Editor's notes.

- Ga. L. 2006, p. 825, § 17/SB 469, purported to amend subsection (b), but actually amended paragraph (b)(1).

Law reviews.

- For article, "Some Distinctive Features of the Georgia Business Corporation Code," 28 Ga. St. B. J. 101 (1991).

COMMENT

Source: Model Act, § 14.02. This replaces former §§ 14-2-272 & 273.

A corporation that has issued shares and commenced business may dissolve voluntarily only with the approval of its shareholders.

Subsection (a) requires the board of directors to propose dissolution and then submit the proposal to the shareholders. There is no Code counterpart to former § 14-2-272, which permitted dissolution by unanimous written consent of the shareholders, without formal board action. Obtaining board action is generally not difficult in closely held corporations, where the former procedure might have been employed. Shareholders of statutory close corporations may agree in advance to such dissolution arrangements as they may provide in the articles of incorporation, under Section14-2-933.

Subsection (b) requires the board of directors to make a recommendation to the shareholders that the proposal to dissolve be approved, unless it elects that, because of conflict of interest or other special circumstances, it should make no recommendation. The Model Act language of a "determination" was replaced with "election" in subsection (b) of the Code, consistent with changes in Sections 14-2-1003, 1103 and 1202. See the Comment to Section 14-2-1003. There were no comparable provisions in prior law, which simply required the board to adopt a resolution recommending that the corporation be dissolved.

Subsection (c) allows the Board of Directors to condition its submission of the dissolution proposal. There was no comparable provision in prior law, although the power to make authorization of corporate dissolution conditional was generally thought to exist. See the discussion of conditional submissions in the Comment to Section 14-2-1003. Article 14 also permits the corporation to revoke the dissolution. See Section 14-2-1404 for the procedures for revocation of dissolution proceedings.

Subsection (d) requires the corporation to notify each shareholder entitled to vote of the proposed shareholder meeting. This preserves former Georgia practice under § 14-2-273(2), but departs from the Model Act, which also required notice to shareholders who were not entitled to vote.

Under subsection (e) dissolution, to be approved, must receive the vote of a majority of the outstanding votes entitled by the articles of incorporation to vote on the proposal. This is a greater vote than that required for ordinary matters under Section 14-2-725. Nonvoting classes of shares are not given a statutory right to vote on proposals to dissolve (either as separate voting groups or together with voting shares) by the Code on the theory that, upon dissolution, the liquidation rights of all classes or series of shares are fixed by the articles of incorporation. The articles of incorporation, however, may stipulate that specified classes or series of shares are entitled to vote by separate voting groups or that a greater percentage of votes is required to approve the proposal than is required by Section 14-2-1402.

Note to 2006 Amendment The changes in clause (1) of subsection (b) of Code Section 14-2-1402 clarify that the board of directors has the authority not only to withhold its recommendation of a proposed dissolution because of conflicts of interest or other special circumstances, but also to recommend that the shareholders reject or vote against such a dissolution.

Cross-References Director standards of conduct, see §§ 14-2-830 &14-2-831. Dissolution by written consent of shareholders, see § 14-2-704. Effect of dissolution, see § 14-2-1408. Effect of notice of intent to dissolve, see § 14-2-1405. "Notice" defined, see § 14-2-141. Notice of shareholders' meeting, see § 14-2-705. Quorum at shareholders' meeting, see § 14-2-725. Revocation of dissolution proceedings, see § 14-2-1404. Supermajority quorum and voting requirements, see § 14-2-727. Voting by voting group, see §§ 14-2-725 &14-2-726. Voting entitlement of shareholders generally, see § 14-2-721. "Voting group" defined, see § 14-2-140.

RESEARCH REFERENCES