§ 7-114-305 — Election to purchase in lieu of dissolution

(1) In a proceeding
under section 7-114-301 (2) to dissolve a corporation, unless otherwise provided in
the articles of incorporation or bylaws of the corporation, the corporation may elect
or, if it fails to elect, one or more shareholders may elect, to purchase all shares
owned by the petitioning shareholder at the fair value of the shares. An election
pursuant to this section is irrevocable unless the court determines 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 any time within ninety days after the filing of the petition under section 7-114-301 (2) or at such later time as the court in its discretion may allow. If the
election to purchase is filed by one or more shareholders, the corporation shall,
within ten days after the filing, give notice to all shareholders other than the
petitioner. The notice must state the name and number of shares owned by the
petitioner and the name and number of shares owned by each electing shareholder
and must advise the recipients of their right to join in the election to purchase
shares in accordance with this section.

(b) Shareholders that wish to participate must file notice of their intention to
join in the purchase no later than thirty days after the effective date of the notice to
them. All shareholders who have filed an election or notice of their intention to
participate in the election to purchase become parties to the proceeding and
participate in the purchase in proportion to their ownership of shares as of the date
the first election was filed unless they otherwise agree or the court otherwise
directs.

(c) After an election has been filed by the corporation or one or more
shareholders, the proceeding under section 7-114-302 (2) may not be discontinued
or settled, nor may the petitioning shareholder sell or otherwise dispose of the
shareholder's shares, unless the court determines that it would be equitable to the
corporation and the shareholders, other than the petitioner, to permit the
discontinuance, settlement, sale, or other disposition.

(3) If, within sixty days after the filing of the first election, the parties reach
agreement as to the fair value and terms of purchase of the petitioner's shares, the
court shall enter an order directing the purchase of the petitioner's shares 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) of this section, the court, upon application of any party, shall stay the
proceedings held pursuant to section 7-114-302 and determine the fair value of the
petitioner's shares as of the day before the date on which the petition under section
7-114-302 was filed or as of such other date as the court deems appropriate under
the circumstances.

(5) (a) Upon determining the fair value of the shares, the court shall enter an
order directing the purchase upon such terms and conditions as the court deems
appropriate, which may include 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 expenses as may have been awarded, and,
if the shares are to be purchased by shareholders, the allocation of shares among
the shareholders. In allocating the petitioner's shares among holders of different
classes of shares, the court shall attempt to preserve the existing distribution of
voting rights among holders of different classes insofar as practicable and may
direct that holders of a specific class or classes not participate in the purchase.

(b) Interest may be allowed at the rate and from the date determined by the
court to be equitable, but if the court finds that the refusal of the petitioning
shareholder to accept an offer of payment was arbitrary or otherwise not in good
faith, no interest shall be allowed.

(c) If the court finds that the petitioning shareholder had probable grounds
for relief under section 7-114-301 (2)(b) or (2)(d), it may award expenses to the
petitioning shareholder.

(6) Upon entry of an order under subsection (3) or (5) of this section, the
court shall dismiss the petition to dissolve the corporation under section 7-114-302
and the petitioning shareholder no longer has any rights or status as a shareholder
of the corporation other than the right to receive the amounts awarded by the order
of the court, which is enforceable in the same manner as any other judgment.

(7) The purchase ordered pursuant to subsection (5) of this section must be
made within ten days after the date the order becomes final unless, before that
time, the corporation files with the court a notice of its intention to adopt articles of
dissolution pursuant to sections 7-114-102 and 7-114-103, which articles must then
be adopted and filed within fifty days after the filing of the notice. Upon filing of the
articles of dissolution, the corporation is dissolved in accordance with sections 7-90-910 to 7-90-914 and the order entered pursuant to subsection (5) of this section
is no longer of any force or effect; except that the court may award the petitioning
shareholder expenses in accordance with subsection (5)(c) of this section and the
petitioner may continue to pursue any claims previously asserted on behalf of the
corporation.

(8) Any payment by the corporation pursuant to an order under subsection
(3) or (5) of this section, other than an award of expenses pursuant to subsection (5)
of this section, is subject to section 7-106-401.

Legislative History

Source: L. 2019: Entire section added, (SB 19-086), ch. 166, p. 1962, � 60, effective July 1, 2020. L. 2021: (2)(a) amended, (HB 21-1124), ch. 41, p. 171, � 28, effective April 19.