2020 Georgia Code
Title 14 - Corporations, Partnerships, and Associations
Chapter 2 - Business Corporations
Article 6 - Shares and Distributions
Part 2 - Issuance of Shares
§ 14-2-622. Liability of Shareholders

1. A purchaser from a corporation of its own shares is not liable to the corporation or its creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued (Code Section 14-2-621) or specified in the subscription agreement (Code Section 14-2-620).
2. Unless otherwise provided in the articles of incorporation, a shareholder of a corporation is not personally liable for the acts or debt of the corporation except that he may become personally liable by reason of his own acts or conduct.

(Code 1981, §14-2-622, enacted by Ga. L. 1988, p. 1070, § 1.)

- For article, "Liability Limbo: Are Incorporated Lawyers in Georgia Really Free from Personal Liability When Their Fellow Shareholders Misbehave?," see 15 Ga. St. U. L. Rev. 1047 (1999).

Source: Model Act, § 6.22. This replaces former § 14-2-110.

Subsection (a) simplifies the provisions of former § 14-2-110(a), making subscribers and shareholders liable only for unpaid consideration. The major change is elimination of the obligation to pay, as the "full consideration" for shares, a minimum price equal to par value, as required by former § 14-2-84(a). Further, all reference to liability of successor transferees formerly provided in § 14-2-110(b) is omitted; this is left to the provisions of Article 8 of the Uniform Commercial Code.

Subsection (b) makes clear that no shareholder, whether original purchaser or transferee, becomes personally liable for corporate debts except through personal conduct, unless otherwise provided in the articles of incorporation.

Cross-References Articles of incorporation, see § 14-2-202. Consideration for shares, see § 14-2-621. Share transfer restrictions, see § 14-2-627. Subscriptions for shares, see § 14-2-620.

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Code 1933, § 22-601 and former Code Section 14-2-110, which was repealed by Ga. L. 1988, p. 1070, § 1, effective July 1, 1989, are included in the annotations for this Code section.

- Rights and liabilities existing between corporation and its stockholders arise out of contract entered into between the subscribers and the corporation, a right of action which is barred after a period of six years from the accrual of the right. C & S Land, Transp. & Dev. Corp. v. Yarbrough, 153 Ga. App. 644, 266 S.E.2d 508 (1980) (decided under former Code 1933, § 22-601).

- Lawyers may practice their profession as shareholders in a professional corporation with the same rights and responsibilities as shareholders in other professional corporations; thus, lawyers in a professional corporation were not jointly and severally liable for the professional misconduct of the majority shareholder; overruling First Bank & Trust Co. v. Zagoria, 250 Ga. 844, 302 S.E.2d 674 (1983). Henderson v. HSI Fin. Servs., Inc., 266 Ga. 844, 471 S.E.2d 885 (1996).

- Trial court erred in granting a directed verdict pursuant to O.C.G.A. § 9-11-50 to a pediatrician in a medical malpractice action by the parents of a minor, whose allegedly misdiagnosed bacterial meningitis caused brain damage and rendered the minor a quadriplegic, because there was some evidence that the pediatrician violated the standard of care when the pediatrician allowed the doctor's unlicensed nurse to handle weekend calls from patients' families without the necessity of contacting the pediatrician; although the nurse, who spoke with the parents and gave them erroneous information that the child probably had a virus or was hungry, was employed by the pediatrician's professional corporation, the pediatrician could not be shielded from individual liability from the pediatrician's own acts, pursuant to O.C.G.A. § 14-2-622(b). Snider v. Basilio, 276 Ga. App. 315, 623 S.E.2d 521 (2005).

Cited in Continental Cas. Co. v. Continental Rent-A-Car of Ga., Inc., 349 F. Supp. 666 (N.D. Ga.); Super Valu Stores, Inc. v. First Nat'l Bank, 463 F. Supp. 1183 (M.D. Ga. 1979); In re Delk Rd. Assocs., 37 Bankr. 354 (Bankr. N.D. Ga. 1984).

RESEARCH REFERENCES

Am. Jur. 2d.

