) the corporation's mailing of a notice to its shareholders of the filing of an election bythe shareholders to purchase all shares of the corporation owned by the petitioning shareholder,the petitioning shareholder and electing corporation or shareholders reach agreement as to thefair value and terms of purchase of the petitioning shareholder's shares, the court shall enter anorder directing the purchase of petitioner's shares, upon the terms and conditions agreed to by theparties.
(4) If the parties are unable to reach an agreement as provided for in Subsection (3), uponapplication of any party the court shall stay the proceedings under Subsection 16-10a-1430(2)and determine the fair value of the petitioning shareholder's shares as of the day before the dateon which the petition under Subsection 16-10a-1430(2) was filed or as of any other date the courtdetermines to be appropriate under the circumstances and based on the factors the courtdetermines to be appropriate.
(5) (a) Upon determining the fair value of the shares of the corporation owned by thepetitioning shareholder, the court shall enter an order directing the purchase of the shares uponterms and conditions the court determines to be appropriate. The terms and conditions mayinclude payment of the purchase price in installments, where necessary in the interests of equity,provision for security to assure payment of the purchase price and any additional costs, fees, andexpenses awarded by the court, and an allocation of shares among shareholders if the shares areto be purchased by shareholders.
(b) In allocating the petitioning shareholders' shares among holders of different classes ofshares, the court shall attempt to preserve the existing distribution of voting rights among holdersof different share classes to the extent practicable. The court may direct that holders of a specificclass or classes may not participate in the purchase. The court may not require any electingshareholder to purchase more of the shares of the corporation owned by the petitioningshareholder than the number of shares that the purchasing shareholder may have set forth in hiselection or notice of intent to participate filed with the court as the maximum number of shareshe is willing to purchase.
(c) Interest may be allowed at the rate and from the date determined by the court to beequitable. However, if the court finds that the refusal of the petitioning shareholder to accept anoffer of payment was arbitrary or otherwise not in good faith, interest may not be allowed.
(d) If the court finds that the petitioning shareholder had probable grounds for reliefunder Subsection 16-10a-1430(2)(b) or (d), it may award to the petitioning shareholderreasonable fees and expenses of counsel and experts employed by the petitioning shareholder.
(6) Upon entry of an order under Subsection (3) or (5), the court shall dismiss thepetition to dissolve the corporation under Section 16-10a-1430, and the petitioning shareholdershall no longer have any rights or status as a shareholder of the corporation, except the right toreceive the amounts awarded to him by the court. The award is enforceable in the same manneras any other judgment.
(7) (a) The purchase ordered pursuant to Subsection (5) shall be made within 10 daysafter the date the order becomes final, unless before that time the corporation files with the courta notice of its intention to adopt articles of dissolution pursuant to Sections 16-10a-1402 and16-10a-1403. The articles of dissolution must then be adopted and filed within 50 days afternotice.
(b) Upon filing of the articles of dissolution, the corporation is dissolved in accordancewith the provisions of Sections 16-10a-1405 through 16-10a-1408, and the order entered
pursuant to Subsection (5) is no longer of any force or effect. However, the court may award thepetitioning shareholder reasonable fees and expenses in accordance with the provisions ofSubsection (5)(d). The petitioning shareholder may continue to pursue any claims previouslyasserted on behalf of the corporation.
(8) Any payment by the corporation pursuant to an order under Subsection (3) or (5),other than an award of fees and expenses pursuant to Subsection (5)(d), is subject to theprovisions of Section 16-10a-640.
Amended by Chapter 378, 2010 General Session