§415A-10  Death or disqualification of a shareholder.  (a)  Upon the death of a shareholder of a professional corporation, or if a shareholder of a professional corporation becomes a disqualified person, or if shares of a professional corporation are transferred by operation of law or court decree to a disqualified person, the shares of the deceased shareholder or of the disqualified person may be transferred to a qualified person and, if not so transferred, shall be purchased or redeemed by the corporation to the extent of funds which may be legally made available for such purchase; provided that upon the death of a sole shareholder of a professional corporation, the personal representative of the estate of the deceased sole shareholder may elect to dissolve the professional corporation, by delivering for filing articles of dissolution signed by the personal representative and the surviving officer of the professional corporation.  If the personal representative elects to dissolve the professional corporation, the personal representative may publish a notice to creditors.

     (b)  If the price for the shares of the corporation is not fixed by its articles of incorporation or bylaws or by private agreement, the corporation within six months after such death or thirty days after such disqualification or transfer, as the case may be, shall make a written offer to pay for the shares at a specified price deemed by the corporation to be the fair value thereof as of the date of the death, disqualification, or transfer.  The offer shall be given to the personal representative of the estate of a deceased shareholder or to the disqualified shareholder or transferee and shall be accompanied by a balance sheet of the corporation, as of the latest available date and not more than twelve months prior to the making of the offer, and a profit and loss statement of the corporation for the twelve-month period ended on the date of that balance sheet.

     (c)  If within thirty days after the date of the written offer from the corporation the fair value of the shares is agreed upon between the disqualified person and the corporation, payment therefor shall be made within sixty days, or such other period as the parties may fix by agreement, after the date of the offer, upon surrender of the certificate or certificates representing the shares.  Upon payment of the agreed value the disqualified person shall cease to have any interest in the shares.

     (d)  If within such period of thirty days the disqualified person and the corporation do not so agree, then the corporation, within thirty days after receipt of written demand from the disqualified person given within sixty days after the date of the corporation's written offer or at its election at any time within such period of sixty days, shall file a petition in any court of competent jurisdiction in the circuit where the principal office of the corporation is located requesting that the fair value of the shares be found and determined.  If the corporation fails to file a petition as provided in this subsection, the disqualified person may file a petition within sixty days after delivery of a written demand to the corporation.  The disqualified person, wherever residing, shall be made a party to the proceeding as an action against the person's shares quasi in rem.  A copy of the petition shall be served on the disqualified person, if a resident of this State, and shall be served by registered or certified mail on the disqualified person, if a nonresident.  Service on nonresidents shall also be made by publication as provided by law.  The jurisdiction of the court shall be plenary and exclusive.  The disqualified person shall be entitled to judgment against the corporation for the amount of the fair value of the person's shares as of the date of death, disqualification, or transfer upon surrender to the corporation of the certificate or certificates representing the shares.  The court, in its discretion, may order that the judgment be paid in such installments as the court may determine.  The court, if it so elects, may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value.  The appraisers shall have such power and authority as shall be specified in the order of their appointment or an amendment thereof.

     (e)  The judgment shall include an allowance for interest at such rate as the court may find to be fair and equitable in all of the circumstances, from the date of death, disqualification, or transfer.

     (f)  The costs and expenses of any such proceeding shall be determined by the court and shall be assessed against the corporation, but all or any part of the costs and expenses may be apportioned and assessed as the court may deem equitable against the disqualified person if the court finds that the action of the disqualified person in failing to accept the offer was arbitrary or vexatious or not in good faith.  Such expenses shall include reasonable compensation for and reasonable expenses of the appraisers, but shall exclude the fees and expenses of counsel for and experts employed by any party; but if the fair value of the shares as determined materially exceeds the amount which the corporation offered to pay therefor, or if no offer was made, the court in its discretion may award to the disqualified person such sum as the court may determine to be reasonable compensation to any expert or experts employed by the disqualified person in the proceeding.

     (g)  If a purchase, redemption, or transfer of the shares of a deceased or disqualified shareholder or of a transferee who is a disqualified person is not completed within ten months after the death of the deceased shareholder or five months after the disqualification or transfer, as the case may be, the corporation shall cancel the shares on its books and the disqualified person shall have no further interest as a shareholder in the corporation other than the person's right to payment for the shares under this section.

     (h)  Shares acquired by a corporation pursuant to payment of the agreed value therefor or to payment of the judgment entered therefor, as provided in this section, may be held and disposed of by the corporation as in the case of other treasury shares.

     (i)  This section shall not require the purchase of shares of a disqualified person where the period of disqualification is for less than five months from the date of disqualification or transfer.

     (j)  Any provision regarding purchase, redemption, or transfer of shares of a professional corporation contained in the articles of incorporation, bylaws, or any private agreement shall be specifically enforceable in the courts of this State.

     (k)  Nothing contained herein shall prevent or relieve a professional corporation from paying pension benefits or other deferred compensation for services rendered to or on behalf of a former shareholder as otherwise permitted by law.

     (l)  Under this section, unless otherwise stated, references to a "disqualified person" shall also be construed to include deceased shareholders and personal representatives of deceased shareholders. [L 1985, c 259, pt of §1; am L 1987, c 135, §116; am L 2001, c 129, §53; am L 2002, c 130, §74]

Cross References

  Vexatious litigants, see chapter 634J.