§ 35-14-1434 — Election To Purchase In Lieu Of Dissolution

35-14-1434 . Election to purchase in lieu of dissolution. (1) Unless the transfer is altered, eliminated, or otherwise restricted by the articles of incorporation, the bylaws, or an agreement among shareholders or between the corporation and shareholders as referenced in 35-14-627 , 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 as defined in 35-14-1301 . An election pursuant to this section is irrevocable unless the court determines that it is equitable to set aside or modify the election.
(2) An election to purchase pursuant to this section may be filed with the court at any time within 90 days after the filing of a petition under 35-14-1430 (1)(b) or at any 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 10 days after the filing, give written notice to all shareholders other than the petitioner. The notice must state the name of and number of shares owned by the petitioner and the name of 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. Shareholders who wish to participate shall file notice of their intention to join in the purchase no later than 30 days after the effectiveness 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 shall 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. After an election has been filed by the corporation or one or more shareholders, the proceeding under 35-14-1430 (1)(b) may not be discontinued or settled, and the petitioning shareholder may not sell or otherwise dispose of shares, unless the court determines that it would be equitable to the corporation and the shareholders, other than the petitioner, to permit that discontinuance, settlement, sale, or other disposition.
(3) If, within 60 days of 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 on 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), the court, upon application of any party, shall stay the proceedings under 35-14-1430 (1)(b) and determine the fair value of the petitioner's shares as of the day before the date on which the petition under 35-14-1430 (1)(b) was filed or another date the court finds appropriate under the circumstances.
(5) Upon determining the fair value of the shares, the court shall enter an order directing the purchase on terms and conditions the court finds appropriate, which may include payment of the purchase price in installments when necessary in the interests of equity, provision for security to ensure payment of the purchase price and any additional expenses awarded, and, if the shares are to be purchased by shareholders, the allocation of shares among them. In allocating the petitioner's shares among holders of different classes or series of shares, the court shall attempt to preserve the existing distribution of voting rights among holders of different classes or series as far as practicable and may direct that holders of a specific class or classes or series may not participate in the purchase. 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 may be allowed. If the court finds that the petitioning shareholder had probable grounds for relief under 35-14-1430 (1)(b)(ii) or (1)(b)(iv), it may award expenses to the petitioning shareholder.
(6) Upon entry of an order under subsection (3) or (5), the court shall dismiss the petition to dissolve the corporation under 35-14-1430 (1)(b), and the petitioning shareholder no longer has any rights or status as a shareholder of the corporation except 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) must be made within 10 days after the date the order becomes final.
(8) Any payment by the corporation pursuant to an order under subsection (3) or (5), other than an award of expenses pursuant to subsection (5), is subject to the provisions of 35-14-640 .

Legislative History

En. Sec. 201, Ch. 271, L. 2019.