Court proceeding by shareholder in close corporation
- • conditions
- • court-ordered remedies
- • share purchase
- • expenses
(1) In a proceeding by a shareholder in a corporation that does not have shares that are listed on a national securities exchange or that are regularly traded in a market maintained by one or more members of a national or affiliated securities association, the circuit court may order one or more of the remedies listed in subsection (2) of this section if it is established that:
(a) The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock and irreparable injury to the corporation is threatened or being suffered, or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally, because of the deadlock;
(b) The directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent;
(c) The shareholders are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired; or
(d) The corporate assets are being misapplied or wasted.
(2) The remedies that the court may order in a proceeding under subsection (1) of this section include but are not limited to the following:
(a) The performance, prohibition, alteration or setting aside of any action of the corporation or of its shareholders, directors or officers or any other party to the proceeding;
(b) The cancellation or alteration of any provision in the corporation’s articles of incorporation or bylaws;
(c) The removal from office of any director or officer;
(d) The appointment of any individual as a director or officer;
(e) An accounting with respect to any matter in dispute;
(f) The appointment of a custodian to manage the business and affairs of the corporation, to serve for the term and under the conditions prescribed by the court;
(g) The appointment of a provisional director to serve for the term and under the conditions prescribed by the court;
(h) The submission of the dispute to mediation or another form of nonbinding alternative dispute resolution;
(i) The issuance of distributions;
(j) The award of damages to any aggrieved party;
(k) The purchase by the corporation or one or more shareholders of all of the shares of one or more other shareholders for their fair value and on the terms determined under subsection (5) of this section;
(L) The retention of jurisdiction of the case by the court for the protection of the shareholder who filed the proceeding; or
(m) The dissolution of the corporation if the court determines that no remedy specified in paragraphs (a) to (L) of this subsection or other alternative remedy is sufficient to resolve the matters in dispute. In determining whether to dissolve the corporation, the court shall consider among other relevant evidence the financial condition of the corporation but may not refuse to dissolve the corporation solely because it has accumulated earnings or current operating profits.
(3) The remedies set forth in subsection (2) of this section shall not be exclusive of other legal and equitable remedies that the court may impose. Except as provided in this subsection, the shareholders of a corporation may, pursuant to an agreement described in ORS 60.265 (Validity of shareholder agreements inconsistent with chapter), agree to limit or eliminate any of the remedies set forth in subsection (2) of this section. The remedies set forth in subsection (2)(e), (j) and (m) of this section may not be eliminated.
(4) In determining the appropriate remedies to order under subsection (2) of this section, the court may take into consideration the reasonable expectations of the corporation’s shareholders as they existed at the time the corporation was formed and developed during the course of the shareholders’ relationship with the corporation and with each other. The court shall endeavor to minimize the harm to the business of the corporation.
(5)(a) If the court orders a share purchase, the court shall:
(A) Determine the fair value of the shares, with or without the assistance of appraisers, taking into account any impact on the value of the shares resulting from the actions giving rise to a proceeding under subsection (1) of this section;
(B) Consider any financial or legal constraints on the ability of the corporation or the purchasing shareholder to purchase the shares;
(C) Specify the terms of the purchase, including, if appropriate, terms for installment payments, interest at the rate and from the date determined by the court to be equitable, subordination of the purchase obligation to the rights of the corporation’s other creditors, security for a deferred purchase price and a covenant not to compete or other restriction on the seller;
(D) Require the seller to deliver all of the seller’s shares to the purchaser upon receipt of the purchase price or the first installment of the purchase price; and
(E) Retain jurisdiction to enforce the purchase order by, among other remedies, ordering the corporation to be dissolved if the purchase is not completed in accordance with the terms of the purchase order.
(b) The share purchase ordered under this subsection shall be consummated within 20 days after the date the order becomes final unless before that time the corporation files with the court a notice of its intention to dissolve and articles of dissolution are properly filed with the Secretary of State within 50 days after filing the notice with the court.
