CHAPTER 3. OWNERSHIP
IC 23-1.5-3
Chapter 3. Ownership
IC 23-1.5-3-1
Shares; issuance; transfer
Sec. 1. (a) Except as provided in IC 25-2.1-5, a professionalcorporation may issue shares, fractional shares, and rights or optionsto purchase shares only to:
(1) individuals who are authorized by Indiana law or the lawsof another state to render a professional service permitted by thearticles of incorporation of the corporation;
(2) general partnerships in which all the partners are authorizedby Indiana law or the laws of another state to render aprofessional service permitted by the articles of incorporationof the corporation;
(3) professional corporations authorized by Indiana law or thelaws of another state to render a professional service permittedby the articles of incorporation of the corporation; and
(4) the trustee of a qualified trust.
(b) When determined necessary by the licensing authority for anyprofession in order to prevent violations of the ethical standards ofthe profession, the licensing authority may by rule further restrict,condition, or abridge the authority of professional corporations toissue shares, but no such rule may, of itself, have the effect ofcausing a shareholder of a professional corporation at the time therule becomes effective to become a disqualified person. All sharesissued in violation of:
(1) this section; or
(2) any rule adopted by a licensing authority as provided by thissection;
are void.
(c) Except as provided in IC 25-2.1-5, a shareholder of aprofessional corporation may transfer or pledge shares, fractionalshares, and rights or options to purchase shares of the corporationonly to individuals, general partnerships, professional corporations,and trustees of qualified trusts qualified under this article to ownshares issued directly to them by the professional corporation. Atransfer of shares in violation of this subsection is void; however,this subsection does not apply to the transactions described in section3 of this chapter.
(d) Each certificate representing shares of a professionalcorporation must state conspicuously upon its face that the sharesrepresented by that certificate are subject to:
(1) restrictions on transfer imposed by this article; and
(2) such restrictions on transfer as may be imposed by thelicensing authority under this article.
(e) This section does not permit or authorize an individual topractice within Indiana any profession with respect to which alicense or registration is required by the state without the individualbeing licensed or registered under the laws of the state.As added by P.L.239-1983, SEC.1. Amended by P.L.34-1997, SEC.5;P.L.128-2001, SEC.2.
IC 23-1.5-3-2
Authority to purchase shares from disqualified persons
Sec. 2. A professional corporation may purchase its own sharesfrom a disqualified person without regard to the availability ofcapital or earned surplus for the purchase; however, no purchase ofor payment for its own shares may be made at a time when thecorporation is insolvent or when the purchase or payment wouldmake it insolvent.
As added by P.L.239-1983, SEC.1.
IC 23-1.5-3-3
Transfer or purchase of shares from disqualified persons;procedure
Sec. 3. (a) Whenever:
(1) a shareholder of a professional corporation dies;
(2) a shareholder of a professional corporation becomes adisqualified person;
(3) a charitable remainder unitrust or charitable remainderannuity trust that holds shares of a professional corporationbecomes a disqualified person; or
(4) shares of a professional corporation are transferred byoperation of law or court decree to a disqualified person;
the shares of the deceased shareholder or disqualified person may betransferred to a qualified person. If the shares are not so transferred,the shares shall be purchased or redeemed by the corporation to theextent of funds that may legally be made available for the purchase,as provided in section 2 of this chapter.
(b) Within five (5) months after such death or thirty (30) daysafter such a disqualification or transfer, if the price and method ofpayment for such shares is not fixed or ascertainable by the articlesof incorporation or bylaws of the corporation or by privateagreement, the corporation shall make a written offer to pay for theshares at a specified price determined by the corporation to be thefair value of the shares as of the date of the death, disqualification,or transfer. The offer:
(1) shall be given to the disqualified person, which, in the caseof a deceased shareholder, is the executor, administrator, orheirs at law if there is no executor or administrator; and
(2) must be accompanied by:
(A) a balance sheet of the corporation, as of the latestavailable date and not more than twelve (12) months beforethe making of the offer; and
(B) an income statement of the corporation for the twelve(12) month period ending on the date of the balance sheet.
(c) If the fair value of the shares is agreed upon between thedisqualified person and the corporation within thirty (30) days afterthe date of the written offer from the corporation, payment for the
shares shall be made upon surrender of the certificate or certificatesrepresenting the shares:
(1) within sixty (60) days after the date of the offer; or
(2) at such other time as the parties may fix by agreement.
Upon payment of the agreed value, the disqualified person ceases tohave any interest in the shares.
(d) If the disqualified person and the corporation do not agree onthe fair value of the shares within thirty (30) days after thecorporation's written offer, the following procedures apply:
(1) The disqualified person may make written demand withinsixty (60) days after the date of the corporation's written offerthat the corporation file a petition in the circuit or superior courtin the county where the principal office of the corporation islocated, requesting that the fair value of the shares bedetermined. The corporation shall file a petition under thissubdivision within thirty (30) days after receipt of writtendemand from the disqualified person. If the corporation fails toinstitute the proceeding as required by this subdivision, thedisqualified person may do so within sixty (60) days afterdelivery of the written demand to the corporation.
