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2018 Georgia Code 14-2-916 | Car Wreck Lawyer

Link to State of Georgia Official Statute 2018 Georgia Code Annotated (sourced from legal.resource.org)
O.C.G.A. 14-2-916 Case Law from Google Scholar Amendments to OCGA 14-2-916

TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

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

ARTICLE 9 CLOSE CORPORATIONS

14-2-916. Court action to compel purchase.

  1. If an offer to purchase shares made under Code Section 14-2-915 is rejected, or if no offer is made, the person exercising the compulsory purchase right may commence a proceeding against the corporation to compel the purchase in the superior court of the county where the corporation's registered office is located. The corporation at its expense shall notify in writing all of its shareholders, and any other person the court directs, of the commencement of the proceeding. The jurisdiction of the court in which the proceeding is commenced under this subsection is plenary and exclusive.
  2. The court shall determine the fair value of the shares subject to compulsory purchase in accordance with standards set forth in Code Section 14-2-942 together with terms for the purchase. Upon making these determinations the court shall order the corporation to purchase or cause the purchase of the shares or empower the person exercising the compulsory purchase right to have the corporation dissolved.
  3. After the purchase order is entered, the corporation may petition the court to modify the terms of purchase and the court may do so if it finds that changes in the financial or legal ability of the corporation or other purchaser to complete the purchase justify a modification.
  4. If the corporation or other purchaser does not make a payment required by the court's order within 30 days of its due date, the seller may petition the court to dissolve the corporation and, absent a showing of good cause for not making the payment, the court shall do so.
  5. A person making a payment to prevent or cure a default by the corporation or other purchaser is entitled to recover the payment from the defaulter.

(Code 1981, §14-2-916, enacted by Ga. L. 1988, p. 1070, § 1.)

COMMENT

Source: Model Statutory Close Corporation Supplement, § 16. There was no counterpart in former Georgia law.

Subsection (a) is jurisdictional, and grants the court full power to fashion relief as may be appropriate.

Subsection (b) requires the court to determine the "fair value" of the petitioning shareholder's shares. The standards to be applied are the same as those applied to dissenting shareholders under Article 13. The direction to consider the standards set out in Section 14-2-942 is a direction to consider the evidence uniquely available in close corporations to determine fair value - collateral agreements among shareholders, or between the corporation and shareholders for buyouts, the going concern value of the corporation, and the legal constraints that may be imposed by restrictions on distributions to shareholders, among other matters.

Subsection (b) also permits the court to set the terms on which the corporation shall make the purchase. The court has discretion to include in its order any conditions it feels are justified on the basis of the financial and other needs of the selling shareholder and of the purchaser. The court, for example, may authorize an installment sale. The order may include a provision for interest and may require collateral to secure the unpaid installments.

Subsection (c) permits the corporation to petition the court for a modification in its order if there are changes in the financial or legal ability of the corporation to make the payment. This is not intended to permit the corporation to relitigate the question of fair value if the corporation's business declines, unless the decline in business was based on facts known at the time of the initial determination of value, so that the initial determination would be subject to reopening under traditional standards. Rather, it is intended to permit the court to reschedule payments, alter security for payments, and take similar actions to make enforcement of the original decree possible.

Subsection (d) provides that if the purchase is not consummated or the purchasers default, the shareholder may petition for dissolution of the corporation. The court may deny the petition for good cause shown. The proceeding, however, affords the corporation an opportunity to be heard on the matter and an opportunity to avoid dissolution. Mandatory dissolution in the event the offered shares are not purchased provides a strong incentive for the corporation and the remaining shareholders to purchase the shares or to find another purchaser. Presumably the corporation and the other shareholders would refuse to purchase if the corporation's financial prospects were bleak. If this is the case, then dissolution may be the appropriate solution.

Cross-References Appointment of appraisers, see § 14-2-942. Appraisal, see § 14-2-942. Dissolution: generally, see Article 14; statutory close corporations, see § 14-2-943. "Notice" defined, see § 14-2-141. "Proceeding" defined, see § 14-2-140. Registered Office: designated in annual registration, see § 14-2-1622; required, see § 14-2-501.

RESEARCH REFERENCES

ALR.

- Use of marketability discount in valuing closely held corporation or its stock, 16 A.L.R.6th 693.

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