48-2c-1214 - Election to purchase in lieu of dissolution.
48-2c-1214. Election to purchase in lieu of dissolution.
(1) In a proceeding under Subsection 48-2c-1210(2) to dissolve a company, the companymay elect, or if it fails to elect, one of more members may elect to purchase the interest in thecompany owned by the petitioning member at the fair market value of the interest, determined asprovided in this section. An election pursuant to this section is irrevocable unless the courtdetermines that it is 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 in a proceeding under Subsection48-2c-1210(2) or at any later time as the court in its discretion may allow. If the company filesan election with the court within the 90-day period, or at any later time allowed by the court, topurchase the interest in the company owned by the petitioning member, the company shallpurchase the interest in the manner provided in this section.
(b) If the company does not file an election with the court within the time period, but anelection to purchase the interest in the company owned by the petitioning member is filed by oneor more members within the time period, the company shall, within 10 days after the later of theend of the time period allowed for the filing of elections to purchase under this section ornotification from the court of an election by members to purchase the interest in the companyowned by the petitioning member as provided in this section, give written notice of the electionto purchase to all members of the company, other than the petitioning member. The notice shallstate the name and the percentage interest in the company owned by the petitioning member andthe name and the percentage interest in the company owned by each electing member. Thenotice shall advise any recipients who have not participated in the election of their right to join inthe election to purchase the interest in the company in accordance with this section, and of thedate by which any notice of intent to participate must be filed with the court.
(c) Members who wish to participate in the purchase of the interest in the company of thepetitioning member must file notice of their intention to join in the purchase by electingmembers, no later than 30 days after the effective date of the company's notice of their right tojoin in the election to purchase.
(d) All members who have filed with the court an election or notice of their intention toparticipate in the election to purchase the interest in the company of the petitioning memberthereby become irrevocably obligated to participate in the purchase of the interest from thepetitioning member upon the terms and conditions of this section, unless the court otherwisedirects.
(e) After an election has been filed by the company or one or more members, theproceedings under Subsection 48-2c-1210(2) may not be discontinued or settled, nor may thepetitioning member sell or otherwise dispose of his interest in the company, unless the courtdetermines that it would be equitable to the company and the members, other than the petitioningmember, to permit any discontinuance, settlement, sale, or other disposition.
(3) If, within 60 days after the earlier of the company filing of an election to purchase theinterest in the company of the petitioning member or the company's mailing of a notice to itsmembers of the filing of an election by the members to purchase the interest in the company ofthe petitioning member, the petitioning member and electing company or members reachagreement as to the fair market value and terms of the purchase of the petitioning member'sinterest, the court shall enter an order directing the purchase of the petitioning member's interest,upon the terms and conditions agreed to by the parties.
(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 48-2c-1210(2) anddetermine the fair market value of the petitioning member's interest in the company as of the daybefore the date on which the petition under Subsection 48-2c-1210(2) was filed or as of any otherdate the court determines to be appropriate under the circumstances and based on the factors thecourt determines to be appropriate.
(5) (a) Upon determining the fair market value of the interest in the company of thepetitioning member, the court shall enter an order directing the purchase of the interest in thecompany upon terms and conditions the court determines to be appropriate. The terms andconditions may include payment of the purchase price in installments, where necessary in theinterest of equity, provision for security to assure payment of the purchase price and anyadditional costs, fees, and expenses awarded by the court, and an allocation of the interest in thecompany among members if the interest in the company is to be purchased by members.
(b) In allocating the petitioning member's interest in the company among holders ofdifferent classes of members, the court shall attempt to preserve the existing distribution ofvoting rights among member classes to the extent practicable. The court may direct that holdersof a specific class or classes shall not participate in the purchase. The court may not require anyelecting member to purchase more of the interest in the company owned by the petitioningmember than the percentage interest that the purchasing member may have set forth in hiselection or notice of intent to participate filed with the court.
(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 member 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 member had probable ground for relief underSubsection 48-2c-1210(2)(b) or (2)(d), it may award to the petitioning member reasonable feesand expenses of counsel and experts employed by the petitioning member.
(6) Upon entry of an order under Subsection (3) or (5), the court shall dismiss thepetition to dissolve the company under Subsection 48-2c-1210(2) and the petitioning membershall no longer have any rights or status as a member of the company, except the right to receivethe amounts awarded to him by the court. The award is enforceable in the same manner as anyother 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 company files with the court anotice of its intention to adopt articles of dissolution pursuant to Section 48-2c-1204. Thearticles of dissolution must then be adopted and filed within 60 days after notice.
(b) Upon filing of articles of dissolution, the company is dissolved and shall be woundup pursuant to Part 13 of this chapter, and the order entered pursuant to Subsection (5) is nolonger of any force or effect. However, the court may award the petitioning member reasonablefees and expenses in accordance with the provisions of Subsection (5)(d). The petitioningmember may continue to pursue any claims previously asserted on behalf of the company.
(8) Any payment by the company pursuant to an order under Subsection (3) or (5), otherthan an award of fees and expenses pursuant to Subsection (5)(d), is subject to the provisions ofSections 48-2c-1005 and 48-2c-1006.
Enacted by Chapter 260, 2001 General Session