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2018 Georgia Code 14-2-911 | Car Wreck Lawyer

Link to State of Georgia Official Statute 2018 Georgia Code Annotated (sourced from legal.resource.org)
O.C.G.A. 14-2-911 Case Law from Google Scholar Amendments to OCGA 14-2-911

TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

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

ARTICLE 9 CLOSE CORPORATIONS

14-2-911. Share transfer prohibition.

  1. An interest in shares of a statutory close corporation may not be voluntarily or involuntarily transferred, by operation of law or otherwise, except to the extent permitted by the articles of incorporation or under Code Section 14-2-912.
  2. Except to the extent the articles of incorporation provide otherwise, this Code section does not apply to a transfer:
    1. To the corporation or to any other holder of the same class or series of shares;
    2. To members of the shareholder's immediate family (or to a trust, all of whose beneficiaries are members of the shareholder's immediate family), which immediate family consists of his spouse, parents, lineal descendants (including adopted children and stepchildren), and the spouse of any lineal descendant, and brothers and sisters;
    3. That has been approved in writing by all of the holders of the corporation's shares having general voting rights;
    4. To an executor or administrator upon the death of a shareholder or to a trustee or receiver as the result of a bankruptcy, insolvency, dissolution, or similar proceeding brought by or against a shareholder;
    5. By merger or share exchange under Article 11 of this chapter or an exchange of existing shares for other shares of a different class or series of the corporation;
    6. By a pledge as collateral for a loan that does not grant the pledgee any voting rights possessed by the pledgor; or
    7. Made after termination of the corporation's status as a statutory close corporation.

(Code 1981, §14-2-911, enacted by Ga. L. 1988, p. 1070, § 1.)

COMMENT

Source: Model Statutory Close Corporation Supplement, § 11. There was no comparable provision in former Georgia law.

This section sets out a standardized transfer prohibition that automatically applies unless the articles of incorporation provide otherwise. The prohibition is designed to accomplish two purposes: first, to provide a prohibition that fits the needs of the "typical" close corporation; and second, to facilitate alteration in order to fit the special needs of shareholders in a particular corporation.

The definition of transfer in subsection (a) is intended to cover every possible type of transaction that might create an interest in corporate shares, including purchase, sale, discount, negotiation, gift, trust, legacy, inheritance, pledge, mortgage lien, creation of a security interest, hypothecation, bankruptcy, or transfer pursuant to court order. It is a blanket definition, from which specific exceptions are carved in subsection (b). Its effect, without more, is to make shares in a statutory close corporation non-transferable, with limited exceptions, much as partnership interests are not transferable.

Subsection (a) also provides that these transfers are permitted only to the extent permitted either by the articles of incorporation or under Section 14-2-912. This intended to make clear that the statutory prohibition can be limited or modified simply by altering it in the articles of incorporation. For example, if shareholders wanted all pledges to be subject to the prohibition, but found the remainder of the statutory prohibitions acceptable, the articles of incorporation may simply provide that "subsection 14-2-911(b)(6) does not apply."

Subsection (b) describes a number of exemptions to the prohibition of subsection (a). Intrashareholder and intrafamily transfers are exempt on the assumption that most typical close corporation shareholders would want these transfers to be exempt. In addition, transfers that are in effect merely internal recapitalizations and transfers having the approval of all the shareholders are exempt. Pledges that do not carry voting power are exempted, just as assignments of a partner's interest, which carries no management rights, is permitted under the Uniform Partnership Act.

Cross-References Corporation's purchase options, see §§ 14-2-912 &14-2-913. Information on shares: generally, see § 14-2-627; statutory close corporation shares, see § 14-2-910. Merger and share exchange: generally, see Article 11; statutory close corporation, see § 14-2-930. Sale of assets: generally, see Article 12; statutory close corporation, see § 14-2-930. "Shareholder" defined, see § 14-2-140. Shareholders' purchase options, see § 14-2-912. Termination of statutory close corporation status, see § 14-2-931.

RESEARCH REFERENCES

Am. Jur. 2d.

- 18A Am. Jur. 2d, Corporations, § 563.

C.J.S.

- 18 C.J.S., Corporations, § 287 et seq.

ALR.

- Validity of restrictions on alienation or transfer of corporate stock, 61 A.L.R.2d 1318.

Validity and construction of provision restricting transfer of corporate stock, which conditions transfer upon consent of one other than shareholder, officer, or director of corporation, 53 A.L.R.3d 1272.

Validity of "consent restraint" on transfer of shares of close corporation, 69 A.L.R.3d 1327.

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