COMMENT

Source: Model Act, § 7.03. This replaces former § 14-2-112(b).

Section14-2-703 provides the remedy for shareholders if the corporation refuses or fails to hold a shareholders' meeting as required by Section14-2-701 or14-2-702. A shareholder entitled to participate in a meeting may apply for a summary court order to command the holding of a meeting if (1) an annual meeting is not held within the later of 6 months after the end of the corporation's fiscal year or 15 months after its last annual meeting, or (2) a special meeting is not properly noticed within 30 days after a valid demand is delivered to the secretary of the corporation or, if properly noticed, is not held in accordance with the notice. Since a meeting must be held within 60 days of the notice date under Section14-2-705, the maximum delay between the demand for a special meeting and the right to petition a court for a summary order is 90 days. Where the corporation fails to hold an annual meeting at the time specified in its bylaws, or, in the absence of such a specification, within 60 days after a demand, former § 14-2-112(b) provided for shareholder application to the superior court to mandate an annual meeting. No provision was made in the former law for special meetings.

The court has discretion under Section 14-2-703 since the language of the statute is that the court "may summarily order" that a meeting be held. In any event, a shareholder applying for a summary order to hold a meeting has the burden of showing that he is entitled to the order.

Subsection (b) of the Model Act, describing the powers of the court, was amended to return to the language of § 14-2-112(b), which is simpler and clearer. The court may provide that a meeting it has ordered is to be the annual meeting. If so provided, the meeting should be viewed as compliance with Section14-2-701, precluding all other shareholder requests for an annual meeting for that year. The court may, consistent with the articles of incorporation, bylaws, and the Code, specify the quorum and votes required for the meeting and actions taken at the meeting. This may include such matters as determining which shares must be counted for approval of business combinations with an interested shareholder under Article 11, Part 2, or which shares are qualified to approve a director's conflicting interest transaction under Article 8, Part 6.

Note to 1989 Amendment Subsection (a)(1) was amended by substituting "earlier" for "later". This returns to Model Act language, and liberalizes a shareholder's right to demand a meeting. Subsection (a)(1) was also amended by changing the phrase "the corporation's fiscal year" to "a fiscal year of the corporation." This was to clarify that where a corporation had missed several annual meetings a shareholder need not wait for a period of six months after the most recent fiscal year before obtaining a court-ordered meeting. If the corporation has not held a meeting within the earlier of 15 months from its last annual meeting or six months after the end of any fiscal year, relief is available under this section.

The 1989 amendment changed subsection (b) to delete the ambiguous reference to a "substitute" meeting and to eliminate surplus language dealing with administrative details, without intending to limit the broad authority of courts to order remedial actions.

Note to 1993 Amendment The 1993 amendment is intended to clarify that any shareholder of a corporation may petition the court to order the annual meeting be held, and not simply a shareholder who is entitled to vote at such a meeting.

Cross-References Annual meeting, see § 14-2-701. Effective date of notice, see § 14-2-141. Notice of meeting, see § 14-2-705. "Principal office": defined, see § 14-2-140; designated in annual registration, see § 14-2-1622. Quorum and voting requirements, see § 14-2-725 et seq. Registered office: designated in annual registration, see § 14-2-1622; required, see § 14-2-202 &14-2-501. Shareholders' list for voting at meeting, see § 14-2-720. Voting entitlement generally, see § 14-2-721.

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