O.C.G.A. § 14-2-622 (2019)

Annotations

Law reviews. - For article, ‘‘Liability Limbo: Are Incorporated Lawyers in Georgia Really Free from Personal Liability

When Their Fellow Shareholders Misbehave?,’’ see 15 Ga. St. U. L. Rev. 1047 (1999).

COMMENT Source: Model Act, § 6.22. This replaces former § 14-2-110. Subsection (a) simplifies the provisions of former § 14-2-110(a), making subscribers and shareholders liable only for unpaid consideration. The major change is elimination of the obligation to pay, as the ‘‘full consideration’’ for shares, a minimum price equal to par value, as required by former § 14-2-84(a). Further, all reference to liability of successor transferees formerly provided in § 14-2-110(b) is omitted; this is left to the provisions of Article 8 of the Uniform Commercial Code. Subsection (b) makes clear that no shareholder, whether original purchaser or transferee, becomes personally liable for corporate debts except through personal conduct, unless otherwise provided in the articles of incorporation. Cross-References Articles of incorporation, see § 14-2-202. Consideration for shares, see § 14-2-621. Share transfer restrictions, see § 14-2-627. Subscriptions for shares, see § 14-2-620. JUDICIAL DECISIONS Editor’s notes. - In light of the similarity of the statutory provisions, decisions under former Code 1933, § 22-601 and former Code Section 14-2-110, which was repealed by Ga. L. 1988, p. 1070, § 1, effective July 1, 1989, are included in the annotations for this Code section. Period of limitations as to contract between subscribers and corporation. - Rights and liabilities existing between corporation and its stockholders arise out of contract entered into between the subscribers and the corporation, a right of action which is barred after a

period of six years from the accrual of the right. C & S Land, Transp. & Dev. Corp. v. Yarbrough, 153 Ga. App. 644, 266 S.E.2d 508 (1980) (decided under former Code 1933, § 22-601). Shareholders of a professional corporation. - Lawyers may practice their profession as shareholders in a professional corporation with the same rights and responsibilities as shareholders in other professional corporations; thus, lawyers in a professional corporation were not jointly and severally liable for the professional misconduct of the majority share-

holder; overruling First Bank & Trust Co. v. Zagoria, 250 Ga. 844, 302 S.E.2d 674 (1983). Henderson v. HSI Fin. Servs., Inc., 266 Ga. 844, 471 S.E.2d 885 (1996). Personal liability of a shareholder for individual actions. - Trial court erred in granting a directed verdict pursuant to O.C.G.A. § 9-11-50 to a pediatrician in a medical malpractice action by the parents of a minor, whose allegedly misdiagnosed bacterial meningitis caused brain damage and rendered the minor a quadriplegic, because there was some evidence that the pediatrician violated the standard of care when the pediatrician allowed the doctor’s unlicensed nurse to handle weekend calls from patients’ families without the necessity of contacting

the pediatrician; although the nurse, who spoke with the parents and gave them erroneous information that the child probably had a virus or was hungry, was employed by the pediatrician’s professional corporation, the pediatrician could not be shielded from individual liability from the pediatrician’s own acts, pursuant to O.C.G.A. § 14-2-622(b). Snider v. Basilio, 276 Ga. App. 315, 623 S.E.2d 521 (2005). Cited in Continental Cas. Co. v. Continental Rent-A-Car of Ga., Inc., 349 F. Supp. 666 (N.D. Ga.); Super Valu Stores, Inc. v. First Nat’l Bank, 463 F. Supp. 1183 (M.D. Ga. 1979); In re Delk Rd. Assocs., 37 Bankr. 354 (Bankr. N.D. Ga. 1984).

RESEARCH REFERENCES Am. Jur. 2d. - 18A Am. Jur. 2d, Corporations, §§ 717 et seq., 725 et seq., 728 et seq., 730 et seq., 732 et seq., 734 et seq., et seq.,739 et seq., 745 et seq., 748 et seq., 755 et seq. C.J.S. - 18 C.J.S., Corporations, §§ 503, 504, 505, 506. ALR. - Liability of one whose name appears upon corporate books as a stockholder without his consent, 3 ALR 1049. Personal liability of officers or stockholders for debts of corporation which has made an unauthorized change in its name, 8 ALR 583. Liability as on unpaid subscription, of transferees of stock issued in exchange for property or services at an overvaluation, 12 ALR 449. Statutory liability of stockholder for tort of corporation, 14 ALR 267. Liability to creditors of stockholders whose stock is forfeited or sold for nonpayment of assessments, 19 ALR 1096. Payments by stockholders applicable upon double liability, 23 ALR 1367; 45 ALR 1215; 56 ALR 527; 83 ALR 147; 120 ALR 511. Disregarding corporate existence, 34 ALR 597. When does statute of limitations begin to run against an action by, or in behalf of, creditors of a corporation on unpaid stock or subscriptions, 35 ALR 832. Validity of provision in contract with

corporation waiving liability of stockholders, 40 ALR 371. Right of stockholder to set off indebtedness of corporation against statutory superadded liability, 40 ALR 1183; 98 ALR 659. Stockholders’ liability as covering interest on claims of corporate creditors after bankruptcy, declared insolvency, or appointment of a receiver, 41 ALR 564. Insolvency of corporation as barring stockholder’s right to rescind subscription on ground of fraud, 41 ALR 674; 46 ALR 484. Liability of transferrer of corporate stock for calls or assessments as affected by insolvency, fraud, or illegality in transfer, 45 ALR 99; 86 ALR 57. Fraud inducing subscription or purchase of stock as defense against statutory superadded liability, 51 ALR 1203. Liability of member of mutual fire insurance company as affected by period of membership, 53 ALR 343. Liability of stockholder as affected by business of corporation being turned over to an officer of the court or other persons, 55 ALR 327. Right of stockholders contributing to make good losses to be reimbursed by, or out of assets of, corporation, 55 ALR 794. Constitutional provision fixing liability of stockholders as limitation of power of legislature in that regard, 63 ALR 870.