(2) If the corporation so elects at any time within sixty (60) daysafter the date of the corporation's written offer, it may file apetition for the determination of the fair value of the shares inthe circuit or superior court in the county where the principaloffice of the corporation is located.
(3) The disqualified person shall be made a party to anyproceeding under this subsection.
(4) All proceedings instituted under this subsection shall begoverned by the Indiana rules of trial procedure.
(5) In a proceeding under this subsection, the court may appointone (1) or more persons as appraisers to receive evidence andmake a recommendation to the court on the question of the fairvalue of the shares. The appraisers have such authority as shallbe specified in the appointment order of the court.
(e) In a proceeding under subsection (d), the disqualified personis entitled to judgment against the corporation for the amount of thefair value of his shares as of the date of death, disqualification, ortransfer, upon surrender to the corporation of the certificate orcertificates representing the shares. The court may order that thejudgment be paid by the corporation in such installments as the courtdetermines to be fair and just. The judgment may include anallowance for interest, not to exceed the legal rate of interest forjudgments specified in IC 24-4.6-1-101, from the date of death,disqualification, or transfer.
(f) Except as provided in this subsection, the costs and expensesof any proceeding under subsection (d) shall be determined by thecourt and shall be assessed against the corporation. If the fair valueof the shares as determined by the court does not exceed the amountspecified in the last written offer made by the corporation, the courtmay assess all or any part of the costs and expenses of the proceeding
against the disqualified person. For purposes of this subsection,expenses include:
(1) reasonable compensation for and reasonable expenses of theappraisers; and
(2) reasonable fees and expenses of counsel.
(g) If a purchase, redemption, or transfer of the shares of adeceased or disqualified shareholder or of a transferee who is adisqualified person is not completed within ten (10) months after thedeath of the deceased shareholder or within five (5) months after thedisqualification or transfer, the corporation shall immediately cancelthe shares on its books, and the disqualified person as of the date ofcancellation has no further interest as a shareholder in thecorporation other than his right to payment for such shares under thissection. A corporation may not cancel its shares if a petition for adetermination of fair value has been filed under this section in acircuit or superior court.
(h) Shares acquired by a corporation:
(1) in payment of the agreed value for the shares; or
(2) in payment of a judgment entered for the payment of thoseshares, as provided in this section;
may be held and disposed of by the corporation as in the case ofother treasury shares.
(i) Any provision regarding purchase, redemption, or transfer ofshares of a professional corporation contained in the articles ofincorporation, bylaws, or any private agreement is specificallyenforceable in the courts of this state.
(j) This section does not prevent or relieve a professionalcorporation from paying pension benefits or other deferredcompensation for services rendered to or on behalf of a formershareholder as otherwise permitted by law.
As added by P.L.239-1983, SEC.1. Amended by P.L.172-1996,SEC.5.
IC 23-1.5-3-4
Proxies; voting trusts
Sec. 4. (a) A proxy for shares of a professional corporation isvalid only if it is given to a qualified person of that corporation.
(b) A voting trust with respect to shares of a professionalcorporation is valid only if all the trustees and beneficiaries of thevoting trust are qualified persons.
As added by P.L.239-1983, SEC.1.
IC 23-1.5-3-5
Powers of administrator, executor, guardian, and others of estateof shareholder who holds all outstanding shares
Sec. 5. This section applies to an administrator, executor,guardian, conservator, or receiver of the estate of a shareholder of aprofessional corporation who holds all of the outstanding shares ofthe corporation. Such a person may:
(1) exercise voting rights; and (2) serve as a director and officer of the corporation;
for the purposes of amending the articles of incorporation asprovided in IC 23-1.5-4-2 or dissolving the corporation.
As added by P.L.239-1983, SEC.1.
IC 23-1.5-3-6
Filing of articles of incorporation; notice of change of ownershipor address
Sec. 6. (a) A professional corporation shall file a copy of itsarticles of incorporation, certified by the secretary of state, with thebureau. Thereafter, the corporation shall file with the bureau certifiedcopies of all amendments to its articles of incorporation, includingarticles of acceptance and all articles of merger to which thecorporation is a party.
(b) A professional corporation shall notify the bureau of a changein the ownership of any of the shares in the professional corporationor a change in its business address within thirty (30) days after thedate of the change. Notice of change in ownership must contain thenames and post office addresses of the transferor shareholder and thetransferee shareholder, and notice of change of business address mustcontain the street address of the old location and the street address ofthe new location.
As added by P.L.239-1983, SEC.1. Amended by P.L.34-1997, SEC.6.