BILL NUMBER: AB 1680 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 9, 2012
AMENDED IN ASSEMBLY MARCH 19, 2012
INTRODUCED BY Assembly Member Wieckowski
FEBRUARY 14, 2012
An act to amend Sections 1300 and 1301 of the Corporations Code,
relating to dissenting shareholders' rights.
LEGISLATIVE COUNSEL'S DIGEST
AB 1680, as amended, Wieckowski. Dissenting shareholders' rights.
Existing law, the General Corporation Law, provides for the
formation and governance of general corporations, including the
rights of shareholders of a corporation who dissent from approving a
reorganization or short-form merger. Existing law provides that a
holder of dissenting shares, as defined, who complies with certain
procedures under specified circumstances is entitled to receive from
the corporation the fair market value of the holder's shares, as
defined, determined as of the day before the first announcement of
the terms of the transaction. Existing law provides that holders of
publicly traded shares are only eligible to receive the fair market
value of their shares if demands for payment are filed with respect
to 5% or more of the class of shares.
This bill would provide that the fair market value of dissenting
shares that are traded on a national securities exchange certified by
the Commissioner of Corporations shall be the most recent closing
price per share prior to the first announcement of the terms of the
proposed transaction, subject to adjustment as specified. The bill
would eliminate the provision making holders of publicly traded
shares only eligible to receive the fair market value of their
dissenting shares if 5% or more of the shares are dissenting shares.
The bill would make conforming changes.
This bill would provide that the fair market value of dissenting
shares that are not publicly traded shall be determined as of the day
before the first announcement of the terms of the proposed
transaction, subject to adjustment, as specified. The
Existing law defines "dissenting shares" for purposes of these
provisions to exclude publicly traded shares, except as specified.
This bill would redefine modify
the definition of "dissenting shares" to exclude
include publicly traded shares for which the
holder is entitled only to anything except
publicly traded shares of another corporation or cash in lieu
of fractional shares, or a combination of those shares and that cash.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1300 of the Corporations Code is amended to
read:
1300. (a) If the approval of the outstanding shares (Section 152)
of a corporation is required for a reorganization under subdivisions
(a) and (b) or subdivision (e) or (f) of Section 1201, each
shareholder of the corporation entitled to vote on the transaction
and each shareholder of a subsidiary corporation in a short-form
merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their
fair market value the shares owned by the shareholder which are
dissenting shares as defined in subdivision (b). The fair market
value shall be determined as follows:
(1) For shares listed on any national securities exchange
certified by the commissioner under subdivision (o) of Section 25100,
the fair market value shall be the most recent closing price per
share (as quoted on the applicable national securities exchange)
prior to the first announcement of the terms of the proposed
reorganization or short-form merger, as adjusted for any stock split,
reverse stock split, or share dividend that becomes effective
thereafter.
(2) For any shares not described in paragraph (1), the fair market
value shall be determined as of the day before the first
announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in
consequence of the proposed reorganization or short-form merger, as
adjusted for any stock split, reverse stock split, or share dividend
that becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares to
which all of the following apply:
(1) That, with respect to those shares, the notice of meeting of
shareholders to act upon the reorganization summarizes this section
and Sections 1301, 1302, 1303 and 1304; provided, however, that this
provision shall not apply to any shares with respect to which there
exists any restriction on transfer imposed by the corporation or by
any law or regulation.
(1) That were not, immediately prior to the reorganization or
short-form merger, listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o)
of Section 25100, and the notice of meeting of shareholders to act
upon the reorganization summarizes this section and Sections 1301,
1302, 1303 and 1304; provided, however, that this provision does not
apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply
to any shares where the holder of those shares is required, by the
terms of the reorganization or short-form merger, to accept for the
shares anything except: (A) shares of any other corporation, which
shares, at the time the reorganization or short-form merger is
effective, are listed on any national securities exchange certified
by the Commissioner of Corporations under subdivision (o) of Section
25100; (B) cash in lieu of fractional shares described in the
foregoing subparagraph (A); or (C) any combination of the shares and
cash in lieu of fractional shares described in the foregoing
subparagraphs (A) and (B).
(2) That were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not
voted in favor of the reorganization or, (B) if described in
paragraph (1), were voted against the reorganization, or were held of
record on the effective date of a short-form merger; provided,
however, that subparagraph (A) rather than subparagraph (B) of this
paragraph applies in any case where the approval required by Section
1201 is sought by written consent rather than at a meeting.
(3) That the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with
Section 1301.
(4) That the dissenting shareholder has submitted for endorsement,
in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of
record.
(d) Dissenting shares do not include any shares with respect to
which the holder is required, by the terms of the reorganization or
short-form merger agreement, to accept for the shares the following
forms of consideration:
(1) Shares of any other corporation the shares of which, at the
effective time of the reorganization or short-form merger, are listed
on any national securities exchange certified by the commissioner
under subdivision (o) of Section 25100.
(2) Cash in lieu of fractional shares described in paragraph (1).
(3) Any combination of the shares or cash in lieu of fractional
shares described in paragraphs (1) or (2).
SEC. 2. Section 1301 of the Corporations Code is amended to read:
1301. (a) If, in the case of a reorganization, any shareholders
of a corporation have a right under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, to
require the corporation to purchase their shares for cash, that
corporation shall mail to each of those shareholders a notice of the
approval of the reorganization by its outstanding shares (Section
152) within 10 days after the date of that approval, accompanied by a
copy of Sections 1300, 1302, 1303, and 1304 and this section, a
statement of the price determined by the corporation to represent the
fair market value of the dissenting shares, and a brief description
of the procedure to be followed if the shareholder desires to
exercise the shareholder's right under those sections. The statement
of price constitutes an offer by the corporation to purchase at the
price stated any dissenting shares as defined in subdivision (b) of
Section 1300, unless they lose their status as dissenting shares
under Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300,
subject to compliance with paragraphs (3) and (4) of subdivision (b)
thereof, and who desires the corporation to purchase shares shall
make written demand upon the corporation for the purchase of those
shares and payment to the shareholder in cash of their fair market
value. The demand is not effective for any purpose unless it is
received by the corporation or any transfer agent thereof (1) in the
case of shares described in subdivision (b) of Section 1300, not
later than the date of the shareholders' meeting to vote upon the
reorganization, or (2) in any other case within 30 days after the
date on which the notice of the approval by the outstanding shares
pursuant to subdivision (a) or the filing pursuant to subdivision (i)
of Section 1110 was mailed to the shareholder.
(c) The demand shall state the number and class of the shares held
of record by the shareholder which the shareholder demands that the
corporation purchase at the fair market value of those shares as
determined pursuant to subdivision (a) of Section 1300.