§415A-10  Death or disqualification of ashareholder.  (a)  Upon the death of a shareholder of a professionalcorporation, or if a shareholder of a professional corporation becomes adisqualified person, or if shares of a professional corporation are transferredby operation of law or court decree to a disqualified person, the shares of thedeceased shareholder or of the disqualified person may be transferred to aqualified person and, if not so transferred, shall be purchased or redeemed bythe corporation to the extent of funds which may be legally made available forsuch purchase; provided that upon the death of a sole shareholder of aprofessional corporation, the personal representative of the estate of thedeceased sole shareholder may elect to dissolve the professional corporation,by delivering for filing articles of dissolution signed by the personalrepresentative and the surviving officer of the professional corporation.  Ifthe personal representative elects to dissolve the professional corporation,the personal representative may publish a notice to creditors.

(b)  If the price for the shares of thecorporation is not fixed by its articles of incorporation or bylaws or byprivate agreement, the corporation within six months after such death or thirtydays after such disqualification or transfer, as the case may be, shall make awritten offer to pay for the shares at a specified price deemed by thecorporation to be the fair value thereof as of the date of the death,disqualification, or transfer.  The offer shall be given to the personalrepresentative of the estate of a deceased shareholder or to the disqualifiedshareholder or transferee and shall be accompanied by a balance sheet of thecorporation, as of the latest available date and not more than twelve monthsprior to the making of the offer, and a profit and loss statement of thecorporation for the twelve-month period ended on the date of that balancesheet.

(c)  If within thirty days after the date ofthe written offer from the corporation the fair value of the shares is agreedupon between the disqualified person and the corporation, payment thereforshall be made within sixty days, or such other period as the parties may fix byagreement, after the date of the offer, upon surrender of the certificate orcertificates representing the shares.  Upon payment of the agreed value thedisqualified person shall cease to have any interest in the shares.

(d)  If within such period of thirty days thedisqualified person and the corporation do not so agree, then the corporation,within thirty days after receipt of written demand from the disqualified persongiven within sixty days after the date of the corporation's written offer or atits election at any time within such period of sixty days, shall file apetition in any court of competent jurisdiction in the circuit where theprincipal office of the corporation is located requesting that the fair valueof the shares be found and determined.  If the corporation fails to file apetition as provided in this subsection, the disqualified person may file apetition within sixty days after delivery of a written demand to thecorporation.  The disqualified person, wherever residing, shall be made a partyto the proceeding as an action against the person's shares quasi in rem.  Acopy of the petition shall be served on the disqualified person, if a residentof this State, and shall be served by registered or certified mail on thedisqualified person, if a nonresident.  Service on nonresidents shall also be madeby publication as provided by law.  The jurisdiction of the court shall beplenary and exclusive.  The disqualified person shall be entitled to judgmentagainst the corporation for the amount of the fair value of the person's sharesas of the date of death, disqualification, or transfer upon surrender to thecorporation of the certificate or certificates representing the shares.  Thecourt, in its discretion, may order that the judgment be paid in suchinstallments as the court may determine.  The court, if it so elects, mayappoint one or more persons as appraisers to receive evidence and recommend adecision on the question of fair value.  The appraisers shall have such powerand authority as shall be specified in the order of their appointment or an amendmentthereof.

(e)  The judgment shall include an allowancefor interest at such rate as the court may find to be fair and equitable in allof the circumstances, from the date of death, disqualification, or transfer.

(f)  The costs and expenses of any suchproceeding shall be determined by the court and shall be assessed against thecorporation, but all or any part of the costs and expenses may be apportionedand assessed as the court may deem equitable against the disqualified person ifthe court finds that the action of the disqualified person in failing to acceptthe offer was arbitrary or vexatious or not in good faith.  Such expenses shallinclude reasonable compensation for and reasonable expenses of the appraisers,but shall exclude the fees and expenses of counsel for and experts employed byany party; but if the fair value of the shares as determined materially exceedsthe amount which the corporation offered to pay therefor, or if no offer wasmade, the court in its discretion may award to the disqualified person such sumas the court may determine to be reasonable compensation to any expert orexperts employed by the disqualified person in the proceeding.

(g)  If a purchase, redemption, or transfer ofthe shares of a deceased or disqualified shareholder or of a transferee who isa disqualified person is not completed within ten months after the death of thedeceased shareholder or five months after the disqualification or transfer, asthe case may be, the corporation shall cancel the shares on its books and thedisqualified person shall have no further interest as a shareholder in thecorporation other than the person's right to payment for the shares under thissection.

(h)  Shares acquired by a corporation pursuantto payment of the agreed value therefor or to payment of the judgment enteredtherefor, as provided in this section, may be held and disposed of by thecorporation as in the case of other treasury shares.

(i)  This section shall not require thepurchase of shares of a disqualified person where the period ofdisqualification is for less than five months from the date of disqualificationor transfer.

(j)  Any provision regarding purchase,redemption, or transfer of shares of a professional corporation contained inthe articles of incorporation, bylaws, or any private agreement shall bespecifically enforceable in the courts of this State.

(k)  Nothing contained herein shall prevent orrelieve a professional corporation from paying pension benefits or otherdeferred compensation for services rendered to or on behalf of a formershareholder as otherwise permitted by law.

(l)  Under this section, unless otherwisestated, references to a "disqualified person" shall also be construedto include deceased shareholders and personal representatives of deceasedshareholders. [L 1985, c 259, pt of §1; am L 1987, c 135, §116; am L 2001, c129, §53; am L 2002, c 130, §74]

 

Cross References

 

  Vexatious litigants, see chapter 634J.