CORPORATIONS & PARTNERSHIPS

Right of corporation to refuse to register transfer of stock because of stockholder’s indebtedness to it, where transfer is by operation of law, 65 ALR 220. Sale, or surrender of stock for sale, to pay assessment, as relieving stockholder from further liability, 66 ALR 436. Right of pledgee of corporate stock in respect of dividends declared thereon, 67 ALR 485; 103 ALR 849. Liability as stockholder of one purchasing stock for, or transferring stock to, infant, 69 ALR 661. Creditor’s knowledge that stock is unpaid as affecting stockholders’ liability, 69 ALR 881. Applicability of constitutional or statutory provisions relating to added liability of stockholders to holders of stock issued, or stockholders of corporations organized, before their enactment, 72 ALR 1252. Infant, his estate or property held in trust for him, as subject to statutory added liability of stockholder, 78 ALR 431; 120 ALR 956. Right of a third person who has paid corporation’s indebtedness to be subrogated to creditors’ right to enforce stockholders’ statutory liability, 78 ALR 611. Stockholder’s statutory added liability as affected by death of stockholder, 79 ALR 1537; 96 ALR 1466. Validity and effect of extrinsic agreement absolving one, in whole or part, from liability on subscription to corporate stock, 81 ALR 198. Liability of pledgee of stock as shareholder, 82 ALR 565. Stockholders’ statutory liability as assignable or subject to sale, 82 ALR 1285; 159 ALR 1114. Transfer of bank or other corporate stock to corporation issuing it, as releasing transferrer from stockholders’ statutory added liability, 86 ALR 72. Statutory added liability of holders of bank stock or other corporate stock the issue of which was ultra vires, invalid, or irregular, 86 ALR 816. Conveyance or transfer by stockholder as fraudulent as regards his liability as stockholder to creditors of corporation, 89 ALR 751. Statutory superadded liability of stock-

holders as affected by reorganization, consolidation, or merger of corporation, 89 ALR 770; 154 ALR 427. Statutory added liability of stockholders of bank or other corporation as affected by sale of, or other transaction in relation to, assets, 89 ALR 790; 100 ALR 1276. Liability under trust-fund doctrine of subscribers to stock of corporation the charter of which has been canceled for reasons other than insolvency, 90 ALR 1350. Liability on stock held by one as trustee or in other fiduciary capacity, 91 ALR 257; 97 ALR 1250; 117 ALR 655. Setoff as between dividends from assets of insolvent bank or other corporation and liability of creditors as stockholders, 91 ALR 326. Rank or preference of claim against estate in respect of superadded liability on corporate stock owned by decedent whose estate is insolvent, 92 ALR 1040. Right of an officer whose power and authority to enforce liability of stockholders of insolvent corporation is derived from statute, without intermediary court action, to maintain action in that regard in another state, 94 ALR 904. Statutory liability of stockholder of bank or other corporation as affected by change in or renewal of corporation’s obligation, 97 ALR 630. Life interest and remainder in corporate stock as affecting stockholder’s statutory liability, 99 ALR 505. Validity and effect of agreement by a corporation contemporaneously with issue or sale of stock, to repurchase or redeem the stock or to cancel the subscription therefor and refund consideration paid, 101 ALR 154. Validity of release, cancelation, or compromise of unpaid subscription for stock by corporation or its representatives, 101 ALR 231. Stockholders’ statutory liabilities as affected by alleged defects or irregularities in organization of corporation, 102 ALR 327. Statutory added liability of stockholders of bank or other corporation as affected by transfer of stock after closing thereof or appointment of receiver therefor, 103 ALR 689.

Agreement by creditors of bank or other corporation postponing payment of their claims as affecting statutory liability of stockholders, 103 ALR 754. Stockholders’ statutory liability as affected by fact that stock is in name of a holding company, 103 ALR 921; 151 ALR 1165. Failure to enter transfer of stock on corporate books as affecting liability of transferrer for calls or assessments, 104 ALR 638. Applicability of constitutional or statutory provisions relating to added liability of stockholders to corporate debts contracted prior to the adoption of the provision, 105 ALR 165. Power of corporation to change obligations to stockholders, 105 ALR 1452; 117 ALR 1290. Recovery against corporate directors or officers for fraud or mismanagement as affected by releases, ratification, waiver, or consent by some, but not for all, of the stockholders, 120 ALR 238. When limitation begins to run against action to enforce stockholder’s superadded liability, 137 ALR 788. Implied obligation of purchaser of corporate stock to indemnify a vendor

against future calls and assessments, 141 ALR 1351. Conflict of laws as to period of limitation to enforce stockholders’ statutory liability, 143 ALR 1442. Effect of fraud to toll the period for bringing action prescribed in statute creating the right of action, 15 ALR2d 500; 48 ALR4th 1094. Enforceability in another jurisdiction of personal liability of stockholders for debts of corporation whose organization is incomplete or defective, 42 ALR2d 659. Settlement negotiations as estopping reliance on statute of limitations, 39 ALR3d 127. Stockholder’s personal conduct of operations or management of assets as factor justifying disregard of corporate entity, 46 ALR3d 428. Liability of director or dominant shareholder for enforcing debt legally owed him by corporation, 56 ALR3d 212. Controlling stockholder’s duty to investigate intent and motive of purchaser before selling stock, 77 ALR3d 1005. Personal liability of stockholder, officer, or agent for debt of foreign corporation doing business in the state, 27 ALR4th 387.