BILL NUMBER: AB 1680 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 6, 2012
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 , 1302, 1304, and 1309 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. Existing law requires that
a corporation give specified notice to shareholders of a
subsidiary corporation regarding a merger of the subsidiary
corporation if all of the corporate shares of the subsidiary
corporation are not owned by the parent corporation.
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 shall be determined as
of the day of, and immediately 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 bill would require a dissenting shareholder who demands that
the corporation purchase his or her shares to include a statement of
what the shareholder claims is the fair market value of those shares
and that statement would constitute an offer by the shareholder to
sell the shares at that price.
Existing law defines "dissenting shares" for purposes of these
provisions to exclude publicly traded shares, except as specified.
This bill would modify the definition of "dissenting shares" to
include publicly traded shares for which the holder is entitled 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 as of the day of, and
immediately prior to, 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 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.
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
notice pursuant to subdivision (i)
(h) 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 and shall contain a
statement of what the shareholder claims to be the fair market
value of those shares as determined pursuant to subdivision (a) of
Section 1300. The statement of fair market value constitutes an
offer by the shareholder to sell the shares at that price.
SEC. 3. Section 1302 of the
Corporations Code is amended to read:
1302. Within 30 days after the date on which notice of the
approval by the outstanding shares or the notice pursuant to
subdivision (i) (h) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the
corporation at its principal office or at the office of any transfer
agent thereof, (a) if the shares are certificated securities, the
shareholder's certificates representing any shares which the
shareholder demands that the corporation purchase, to be stamped or
endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped
or endorsed or (b) if the shares are uncertificated securities,
written notice of the number of shares which the shareholder demands
that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation, the new
certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with
the name of the original dissenting holder of the shares.
SEC. 4. Section 1304 of the
Corporations Code is amended to read:
1304. (a) If the corporation denies that the shares are
dissenting shares, or the corporation and the shareholder fail to
agree upon the fair market value of the shares, then the shareholder
demanding purchase of such shares as dissenting shares or any
interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or
notice pursuant to subdivision (i) (h)
of Section 1110 was mailed to the shareholder, but not thereafter,
may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting
shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or
be joined as defendants in any such action and two or more such
actions may be consolidated.
(c) On the trial of the action, the court shall determine the
issues. If the status of the shares as dissenting shares is in issue,
the court shall first determine that issue. If the fair market value
of the dissenting shares is in issue, the court shall determine, or
shall appoint one or more impartial appraisers to determine, the fair
market value of the shares.
SEC. 5. Section 1309 of the
Corporations Code is amended to read:
1309. Dissenting shares lose their status as dissenting shares
and the holders thereof cease to be dissenting shareholders and cease
to be entitled to require the corporation to purchase their shares
upon the happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment
of the reorganization, the corporation shall pay on demand to any
dissenting shareholder who has initiated proceedings in good faith
under this chapter all necessary expenses incurred in such
proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for
conversion into shares of another class in accordance with the
articles.
(c) The dissenting shareholder and the corporation do not agree
upon the status of the shares as dissenting shares or upon the
purchase price of the shares, and neither files a complaint or
intervenes in a pending action as provided in Section 1304, within
six months after the date on which notice of the approval by the
outstanding shares or notice pursuant to subdivision (i)
(h) of Section 1110 was mailed to the
shareholder.
(d) The dissenting shareholder, with the consent of the
corporation, withdraws the shareholder's demand for purchase of the
dissenting shares.