2015 Code of Alabama
Title 10A - ALABAMA BUSINESS AND NONPROFIT ENTITIES CODE.
Chapter 4 - PROFESSIONAL CORPORATIONS.
Article 3 - Shareholders; Directors and Officers; Professional Liability.
Section 10A-4-3.02 - Death or disqualification of shareholder.
(a) Upon the death of a shareholder of a domestic professional corporation or if a shareholder of a domestic professional corporation becomes a disqualified person or if shares of a domestic 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 domestic professional corporation to the extent of funds which may be legally made available for the purchase.
(b) If the price for the shares is not fixed by the governing documents of the domestic professional corporation or by private agreement, the domestic professional corporation, within six months after the death or 30 days after the 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 domestic professional corporation to be the fair value thereof as of the date of the death, disqualification or transfer. The offer shall be given to the executor or administrator of the estate of a deceased shareholder or to the disqualified shareholder or transferee and shall be accompanied by a balance sheet of the domestic professional corporation, as of the latest available date and not more than 12 months prior to the making of the offer, and a profit and loss statement of the domestic professional corporation for the 12 months' period ended on the date of the balance sheet.
(c) If within 30 days after the date of the written offer from the domestic professional corporation the fair value of the shares is agreed upon between the disqualified person and the domestic professional corporation, payment therefor shall be made within 90 days, or 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 persons shall cease to have any interest in the shares.
(d) If within 30 days from the date of the written offer from the domestic professional corporation, the disqualified person and the domestic professional corporation do not so agree, then either party may commence a civil action in the circuit court in the county in Alabama where the registered office of the domestic professional corporation is located requesting that the fair value of the shares be found and determined. The disqualified person, wherever residing, shall be made a party to the proceeding as an action against his or her shares quasi in rem. Service shall be made in accordance with the rules of civil procedure. The disqualified person shall be entitled to judgment against the domestic professional corporation for the amount of the fair value of his or her shares as of the date of death, disqualification, or transfer upon surrender to the domestic professional corporation of the certificate or certificates representing the shares. The court may, in its discretion, order that the judgment be paid in installments and with interest and on terms as the court may determine. The court may, if it so elects, appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the 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 the rate the court finds to be fair and equitable in all the circumstances, from the date of death, disqualification, or transfer.
(f) The costs and expenses of any proceeding shall be determined by the court and shall be assessed against the domestic professional 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 shall find that the action of the disqualified person in failing to accept the offer was arbitrary or vexatious or not in good faith. The expenses shall include reasonable compensation for and reasonable expenses of the appraisers and a reasonable attorney's fee but shall exclude the fees and expenses of counsel for and of experts employed by any party; but if the fair value of the shares as determined materially exceeds the amount which the domestic professional corporation offered to pay therefor, or if no offer was made, the court in its discretion may award to the disqualified person the sum the court determines 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 12 months after the death of the deceased shareholder or 12 months after the disqualification or transfer, as the case may be, the domestic professional corporation shall forthwith cancel the shares on its books and the disqualified person shall have no further interest as a shareholder in the domestic professional corporation other than his or her right to payment for the shares under this section.
(h) Shares acquired by a domestic professional corporation pursuant to payment of the agreed value therefor or to payment of the judgment entered therefor, as in this section provided, may be held, cancelled, or disposed of by the domestic professional corporation as in the case of other treasury shares.
(i) This section shall not be deemed to require the purchase of shares of a disqualified person where the period of the disqualification is for less than 12 months from the date of disqualification or transfer.
(j) Any provision regarding purchase, redemption, or transfer of shares of a domestic professional corporation contained in the certificate of formation, bylaws, or any private agreement shall be specifically enforceable in the courts of Alabama.
(k) Nothing herein contained shall prevent or relieve a domestic 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) A domestic professional corporation may purchase its own shares from a disqualified person without regard to the availability of capital or surplus for the purchase; however, no purchase of or payment for the shares shall be made at a time when the domestic professional corporation is insolvent or when the purchase or payment would make it insolvent.
(m) The foregoing provisions of this section shall not apply to a domestic nonprofit professional corporation. Any member of a corporation who becomes a disqualified person must cease being a member not more than 12 months after the date of disqualification, if he or she is then a disqualified person.(Acts 1983, No. 83-514, p. 763, §10; Acts 1988, 1st Ex. Sess., No. 88-905, p. 474, §1; §10-4-389; amended and renumbered by Act 2009-513, p. 967, §205.)
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