CopyCited 15 times | Published | Supreme Court of Georgia | May 23, 2005 | 279 Ga. 466, 2005 Fulton County D. Rep. 2099
...In 1959, Shorter College (College) amended its charter to confer on the Baptist Convention of the State of Georgia (GBC) the exclusive authority to name the school's Board of Trustees (Board). As a result of the grant of this power to choose the trustees, GBC assumed the status of a "member" of the College. OCGA §
14-3-140(22)....
...n." 19 Am.Jur.2d, Corporations, § 2348, pp. 453-454 (2004). This definition of a "dissolution" as the winding up and liquidation of all business affairs applies equally to both for-profit and non-profit corporations in Georgia. OCGA §§
14-2-1405,
14-3-1406....
...to nonprofit corporations." (Cit.)' [Cit.]" Dunn v. Ceccarelli,
227 Ga.App. 505, 507(1),
489 S.E.2d 563 (1997). See also Southeast Shippers Assn. v. Ga. PSC,
211 Ga. 550, 555(1),
87 S.E.2d 75 (1955) (applying prior law). With specific regard to OCGA §
14-3-1406, nothing in the language of that provision indicates that the meaning of "dissolution" differs in any substantive particular from its for-profit counterpart in OCGA §
14-2-1405. Indeed, the wording of the two statutes is essentially identical, and the Comment to OCGA §
14-3-1406 specifies that it "is based on section
14-2-1405 of the [Georgia] Business [Corporation] Code[, OCGA §§
14-2-101 et seq.]" As statutes which are in pari materia, OCGA §§
14-2-1405 and
14-3-1406 must be construed together and harmonized wherever possible. Schrenko v. DeKalb County School Dist.,
276 Ga. 786, 790(1),
582 S.E.2d 109 (2003); Georgia Forestry Comm. v. Taylor,
241 Ga.App. 151, 153,
526 S.E.2d 373 (1999). Because the "wind up and liquidate" language of OCGA §
14-3-1406 was borrowed verbatim from OCGA §
14-2-1405, the "dissolution" of non-profit and for-profit corporations must necessarily be analogous in that particular aspect....
...Therefore, the Court of Appeals correctly held that the effort to reorganize the College, which clearly would not qualify as a dissolution of a for-profit corporation, was likewise not a valid "dissolution" of a non-profit corporation within the meaning of OCGA §
14-3-1406. This is true even though, under OCGA §
14-3-1402(b), the Board had the unilateral power to approve a dissolution of the College....
...ly is not controlling in that regard. Instead, a corporate dissolution is a "statutory procedure[ ], [so] the statutory requirements must be complied with to accomplish an effective dissolution." Kaplan's Nadler, supra at § 14-35, p. 62. Under OCGA §
14-3-1406, the winding up and liquidation of the business affairs of the dissolving non-profit corporation is one of those requirements....
...That statutory prerequisite to the effectiveness of a "dissolution" was not satisfied here, notwithstanding the Board's determination to denominate the transaction as such. Because the transfer of the College's assets to the Foundation did not meet substantive requirements of OCGA §
14-3-1406, the trustees' compliance with any of the procedures applicable to the "dissolution" of a non-profit corporation is immaterial....
...gislative intent.' [Cit.]" Ray v. Barber,
273 Ga. 856(1),
548 S.E.2d 283 (2001). Under applicable statutes, the business of a corporation, regardless of whether it is operated for profit or not, cannot survive a valid "dissolution." Pursuant to OCGA §
14-3-1402(b), the trustees had every right to vote to dissolve the College and to transfer its assets intact or piecemeal to other separate and independent educational institutions. Such a transfer would perpetuate the underlying beneficial purpose for which the school was created, notwithstanding its own extinction. Under OCGA §
14-3-1406, however, the Board was not authorized to reorganize the school by transferring its assets to the Foundation for the purpose of maintaining the College as a functioning educational institution. 2. OCGA §
14-3-1406(5) requires that a dissolving non-profit corporation "wind up and liquidate its business and affairs," which is exactly what a dissolving for-profit corporation must do under OCGA §
14-2-1405(5)....
