2015 Kentucky Revised Statutes CHAPTER 274 - PROFESSIONAL SERVICE CORPORATIONS 274.095 Withdrawing shareholders -- Procedure for redemption of stock -- Procedure upon death of sole shareholder -- Insolvency.
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274.095
Withdrawing shareholders -- Procedure for redemption of stock -Procedure upon death of sole shareholder -- Insolvency.
(1)
(2)
(3)
The articles of incorporation may provide for the purchase or redemption of all of
the shares of any shareholder within a period not to exceed one (1) year after the
death or disqualification to practice the profession of such shareholder, or for the
purchase or redemption within said time of all of the shares of any shareholder
desiring to sell them, all of whom are herein sometimes called "withdrawing
shareholders" or, in default of such provisions in the articles of incorporation, the
foregoing provisions and time limitation may be included in the bylaws of a
professional service corporation, or, if no such provision and time limitation is
made in the articles of incorporation or bylaws, they may be provided for by such
private agreement or agreements as the shareholders and corporation may enter into.
If such an article, bylaw or agreement is adopted or provided for and such stock is
not redeemed by the corporation within said one (1) year period, then within ten
(10) days following the end of said period the president and/or secretary of the
corporation shall give notice thereof to the Secretary of State of Kentucky and, upon
receipt of such notice by the Secretary of State, the charter of the corporation shall
be immediately void.
In the absence of such provisions in the articles of incorporation, bylaws or by
private agreement, a professional service corporation shall redeem the shares of a
withdrawing shareholder within ninety (90) days after the death or disqualification
of a shareholder or of the receipt by the corporation of written notice from a
shareholder that he desires to sell or transfer all his shares of stock in the
corporation upon terms mutually agreeable to the parties. Should a redemption not
occur within the time limit provided herein, the shares shall immediately be
cancelled on the books of the corporation and the holder of such shares shall be
reimbursed as provided in subsection (4) of this section as a general creditor of the
corporation.
If the sole shareholder of a professional service corporation organized pursuant to
this chapter dies:
(a) It shall be the duty of his personal representative to so notify the Secretary of
State, whereupon the charter of such corporation shall lapse; or
(b) The administrator, executor, guardian, conservator, or receiver of the estate of
the deceased sole shareholder may amend the articles of incorporation by
signing a written consent to such amendment. Articles of amendment to be
adopted shall set forth:
1.
The name of the corporation;
2.
The amendments so adopted;
3.
The date of adoption of the amendment by the administrator, executor,
guardian, conservator, or receiver;
4.
The number of shares outstanding; and
5.
The number of shares held by the administrator, executor, guardian,
conservator, or receiver.
(4)
The amendment to the articles of incorporation may allow the corporation to
continue as a professional service corporation or may convert the corporation
to a private business corporation provided, however, that the corporation shall
not render professional services until such time as all outstanding shares are
held by qualified persons and the corporation conforms to the provisions of
this chapter; or
(c) The administrator, executor, guardian, conservator, or receiver of the estate of
the deceased shareholder shall transfer all outstanding shares of the
corporation to other qualified persons or person within the meaning of this
chapter. The professional service corporation shall cease to render
professional services until such time as the transfer or transfers provided in
this subsection are completed.
In the absence of an article, bylaw or agreement as provided for in subsection (1) of
this section, or a sale as provided for within the time stated in subsection (2) of this
section, a professional service corporation, within one hundred eighty (180) days
after the death or disqualification of a shareholder or within the same period after
receiving written notice from a shareholder that he desires the corporation to
redeem all of his stock in the corporation, shall institute an equitable action for a
determination of the fair market value of all of the shares of the corporation's
outstanding stock cancelled pursuant to subsection (2) of this section and owned by
such shareholder.
(a) The court shall designate a time for a hearing and at said hearing shall appoint
a disinterested appraiser to determine the fair market, pre-cancellation value of
such shares. The court shall administer an oath to the appraiser to honestly and
faithfully discharge his duties and shall fix a time and place for the appraiser
to begin hearing evidence on such fair market value. The appraiser shall have
the powers conferred upon master commissioners by KRS 31A.010 and shall
afford a reasonable opportunity to the corporation and the shareholder or
personal representative of a deceased shareholder to introduce pertinent
evidence on such fair market value. The appraiser shall conduct his hearings
as expeditiously as practicable, and upon completion of the hearing shall
report in writing to the court his determination of the fair market precancellation value of such shares and shall file with the court a written
transcript of the testimony heard by him, together with all exhibits introduced
in evidence.
(b) The corporation or any withdrawing shareholder may, within ten (10) days
after the filing of the appraiser's report, file exceptions thereto. Such
exceptions shall be heard and decided by the court upon the evidence
submitted to the appraiser as shown by the transcript. After hearing the
exceptions to the appraiser's report, or if no exceptions thereto have been filed
within the time hereinbefore provided for, the court shall enter final judgment
determining such fair market, pre-cancellation value of the shares of each
withdrawing shareholder and shall direct payment thereof by the corporation
to each withdrawing shareholder and the surrender of the duly indorsed
(5)
(6)
certificate or certificates representing his shares. The court shall be
empowered to direct payment by the corporation in installments reasonably
calculated to avoid any impending corporate insolvency while reimbursing the
withdrawing shareholder in as direct a manner as may be practicable.
If a professional service corporation fails to bring the above provided for action for
the redemption of its shares within the time provided, then within ten (10) days after
the end of said period, the president of the corporation, or if he be then dead, the
secretary thereof, shall so notify, in writing, the Secretary of State of Kentucky, and
upon receipt of such notice by the Secretary of State of Kentucky, the charter of the
professional service corporation shall be void.
If the obligation of the corporation to redeem any shares of its outstanding stock as
set out in subsections (1) to (5) of this section would render the corporation
insolvent and the court has deemed an installment redemption as provided in
subsection (4) of this section to be unwarranted, then without delay the corporation
shall commence to liquidate and dissolve, unless the remaining shareholders shall
have prior thereto purchased or redeemed all of the withdrawing shareholder's
shares or satisfied such shareholder's claim against the corporation.
Effective: July 15, 1980
History: Amended 1980 Ky. Acts ch. 188, sec. 240, effective July 15, 1980; and ch.
288, sec. 12, effective July 15, 1980. -- Amended 1968 Ky. Acts ch. 166, sec. 1. -Created 1962 Ky. Acts ch. 236, sec. 10.
Legislative Research Commission Note. This section was amended by two 1980 acts
which do not appear to be in conflict and have been compiled together.
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