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2018 Georgia Code 14-2-914 | Car Wreck Lawyer

Link to State of Georgia Official Statute 2018 Georgia Code Annotated (sourced from legal.resource.org)
O.C.G.A. 14-2-914 Case Law from Google Scholar Amendments to OCGA 14-2-914

TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

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

ARTICLE 9 CLOSE CORPORATIONS

14-2-914. Compulsory purchase of shares after death of shareholder.

  1. This Code section and Code Sections 14-2-915 through 14-2-917 apply to a statutory close corporation only if so provided in its articles of incorporation. If these Code sections apply, the executor or administrator of the estate of a deceased shareholder may require the corporation to purchase or cause to be purchased all (but not less than all) of the decedent's shares or to be dissolved.
  2. The provisions of Code Sections 14-2-915 through 14-2-917 may be modified only if the modification is set forth or referred to in the articles of incorporation.
  3. An amendment to the articles of incorporation to provide for application of Code Sections 14-2-915 through 14-2-917, or to modify or delete the provisions of these Code sections, must be approved by the holders of at least two-thirds of the votes of each class or series of shares of the statutory close corporation, voting as separate voting groups, whether or not otherwise entitled to vote on amendments. If the corporation has no shareholders when the amendment is proposed, it must be approved by at least two-thirds of the subscribers for shares, if any, or, if none, by all of the incorporators.
  4. A shareholder who votes against an amendment to modify or delete the provisions of Code Sections 14-2-915 through 14-2-917 is entitled to dissenters' rights under Article 13 of this chapter if the amendment upon adoption terminates or substantially alters his existing rights under these Code sections to have his shares purchased.
  5. A shareholder may waive his and his estate's rights under Code Sections 14-2-915 through 14-2-917 by a signed writing.
  6. Code Sections 14-2-915 through 14-2-917 do not prohibit any other agreement providing for the purchase of shares upon a shareholder's death, nor do they prevent a shareholder from enforcing any remedy he has independently of these Code sections.

(Code 1981, §14-2-914, enacted by Ga. L. 1988, p. 1070, § 1.)

COMMENT

Source: Model Statutory Close Corporation Supplement, § 14.

Sections 14-2-914 through 14-2-917, which are operative only if the articles of incorporation specifically so provide, guarantee a buy-out at the death of a shareholder. Thus, it is not enough to comply with Section 14-2-902(a), to state that the corporation is a statutory close corporation, to trigger application of these sections. Subsection (a) requires a specific provision in the articles of incorporation to the effect that "Sections 14-2-914 - 14-2-917 of the Georgia Business Corporation Code apply to this corporation," or words of similar import.

Subsection (b) specifically contemplates modification of the standard form of buyout arrangements provided in Sections 14-2-914 - 14-2-917, but requires that modification to be contained in, or at least referred to in the articles of incorporation. Thus, a lengthy buy-sell agreement need not be set out in the articles of incorporation, if specific reference is made to it in the articles. Thus these buy-sell arrangements can be expanded to cover events other than death, such as disability or retirement, and the terms of payment can be modified. Where immediate payment or dissolution appears too harsh, provision can be made for extended payments to a decedent's estate or a withdrawing shareholder.

Subsection (c) varies the usual voting rules in the case of adoption or modification of these buyout arrangements. Subsection (c) raises the voting requirement of Section 14-2-1003(e) (a majority of the votes entitled to be cast) to two-thirds. It is not intended to modify the rule of Section 14-2-1003(e) that permits the articles of incorporation to require a higher vote. While Section 14-2-1003 only provides for voting by each voting group that has dissenter's rights, subsection (c) provides that all voting groups must separately approve an amendment making these provisions applicable, or modifying them. These voting rules emphasize that the decision to utilize any kind of a buyout arrangement should be made only after careful consideration of the factors involved in the particular consideration.

Because these sections have the effect of making a corporation subject to dissolution upon the death of a shareholder, if the shares are not repurchased, they remove one of the normal characteristics of the corporate form - continuity of life, and make its life more like that of a partnership. Subsection (d) provides dissenters' rights under Article 13 for those shareholders who vote against an amendment to modify or delete these provisions, if the amendment substantially alters previously existing rights to have shares purchased. No dissenters' rights are granted for an original amendment making these sections applicable, even if the amendment at the same time modifies these provisions, since a shareholder is being granted some right, however limited or conditioned, to have shares purchased.

Subsections (e) and (f) make clear that the rights granted by these sections may be waived or added to by other instruments. Thus, a corporation can adopt the buyout provisions of these sections to provide for the death of shareholders, and agree by separate contract to buy shares of retiring employees.

Cross-References Acquisition of own shares by corporation, see §§ 14-2-631 &14-2-640. Amendment of articles of incorporation, see Article 10, Part 1. Court action to compel purchase, see § 14-2-916. Dissenters' rights, see Article 13. Dissolution: generally, see Article 14; statutory close corporations, see § 14-2-943. Procedure for compulsory purchase, see § 14-2-915. Voting by voting groups: amendment of articles of incorporation, see § 14-2-1004; generally, see § 14-2-726. "Voting group" defined, see § 14-2-140.

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