...so] it is wrong for this Court to mandate that they be the same." P. 42. As support for this assertion, the dissent notes that, while the assets of a dissolving for-profit corporation are conveyed to its shareholders under OCGA §
14-2-1405(4), OCGA §
14-3-1403(b)(3) provides, in relevant part, that certain specified assets of a dissolving non-profit corporation "shall be transferred or conveyed to one or more domestic or foreign corporations, trusts, societies, or organizations engaged in acti...
...Whether the distribution of a corporation's assets constitutes a valid dissolution is not determined by how and to whom the assets were conveyed. *41 As a matter of law, any dissolving corporation, whether or not for-profit, must wind up and liquidate "its business and affairs." (Emphasis supplied.) OCGA §§
14-2-1405(5),
14-3-1406(5)....
...it is entitled to perpetuate its business by means of a transfer of all assets to another corporation which will then continue to carry on the identical pre-dissolution activity as was formerly pursued by the previous corporate entity. Instead, OCGA §
14-3-1403(b)(3) provides that a dissolving non-profit corporation is authorized to distribute its assets to another corporation "engaged in activities substantially similar to those of the dissolving corporation." (Emphasis supplied.) Here, the Bo...
...Instead, the assets were transferred to the Foundation, which was incorporated for the express purpose of carrying on precisely the same activities formerly pursued by the corporation which the Board sought to dissolve. That transfer was not pursuant to a valid dissolution accomplished pursuant to OCGA §
14-3-1406(5)....
...However, advancing the school's educational activities is simply not the legal test for determining whether the transaction satisfied the statutory requirements for a dissolution. A dissolution of the College could be accomplished only when "its" business and affairs were wound up and liquidated under OCGA §
14-3-1406(5) and, pursuant to OCGA §
14-3-1403(b)(3), when its assets had been transferred to another organization already engaged in "activities substantially similar" to those which it no longer was authorized to pursue....
...In this case, the Board fully complied with this standard of conduct, acting in the good faith belief that it was responding to a threat to the accreditation of the College. However, the underlying good faith of the trustees cannot substitute for objective compliance with applicable statutory requirements. Under OCGA §
14-3-1406, a valid "dissolution" of the College would accomplish a more definite and rapid end to the school's existence than the threatened loss of its accreditation....
...tributed to its shareholders under OCGA §
14-2-1405(4). [3] When a nonprofit is dissolved, however, there is a different procedure: instead of distributing the nonprofit's assets to its members, they are transferred to a similar business under OCGA §
14-3-1403(b)(3)....
...rporation. Accordingly, the legislature made a nonprofit dissolution more closely resemble a transfer of assets or a reorganization than a for-profit dissolution. The majority opinion compares the dissolution procedures in OCGA §
14-2-1405 and OCGA §
14-3-1406 and states that "the wording of the two statutes is essentially identical." But one of the ways in which it is not identical is that OCGA §
14-3-1406, applicable to nonprofits, mandates dissolving in accordance with a "plan of dissolution." This plan of dissolution must comply with OCGA §
14-3-1403, and it is that statute that contains the pertinent difference regarding the disposition of assets in nonprofit and for-profit dissolutions....
...transferring its assets to the Foundation. It is undisputed that the College's governing documents gave only the Board, and not the Baptist Convention of the State of Georgia (GBC), the right to vote on the College's dissolution. Further, under OCGA §
14-3-1402(b), the Board alone had the right to dissolve the College....
...[2] 19 AmJur2d, Corporations, § 2348, at 454 (2004). [3] OCGA §
14-2-1405(4) provides that, after making provision for or discharging its liabilities, a for-profit corporation distributes its "remaining property among its shareholders in accordance to their interests." [4] OCGA §
14-3-1403(b)(3) provides that, after making provision for or discharging its liabilities, a nonprofit corporation's assets "shall be transferred or conveyed to one or more domestic or foreign corporations, trusts, societies, or organizations engag...
