Bill Summary for S 457 (2011-2012)

Summary date: 

Mar 29 2011

Bill Information:

View NCGA Bill Details2011-2012 Session
Senate Bill 457 (Public) Filed Tuesday, March 29, 2011
TO AMEND ARTICLE 13 OF THE NORTH CAROLINA BUSINESS CORPORATION ACT.
Intro. by Clodfelter.

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Bill summary

Amends GS 55-13-01 to modify the definitions of “corporation,” “fair value,” “interest,” “record shareholder,” “beneficial shareholder,” and “shareholder,” and adds definitions of “affiliate,” “expenses,” “interested transaction,” “interested person,” “beneficial owner,” “preferred shares,” and “senior executive.”
Amends GS 55-13-02 to provide that a shareholder is entitled to appraisal rights and to obtain payment of the fair value of the shareholder’s shares upon any of the following corporate actions: (1) consummation of a merger to which the corporation is a party if either shareholder approval is required for the merger and the shareholder is entitled to vote on the merger, except with respect to shares of any class or series that remain outstanding after the merger, or the corporation is a subsidiary and the merger is governed by GS 55-11-04; (2) consummation of a share exchange if the shareholder is entitled to vote on the exchange, except with respect to any class or series of shares that is not exchanged; (3) consummation of a disposition of assets pursuant to GS 55-12-02 if the shareholder is entitled to vote on the disposition; (4) an amendment of the articles of incorporation (a) 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 an obligation or right to repurchase the fractional share so created or (b) changes the corporation into a nonprofit corporation or cooperative organization; (5) any other amendment to the articles of incorporation, merger, share exchange, or disposition of assets to the extent provided by the articles of incorporation, bylaws, or a resolution of the board of directors; (6) consummation of a conversion to a foreign corporation if the shareholder does not receive shares in the foreign corporation that have terms as favorable to the shareholder and that represent at least the same percentage interest of the total voting rights of the outstanding shares of the corporation as the shares held by the shareholder before the conversion; (7) consummation of a conversion of the corporation to nonprofit status; (8) consummation of a conversion to an unincorporated entity. Specifies certain conditions under which appraisal rights are limited. Authorizes the articles of incorporation to limit or eliminate appraisal rights for any class or series of preferred shares, subject to certain restrictions. Provides that a shareholder holding shares of a class or series that were issued and outstanding as of the effective date of the act but did not entitle the shareholder to vote on certain corporate actions is entitled to appraisal rights to the same extent as if such shares did entitle the shareholder to vote.
Amends GS 55-13-03 to make technical and conforming changes.
Amends GS 55-13-20(a) to specify certain notice requirements of any corporate action specified in GS 55-13-02.
Amends GS 55-13-20(b) to specify certain notice requirements of a merger pursuant to GS 55-11-04 and of any other corporate action specified in GS 55-13-02(a).
Amends GS 55-13-20(c) to specify certain notice requirements of any corporate action that is specified in GS 55-13-02(a) to be approved by written consent of shareholders pursuant to GS 55-7-04.
Amends GS 55-13-20(d) to require additional information be included in notice to shareholders if the corporation concludes that appraisal rights are or may be available.
Amends GS 55-13-21 to specify certain actions that a shareholder may and may not take in order to exercise his or her appraisal rights.
Amends GS 55-13-22 to specify information that must be include in the appraisal notice that must be provided to shareholders who satisfy the requirements of GS 55-13-21. Requires the appraisal notice to be sent no earlier than the date the corporate action became effective and no later than 10 days after that date.
Amends GS 55-13-23 to specify how a shareholder may exercise his or her appraisal rights and the consequences of failing to follow the applicable procedures.
Repeals GS 55-13-24.
Amends GS 55-13-25 to require the corporation to pay each shareholder who complied with the procedures in GS 55-13-23 the estimated fair market value of their shares, plus interest, within 30 days after the form required by GS 55-13-22(b) is due. Specifies certain financial and other information that must accompany the payment.
Repeals GS 55-13-26.
Amends GS 55-13-27 to specify the conditions under which a corporation may withhold payment required by GS 55-13-25 and the notice it is required to provide to affected shareholders.
Amends GS 55-13-28 to specify the procedure that a shareholder who is dissatisfied with the amount of payment made pursuant to GS 55-13-25 must use to contest the payment amount and make a demand for additional payment.
Amends GS 55-13-30 to authorize a corporation to commence a judicial proceeding within a specified period of time if a shareholder makes a demand for payment under GS 55-13-28 which remains unsettled. Provides that each shareholder made a party to the proceeding is entitled to judgment either (1) for the amount, if any, by which the court finds the fair value of the shareholder’s shares, plus interest, exceeds the amount paid by the corporation to the shareholder; or (2) for the fair value, plus interest, of the shareholder’s shares for which the corporation elected to withhold payment under GS 55-13-27.
Amends GS 55-13-31 to: (1) direct the court to determine the court costs of a proceeding commenced pursuant to GS 55-13-30, and assess the costs against the corporation unless the court finds that the shareholders acted arbitrarily, vexatiously, or not in good faith; (2) allow the court to determine the expenses of the parties and assess them against the corporation if the corporation did not substantially comply with the applicable statutory provisions or against the corporation of any shareholder demanding appraisal if the court finds that the party against whom expenses are assessed acted arbitrarily, vexatiously, or not in good faith; (3) allow the court, if a determines that expenses incurred by any shareholder were of substantial benefit to other similarly situated shareholders, and the expenses are not assessed against the corporation, to direct that the expenses be paid out of the amounts awarded to the shareholders who were benefited; and (4) allow a shareholder to sue directly for the amount owed and be entitled to recover from the corporation all expenses of the suit if the corporation fails to make a required payment pursuant to GS 55-13-25, GS 55-13-27, or GS 55-13-28.
Adds new GS 55-13-40 to specify that shareholders may not contest the legality of a proposed or completed corporate action in GS 55-13-02(a) after the shareholders have approved the action, except under certain, specified circumstances.
Makes conforming changes to GS 53-362, GS 54B-261(a1), GS 54C-195(b), GS 55-10-03(e), GS 55-11-06(a)(7); GS 55-11-06(b), GS 55-11-10(e)(7), GS 55-11-10(e1)(1), GS 55-11A-13(a)(6), GS 55-11A-13(b)(1), GS 55-14A-01(c), GS 55A-11-09(e)(7), GS 55A-11-09(e1)(1), GS 57C-9A-23(a)(7), GS 57C-9A-23(b)(1), GS 59-73.33(a)(6), GS 59-73,33(b)(1), GS 59-1073(a)(7), and GS 59-1073(b)(1).
Directs the Revisor of Statutes to print with the act all relevant portions of the Official Comments to the 2002 Model Business Corporation Act and all explanatory comments the Revisor deems appropriate.
If Senate Bill 26 of the 2011 Regular Session of the General Assembly becomes law repeals Section 2 of Senate Bill 26 of the 2011 Regular Session of the General Assembly, further amends GS 55-13-02(a) and makes a conforming change.
Effective October 1, 2011.

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