COMMENT

Source: Model Statutory Close Corporation Supplement, § 25. There was nothing comparable in former Georgia law. The only possible reference to informalities was in former § 14-2-120(b), to the effect that nothing in any agreement "shall be invalid as between the parties thereto on the ground that it is an attempt by the parties thereto to restrict the discretion of the board of directors . . . or to treat the corporation as if it were a partnership or to arrange their relationships in a manner that would be appropriate only between partners." This only operates to make these agreements enforceable among the parties, and does not speak to third parties.

The purpose of this section is to eliminate the possible argument that the shareholders in a statutory close corporation are individually liable for the debts and torts of the business because the corporation did not follow the classical model of a corporation. Pursuant to Sections 14-2-920, 921, and 933, a statutory close corporation may in effect function like a partnership, although legally the business is still a corporation. This section does not prevent a court from "piercing the corporate veil" of a statutory close corporation if the circumstances should justify imposing personal liability on the shareholders were the corporation not a statutory close corporation. It merely prevents a court from "piercing the corporate veil" because it is a statutory close corporation.

The section was derived from the California close corporation provisions.

Cross-References Dissolution at option of shareholder, see § 14-2-933. Elimination of board of directors, see § 14-2-922. Liability for preincorporation transactions, see § 14-2-204.

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PART 4 R EORGANIZATION AND TERMINATION

14-2-930. Merger, share exchange, and sale of assets.

1. A plan of merger or share exchange:
   1. That if effected would terminate statutory close corporation status 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 the holders are otherwise entitled to vote on the plan; or
   2. That if effected would create the surviving corporation as a statutory close corporation must be approved by the holders of at least two-thirds of the votes of each class or series of shares of the surviving corporation, voting as separate voting groups, whether or not the holders are otherwise entitled to vote on the plan.
2. A sale, lease, exchange, or other disposition of all or substantially all of the property (with or without the good will) of a statutory close corporation that requires approval of the shareholders pursuant to Code Section 14-2-1202 must be approved by the holders of at least two-thirds of the votes of each class or series of shares of the corporation, voting as separate voting groups, whether or not the holders are otherwise entitled to vote on the transaction.

(Code 1981, §14-2-930, enacted by Ga. L. 1988, p. 1070, § 1.)

COMMENT

Source: Model Statutory Close Corporation Supplement, § 30. There were no comparable provisions in former law.

Section 14-2-931 requires a minimum two-thirds vote of every class or series of shares whether or not otherwise entitled to vote to terminate close corporation status. Each class or series is entitled to vote as a separate voting group. Section 14-2-930 imposes the same voting requirement in transactions that have the effect of terminating a corporation's status as a statutory close corporation. Like other amendments to the articles, the voting rules may be set higher by the articles themselves, as provided in Section 14-2-1003(e).

In addition, under subsection (a)(2), the shareholders of a corporation that will become a statutory close corporation in a merger or share exchange must approve the transaction by the same minimum two-thirds vote. This is consistent with Section 14-2-902(b), which requires that an amendment to the articles of incorporation to elect statutory close corporation status must also be approved by a two-thirds vote.

The exceptions to shareholder approval of mergers or share exchanges for subsidiary mergers and some other types of transactions (in Article 11) do not apply to statutory close corporations since a shareholder vote is required in all circumstances where statutory close corporation status is elected or terminated.

Subsection (b) requires that a sale of all or substantially all the assets of a corporation that requires a shareholder vote under Section 14-2-1202 must be approved by a two-thirds vote of all classes or series of shares, voting as separate voting groups, whether or not they are otherwise entitled to vote.

Cross-References Merger or share exchange, see Article 11. Sale of assets, see Article 12. Voting by voting groups: generally, see §§ 14-2-725 &14-2-726; merger or share exchange, see § 14-2-1103. "Voting group" defined, see § 14-2-140.

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