§ 35-14-1302 — Right To Appraisal

35-14-1302 . Right to appraisal. (1) A shareholder is entitled to appraisal rights and to obtain payment of the fair value of that shareholder's shares in the event of any of the following corporate actions:
(a) consummation of a merger to which the corporation is a party if:
(i) shareholder approval is required for the merger by 35-14-1104 or would be required but for the provisions of 35-14-1104 (10), except that appraisal rights are not available to any shareholder of the corporation with respect to shares of any class or series that remain outstanding after consummation of the merger; or
(ii) the corporation is a subsidiary and the merger is governed by 35-14-1105 ;
(b) consummation of a share exchange to which the corporation is a party the shares of which will be acquired, except that appraisal rights may not be available to any shareholder of the corporation with respect to any class or series of shares of the corporation that is not acquired in the share exchange;
(c) consummation of a disposition of assets pursuant to 35-14-1202 if the shareholder is entitled to vote on the disposition, except that appraisal rights are not available to any shareholder of the corporation with respect to shares of any class or series if:
(i) under the terms of the corporate action approved by the shareholders, the corporation's net assets, in excess of a reasonable amount reserved to meet claims of the type described in 35-14-1406 and 35-14-1407 , are to be distributed to shareholders in cash:
(A) within 1 year after the shareholders' approval of the action; and
(B) in accordance with their respective interests determined at the time of distribution; and
(ii) the disposition of assets is not an interested transaction;
(d) an amendment of the articles of incorporation with respect to a class or series of shares that reduces the number of shares of a class or series owned by the shareholder to a fraction of a share if the corporation has the obligation or right to repurchase the fractional share created;
(e) any other merger, share exchange, disposition of assets, or amendment to the articles of incorporation, in each case to the extent provided by the articles of incorporation, the bylaws, or a resolution of the board of directors;
(f) consummation of a domestication pursuant to 35-14-920 if the shareholder does not receive shares in the foreign corporation resulting from the domestication that have terms as favorable to the shareholder in all material respects, and represent at least the same percentage interest of the total voting rights of the outstanding shares of the foreign corporation, as the shares held by the shareholder before the domestication;
(g) consummation of a conversion of the corporation to a nonprofit corporation pursuant to 35-14-930 ; or
(h) consummation of a conversion of the corporation to an unincorporated entity pursuant to 35-14-930 .
(2) Notwithstanding subsection (1), the availability of appraisal rights under subsections (1)(a), (1)(b), (1)(c), (1)(d), (1)(f) and (1)(h) is limited in accordance with the following provisions:
(a) Appraisal rights are not available for the holders of shares of any class or series of shares that is:
(i) a covered security under section 18(b)(1)(A) or (B) of the Securities Act of 1933;
(ii) traded in an organized market and has at least 2,000 shareholders and a market value of at least $20 million, exclusive of the value of shares of that class or series held by the corporation's subsidiaries, senior executives, and directors and by any beneficial shareholder and any voting trust beneficial owner owning more than 10% of those shares; or
(iii) issued by an open-end management investment company registered with the United States securities and exchange commission under the Investment Company Act of 1940 and that may be redeemed at the option of the holder at net asset value.
(b) The applicability of subsection (2)(a) must be determined as of:
(i) the record date fixed to determine the shareholders entitled to receive notice of the meeting of shareholders to act upon the corporate action requiring appraisal rights or, in the case of an offer made pursuant to 35-14-1104 (10), the date of the offer; or
(ii) if there is no meeting of shareholders and no offer made pursuant to 35-14-1104 (10), the day before the consummation of the corporate action or effective date of the amendment of the articles of incorporation, as applicable.
(c) Subsection (2)(a) is not applicable and appraisal rights are available pursuant to subsection (1) for the holders of any class or series of shares:
(i) who are required by the terms of the corporate action requiring appraisal rights to accept for those shares anything other than cash or shares of any class or any series of shares of any corporation, or any other proprietary interest of any other entity, that satisfies the standards set forth in subsection (2)(a) at the time the corporate action becomes effective; or
(ii) in the case of the consummation of a disposition of assets pursuant to 35-14-1202 , unless the cash, shares, or proprietary interests received in the disposition are, under the terms of the corporate action approved by the shareholders, to be distributed to the shareholders as part of a distribution to shareholders of the net assets of the corporation in excess of a reasonable amount to meet claims of the type described in 35-14-1406 and 35-14-1407 :
(A) within 1 year after the shareholders' approval of the action; and
(B) in accordance with their respective interests determined at the time of the distribution.
(d) Subsection (2)(a) is not applicable and appraisal rights must be available pursuant to subsection (1) for the holders of any class or series of shares where the corporate action is an interested transaction.
(3) Notwithstanding any other provision of this section, the articles of incorporation as originally filed or any amendment to the articles of incorporation may limit or eliminate appraisal rights for any class or series of preferred shares, except that:
(a) no limitation or elimination is effective if the class or series does not have the right to vote separately as a voting group, alone or as part of a group, on the action or if the action is a conversion under 35-14-930 or a merger having a similar effect as a conversion in which the converted entity is an eligible entity; and
(b) any limitation or elimination contained in an amendment to the articles of incorporation that limits or eliminates appraisal rights for any shares that are outstanding immediately before the effective date of the amendment or that the corporation is or may be required to issue or sell thereafter pursuant to any conversion, exchange, or other right existing immediately before the effective date of the amendment does not apply to any corporate action that becomes effective within 1 year after the effective date of the amendment if the action would otherwise afford appraisal rights.

Legislative History

En. Sec. 172, Ch. 271, L. 2019.