(c) After the purchase order is entered and before the purchase price is fully paid, any party may petition the court to modify the terms of the purchase, and the court may do so if the court finds that the modifications are equitable.
(d) Unless the purchase order is modified by the court, the selling shareholder shall have no further rights as a shareholder from the date the seller delivers all of the shareholder’s shares to the purchaser or such other date specified by the court.
(e) If the court orders shares to be purchased by one or more other shareholders, in allocating the shares to be purchased by the other shareholders, unless equity requires otherwise, the court shall attempt to preserve the existing distribution of voting rights and other designations, preferences, qualifications, limitations, restrictions and special or relative rights among the holders of the class or classes of shares and may direct that holders of a specific class or classes not participate in the purchase.
(6) At any time within 90 days after the filing of a proceeding under subsection (1) of this section, or at such time determined by the court to be equitable, the corporation or one or more shareholders may elect to purchase all of the shares owned by the shareholder who filed the proceeding for their fair value. An election to purchase under this subsection shall state in writing the amount that the electing party will pay for the shares. The following apply:
(a) The election to purchase shall be irrevocable unless the court determines that it is equitable to set aside or modify the election.
(b) If the election to purchase is filed by one or more shareholders, the corporation shall, within 10 days thereafter, give written notice to all shareholders. The notice shall state the name of the shareholder who filed the proceeding under subsection (1) of this section and the number of shares owned by that shareholder, the name of each electing shareholder and the number of shares owned by that electing shareholder and the amount that each electing shareholder will pay for the shares. The notice also must advise the recipients of their right to join in the election to purchase shares. Shareholders who wish to participate must file notice of their intention to join in the election to purchase not later than 30 days after the date of the notice to them or at such time as the court in its discretion may allow. All shareholders who have filed an election or notice of their intention to participate in the election to purchase thereby become parties to the proceeding under subsection (1) of this section and shall participate in the purchase in proportion to their ownership of shares as of the date the first election was filed, unless the shareholders otherwise agree or the court otherwise directs.
(c) The court in its discretion may allow the corporation and shareholders to file an election to purchase the shares of the shareholder who filed the proceeding under subsection (1) of this section at a price higher than the amount previously offered. If the court does so, it shall allow other shareholders an opportunity to join in the election to purchase at the higher price in accordance with their proportionate ownership interest.
(d) After an election to purchase has been filed by the corporation or one or more shareholders, the proceeding filed under subsection (1) of this section may not be discontinued or settled, nor may the shareholder who filed the proceeding sell or otherwise dispose of the shareholder’s shares, unless the court determines that it would be equitable to the corporation and the shareholders, other than the petitioner, to permit the discontinuance, settlement, sale or other disposition. In considering whether equity exists to approve any settlement, the court may take into consideration the reasonable expectations of the shareholders as referred to in subsection (4) of this section, including any existing agreement among the shareholders.
(e) If, within 30 days of the filing of the latest election to purchase allowed by the court, the parties reach agreement as to the fair value and terms of purchase of the shares of the shareholder who filed the proceeding under subsection (1) of this section, the court shall enter an order directing the purchase of shares upon the terms and conditions agreed to by the parties.
(f) If the parties are unable to reach an agreement as described in paragraph (e) of this subsection, the court, upon application of any party, shall stay the proceeding under subsection (1) of this section and shall, under subsection (5) of this section, determine the fair value and terms of purchase of the shares of the shareholder who filed the proceeding as of the day before the date on which the proceeding was filed or as of such other date as the court deems appropriate under the circumstances.
(7) In any proceeding under subsection (1) of this section, the court shall allow reasonable compensation to the custodian, provisional director, appraiser or other such person appointed by the court for services rendered and reimbursement or direct payment of reasonable costs and expenses. Amounts described in this subsection shall be paid by the corporation. [2001 c.315 §60]
3 OregonLaws.org assembles these lists by analyzing references between Sections. Each listed item refers back to the current Section in its own text. The result reveals relationships in the code that may not have otherwise been apparent.