- 18A Am. Jur. 2d, Corporations, §§ 717 et seq., 725 et seq., 728 et seq., 730 et seq., 732 et seq., 734 et seq., et seq.,739 et seq., 745 et seq., 748 et seq., 755 et seq.

- 18 C.J.S., Corporations, §§ 503, 504, 505, 506.

- Liability of one whose name appears upon corporate books as a stockholder without his consent, 3 A.L.R. 1049.

Personal liability of officers or stockholders for debts of corporation which has made an unauthorized change in its name, 8 A.L.R. 583.

Liability as on unpaid subscription, of transferees of stock issued in exchange for property or services at an overvaluation, 12 A.L.R. 449.

Statutory liability of stockholder for tort of corporation, 14 A.L.R. 267.

Liability to creditors of stockholders whose stock is forfeited or sold for nonpayment of assessments, 19 A.L.R. 1096.

Payments by stockholders applicable upon double liability, 23 A.L.R. 1367; 45 A.L.R. 1215; 56 A.L.R. 527; 83 A.L.R. 147; 120 A.L.R. 511.

Disregarding corporate existence, 34 A.L.R. 597.

When does statute of limitations begin to run against an action by, or in behalf of, creditors of a corporation on unpaid stock or subscriptions, 35 A.L.R. 832.

Validity of provision in contract with corporation waiving liability of stockholders, 40 A.L.R. 371.

Right of stockholder to set off indebtedness of corporation against statutory superadded liability, 40 A.L.R. 1183; 98 A.L.R. 659.

Stockholders' liability as covering interest on claims of corporate creditors after bankruptcy, declared insolvency, or appointment of a receiver, 41 A.L.R. 564.

Insolvency of corporation as barring stockholder's right to rescind subscription on ground of fraud, 41 A.L.R. 674; 46 A.L.R. 484.

Liability of transferrer of corporate stock for calls or assessments as affected by insolvency, fraud, or illegality in transfer, 45 A.L.R. 99; 86 A.L.R. 57.

Fraud inducing subscription or purchase of stock as defense against statutory superadded liability, 51 A.L.R. 1203.

Liability of member of mutual fire insurance company as affected by period of membership, 53 A.L.R. 343.

Liability of stockholder as affected by business of corporation being turned over to an officer of the court or other persons, 55 A.L.R. 327.

Right of stockholders contributing to make good losses to be reimbursed by, or out of assets of, corporation, 55 A.L.R. 794.

Constitutional provision fixing liability of stockholders as limitation of power of legislature in that regard, 63 A.L.R. 870.

Right of corporation to refuse to register transfer of stock because of stockholder's indebtedness to it, where transfer is by operation of law, 65 A.L.R. 220.

Sale, or surrender of stock for sale, to pay assessment, as relieving stockholder from further liability, 66 A.L.R. 436.

Right of pledgee of corporate stock in respect of dividends declared thereon, 67 A.L.R. 485; 103 A.L.R. 849.

Liability as stockholder of one purchasing stock for, or transferring stock to, infant, 69 A.L.R. 661.

Creditor's knowledge that stock is unpaid as affecting stockholders' liability, 69 A.L.R. 881.

Applicability of constitutional or statutory provisions relating to added liability of stockholders to holders of stock issued, or stockholders of corporations organized, before their enactment, 72 A.L.R. 1252.

Infant, his estate or property held in trust for him, as subject to statutory added liability of stockholder, 78 A.L.R. 431; 120 A.L.R. 956.

Right of a third person who has paid corporation's indebtedness to be subrogated to creditors' right to enforce stockholders' statutory liability, 78 A.L.R. 611.

Stockholder's statutory added liability as affected by death of stockholder, 79 A.L.R. 1537; 96 A.L.R. 1466.

Validity and effect of extrinsic agreement absolving one, in whole or part, from liability on subscription to corporate stock, 81 A.L.R. 198.

Liability of pledgee of stock as shareholder, 82 A.L.R. 565.

Stockholders' statutory liability as assignable or subject to sale, 82 A.L.R. 1285; 159 A.L.R. 1114.

Transfer of bank or other corporate stock to corporation issuing it, as releasing transferrer from stockholders' statutory added liability, 86 A.L.R. 72.

