TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

Section 2. Business Corporations, 14-2-101 through 14-2-1703.

ARTICLE 13 DISSENTERS' RIGHTS

14-2-1301. Definitions.

As used in this article, the term:

"Beneficial shareholder" means the person who is a beneficial owner of shares held in a voting trust or by a nominee as the record shareholder.
"Corporate action" means the transaction or other action by the corporation that creates dissenters' rights under Code Section 14-2-1302.
"Corporation" means the issuer of shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer.
"Dissenter" means a shareholder who is entitled to dissent from corporate action under Code Section 14-2-1302 and who exercises that right when and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
"Fair value," with respect to a dissenter's shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action.
"Interest" means interest from the effective date of the corporate action until the date of payment, at a rate that is fair and equitable under all the circumstances.
"Record shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
"Shareholder" means the record shareholder or the beneficial shareholder.

(Code 1981, §14-2-1301, enacted by Ga. L. 1988, p. 1070, § 1; Ga. L. 1993, p. 1231, § 16.)

Law reviews.

- For article, "Going Private Through Stock Reclassification," see 15 (No. 7) Ga. St. B. J. 14 (2010).

COMMENT

Source: Model Act, § 13.01. Former law contained some of these definitions in § 14-2-251.

Section 14-2-1301 contains specialized definitions applicable only to Article 13.

The Model Act's definition of "beneficial shareholder" has been renumbered as subsection (1) and expanded to include holders of voting trust certificates.

The definition of "dissenter" in subsection (3) is a limiting one, since only a shareholder who has performed all the conditions imposed on him by this article in order to obtain payment for his shares is a "dissenter." Under this definition, a shareholder who initially objects but fails to perform any of these conditions with the times specified by this article loses his status as "dissenter" under this section.

The definition of "fair value" in subsection (4) leaves to the parties (and ultimately to the courts) the details by which "fair value" is to be determined within the broad outlines of the definition. This definition recognizes that determination of value is a question of fact, and is to be determined on the basis of the best available information in the particular case. It specifically preserves the language of former § 14-2-251(f) excluding appreciation and depreciation in anticipation of the proposed corporate action. The Model Act permitted an exception for equitable considerations that was deleted from the Code. The Code's approach of excluding appreciation or depreciation in anticipation of the corporate action provides a minority shareholder with full protection. The equitable exception only introduces vagueness and uncertainty into an already difficult determination.

"Fair value" is to be determined immediately before the effectuation of the corporate action, instead of the date of the shareholder's vote, as was the case under former § 14-2-251(f). This comports with the plan of this article to preserve the dissenter's prior rights as a shareholder until the effective date of the corporate action, rather than leaving him in a twilight zone where he has lost his former rights, but has not yet gained his new ones.

The definition of "interest" in subsection (5) of the Model Act has been altered. Former § 14-2-251(g)(6) provided for interest "at such rate as the court finds to be equitable." The Model Act's approach, tying interest rates to the average rate paid by a corporation on its principal bank loans, created factual difficulties, and would have led to varying interest rate awards for dissenters in different corporations at the same time. The date from which interest runs has been changed from the date of the shareholders' vote to the effective date of the corporate action, in conformity with the change of the valuation date in subsection (4).

The definition of "record shareholder" in subsection (6) is the key to determination of dissenters' rights under Section 14-2-1302. This represents a departure from the Model Act, which granted dissenters' rights, under different conditions, to both "shareholders" and "record shareholders." Record ownership for purposes of determining who can vote on a transaction, under Section 14-2-707, may be set as much as 70 days in advance of the meeting. But the action triggering dissenters' rights in some cases may be taken without a shareholder vote (as in the case of a parent-subsidiary merger under Section 14-2-1104), or by written consent of the holders of a sufficient number of shares authorized by articles of incorporation under Section 14-2-704, in which cases notice must be sent within ten days after the action is taken. In these cases Section 14-2-1320(b) requires a notice of dissenters' rights to be sent at that time, which would create a new "record date" for determining who is a "record shareholder." See the Comment to Section 14-2-1323.

Subsection (7) includes beneficial owners within the definition of "shareholder" for purpose of determining who can dissent, if a nominee certificate has been filed pursuant to Section 14-2-723 granting such rights.

Note to 1993 Amendment The 1993 amendment added the definition of corporate action.

Cross-References Act definitions, see § 14-2-140. Legal rate of interest, see § 7-4-12. Merger and share exchange, see Articles 11 and 11A (Article 11A has been redesignated as Part 3 of Article 11).

JUDICIAL DECISIONS

Determining fair value.

- Under the dissenters' rights statute a court should not apply minority or marketability discounts in determining the fair value of dissenters' shares; rather, the term fair value encompasses the modern view expressed by the Revised Model Business Corporation Act that a shareholder should generally be awarded his or her proportional interest in the corporation after valuing the corporation as a whole. Blitch v. Peoples Bank, 246 Ga. App. 453, 540 S.E.2d 667 (2000).

RESEARCH REFERENCES

Am. Jur. 2d.

- 18A Am. Jur. 2d, Corporations, §§ 2151 et seq.

C.J.S.

- 19 C.J.S., Corporations, § 896 et seq.

ALR.

- Status of owners of nonregistered stock as "stockholders" within state statute relating to merger or consolidation or reorganization of corporation, or sale of its entire assets, 158 A.L.R. 983.

Conclusiveness of statement or decision of accountant or similar third person under contract between others requiring property to be valued by him, 50 A.L.R.2d 1268.

Valuation of stock of dissenting stockholders in case of consolidation or merger of corporation, sale of its assets, or the like, 48 A.L.R.3d 430.

Distribution of funds by nonprofit corporation absent dissolution, 51 A.L.R.3d 1318.

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