COMMENT

Source: Model Statutory Close Corporation Supplement, § 2. There was no comparable comprehensive set of provisions in former Georgia law. Previously § 14-2-120(b) expressly validated shareholders' agreements that varied the form of management of the corporation (much as Code § 14-2-731(c) does), and § 14-2-141(a) permitted the board of directors to consist of one or two persons, rather than three, under specified conditions. Former § 14-2-142 permitted the court to appoint provisional directors.

Provisions in the Georgia Business Corporation Code apply to all statutory close corporations except to the extent they are not consistent with the provisions in this article. Whenever this article is silent on an issue, the corresponding provision of the remainder of the Code applies.

One provision of the Code only becomes applicable upon election of statutory close corporation status. Section 14-2-627 provides that corporations formed under the Code do not have preemptive rights unless they elect them in their articles of incorporation. However, under Section 14-2-627(b) election of statutory close corporation status is treated as an election of preemptive rights, unless they are denied in the articles of incorporation.

Under subsection (b) the provisions of this article apply to all professional corporations that elect to be statutory close corporations.

Subsection (c) is derived from section 356 of the Delaware Corporation Law, and makes clear that enactment of this article does not affect the law applicable to corporations, including closely held corporations, that are not statutory close corporations. Election of statutory close corporation status is not intended to provide the exclusive means of varying the corporate form, where authority to do so exists under other provisions of the Code, or has previously been a normal incident of Georgia corporations. This article has independent legal significance, as does each other provision of the Code. See Zion v. Kurtz, 50 N.Y.2d 92, 405 N.E.2d 681 (Ct. App. 1980) (applying Delaware law), for a judicial approach consistent with the intent of this article.

The Code departs from the Model Close Corporation Supplement in Sections 14-2-731(c) and 801(a) to make clear that the flexibility provided by election of statutory close corporation status can effectively be obtained by provisions in articles of incorporation, bylaws or shareholder agreements, provided all shareholders approve in writing, and provided the corporation's shares are not regularly traded in public securities markets.

Cross-References Election of statutory close corporation status, see § 14-2-902. Business Corporation Code definitions, see § 14-2-140. Shareholders' agreements to vary management of the corporation, see §§ 14-2-731 and14-2-801.