Statutory added liability of holders of bank stock or other corporate stock the issue of which was ultra vires, invalid, or irregular, 86 A.L.R. 816.

Conveyance or transfer by stockholder as fraudulent as regards his liability as stockholder to creditors of corporation, 89 A.L.R. 751.

Statutory superadded liability of stockholders as affected by reorganization, consolidation, or merger of corporation, 89 A.L.R. 770; 154 A.L.R. 427.

Statutory added liability of stockholders of bank or other corporation as affected by sale of, or other transaction in relation to, assets, 89 A.L.R. 790; 100 A.L.R. 1276.

Liability under trust-fund doctrine of subscribers to stock of corporation the charter of which has been canceled for reasons other than insolvency, 90 A.L.R. 1350.

Liability on stock held by one as trustee or in other fiduciary capacity, 91 A.L.R. 257; 97 A.L.R. 1250; 117 A.L.R. 655.

Setoff as between dividends from assets of insolvent bank or other corporation and liability of creditors as stockholders, 91 A.L.R. 326.

Rank or preference of claim against estate in respect of superadded liability on corporate stock owned by decedent whose estate is insolvent, 92 A.L.R. 1040.

Right of an officer whose power and authority to enforce liability of stockholders of insolvent corporation is derived from statute, without intermediary court action, to maintain action in that regard in another state, 94 A.L.R. 904.

Statutory liability of stockholder of bank or other corporation as affected by change in or renewal of corporation's obligation, 97 A.L.R. 630.

Life interest and remainder in corporate stock as affecting stockholder's statutory liability, 99 A.L.R. 505.

Validity and effect of agreement by a corporation contemporaneously with issue or sale of stock, to repurchase or redeem the stock or to cancel the subscription therefor and refund consideration paid, 101 A.L.R. 154.

Validity of release, cancelation, or compromise of unpaid subscription for stock by corporation or its representatives, 101 A.L.R. 231.

Stockholders' statutory liabilities as affected by alleged defects or irregularities in organization of corporation, 102 A.L.R. 327.

Statutory added liability of stockholders of bank or other corporation as affected by transfer of stock after closing thereof or appointment of receiver therefor, 103 A.L.R. 689.

Agreement by creditors of bank or other corporation postponing payment of their claims as affecting statutory liability of stockholders, 103 A.L.R. 754.

Stockholders' statutory liability as affected by fact that stock is in name of a holding company, 103 A.L.R. 921; 151 A.L.R. 1165.

Failure to enter transfer of stock on corporate books as affecting liability of transferrer for calls or assessments, 104 A.L.R. 638.

Applicability of constitutional or statutory provisions relating to added liability of stockholders to corporate debts contracted prior to the adoption of the provision, 105 A.L.R. 165.

Power of corporation to change obligations to stockholders, 105 A.L.R. 1452; 117 A.L.R. 1290.

Recovery against corporate directors or officers for fraud or mismanagement as affected by releases, ratification, waiver, or consent by some, but not for all, of the stockholders, 120 A.L.R. 238.

When limitation begins to run against action to enforce stockholder's superadded liability, 137 A.L.R. 788.

Implied obligation of purchaser of corporate stock to indemnify a vendor against future calls and assessments, 141 A.L.R. 1351.

Conflict of laws as to period of limitation to enforce stockholders' statutory liability, 143 A.L.R. 1442.

Effect of fraud to toll the period for bringing action prescribed in statute creating the right of action, 15 A.L.R.2d 500; 48 A.L.R.4th 1094.

Enforceability in another jurisdiction of personal liability of stockholders for debts of corporation whose organization is incomplete or defective, 42 A.L.R.2d 659.

Settlement negotiations as estopping reliance on statute of limitations, 39 A.L.R.3d 127.

Stockholder's personal conduct of operations or management of assets as factor justifying disregard of corporate entity, 46 A.L.R.3d 428.

Liability of director or dominant shareholder for enforcing debt legally owed him by corporation, 56 A.L.R.3d 212.

Controlling stockholder's duty to investigate intent and motive of purchaser before selling stock, 77 A.L.R.3d 1005.

Personal liability of stockholder, officer, or agent for debt of foreign corporation doing business in the state, 27 A.L.R.4th 387.