Minnesota Session Laws - 1986, Regular Session

  

                         Laws of Minnesota 1986 

                        CHAPTER 431-H.F.No. 2263 
           An act relating to corporations; regulating control 
          share acquisitions; providing for solicitations of 
          proxies and meetings of shareholders; amending 
          Minnesota Statutes 1984, section 302A.751; Minnesota 
          Statutes 1985 Supplement, sections 302A.449, 
          subdivision 7; and 302A.671, subdivision 3; and Laws 
          1985, First Special Session chapter 5, section 21.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1985 Supplement, section 
302A.449, subdivision 7, is amended to read:  
    Subd. 7.  [PROXY IN CONTROL SHARE ACQUISITION.] 
Notwithstanding any contrary provision of this chapter, a proxy 
relating to a meeting of shareholders required under section 
302A.671, subdivision 3, must be solicited separately from the 
offer to purchase or solicitation of an offer to sell shares of 
the issuing public corporation and must not be solicited less 
than 30 days before the meeting unless otherwise agreed in 
writing by the acquiring person and the issuing public 
corporation.  Except for irrevocable proxies appointed in the 
regular course of business and not in connection with a control 
share acquisition, all proxies appointed for or in connection 
with the shareholder authorization of a control share 
acquisition pursuant to section 302A.671 shall be at all times 
terminable at will prior to the obtaining of the shareholder 
authorization, whether or not the proxy is coupled with an 
interest.  Without affecting any vote previously taken, the 
proxy may be terminated in any manner permitted by subdivision 
3, or by giving oral notice of the termination in the open 
meeting of shareholders held pursuant to section 302A.671, 
subdivision 3.  The presence at a meeting of the person 
appointing a proxy does not revoke the appointment. 
    Sec. 2.  Minnesota Statutes 1985 Supplement, section 
302A.671, subdivision 3, is amended to read:  
    Subd. 3.  [MEETING OF SHAREHOLDERS.] Within five days after 
receipt of an information statement pursuant to subdivision 2, a 
special meeting of the shareholders of the issuing public 
corporation shall be called pursuant to section 302A.433, 
subdivision 1, to vote on the proposed control share 
acquisition.  The meeting shall be held no later than 55 20 
business days after receipt of the information statement, unless 
the acquiring person agrees to a later date, and no sooner than 
30 days after receipt of the information statement, if the 
acquiring person so requests in writing when delivering the 
information statement.  The notice of the meeting shall at a 
minimum be accompanied by a copy of the information statement 
and a statement disclosing that the board of directors of the 
issuing public corporation recommends acceptance of, expresses 
no opinion and is remaining neutral toward, recommends rejection 
of, or is unable to take a position with respect to the proposed 
control share acquisition.  The notice of meeting shall be given 
within 25 days after receipt of the information statement at 
least ten days prior to the meeting. 
    Sec. 3.  Minnesota Statutes 1984, section 302A.751, is 
amended to read: 
    302A.751 [INVOLUNTARY DISSOLUTION JUDICIAL INTERVENTION; 
EQUITABLE REMEDIES OR DISSOLUTION.] 
    Subdivision 1.  [WHEN PERMITTED.] A court may grant any 
equitable relief it deems just and reasonable in the 
circumstances or may dissolve a corporation and liquidate its 
assets and business:  
    (a) In a supervised voluntary dissolution pursuant to 
section 302A.741;  
    (b) In an action by a shareholder when it is established 
that:  
    (1) the directors or the persons having the authority 
otherwise vested in the board are deadlocked in the management 
of the corporate affairs and the shareholders are unable to 
break the deadlock;  
    (2) the directors or those in control of the corporation 
have acted fraudulently, illegally, or in a manner unfairly 
prejudicial toward one or more shareholders in their capacities 
as shareholders, directors, or officers, or as employees of a 
closely held corporation;  
    (3) the shareholders of the corporation are so divided in 
voting power that, for a period that includes the time when two 
consecutive regular meetings were held, they have failed to 
elect successors to directors whose terms have expired or would 
have expired upon the election and qualification of their 
successors;  
    (4) the corporate assets are being misapplied or wasted; or 
     (5) the period of duration as provided in the articles has 
expired and has not been extended as provided in section 
302A.801;  
     (c) In an action by a creditor when:  
     (1) the claim of the creditor has been reduced to judgment 
and an execution thereon has been returned unsatisfied; or 
     (2) the corporation has admitted in writing that the claim 
of the creditor is due and owing and it is established that the 
corporation is unable to pay its debts in the ordinary course of 
business; or 
     (d) In an action by the attorney general to dissolve the 
corporation in accordance with section 302A.757 when it is 
established that a decree of dissolution is appropriate. 
    Subd. 2.  [BUY-OUT ON MOTION.] In an action under 
subdivision 1, clause (b), involving a closely held corporation 
at the time the action is commenced and in which one or more of 
the circumstances described in that clause is established, the 
court may, upon motion of a corporation or a shareholder or 
beneficial owner of shares of the corporation, order the sale by 
a plaintiff or a defendant of all shares of the corporation held 
by the plaintiff or defendant to either the corporation or the 
moving shareholders, whichever is specified in the motion, if 
the court determines in its discretion that an order would be 
fair and equitable to all parties under all of the circumstances 
of the case.  
     The purchase price of any shares so sold shall be the fair 
value of the shares as of the date of the commencement of the 
action or as of another date found equitable by the court, 
provided that, if the shares in question are then subject to 
sale and purchase pursuant to the bylaws of the corporation, a 
shareholder control agreement, the terms of the shares, or 
otherwise, the court shall order the sale for the price and on 
the terms set forth in them, unless the court determines that 
the price or terms are unreasonable under all the circumstances 
of the case. 
      Within five days after the entry of the order, the 
corporation shall provide each selling shareholder or beneficial 
owner with the information it is required to provide under 
section 302A.473, subdivision 5, paragraph (a).  
      If the parties are unable to agree on fair value within 40 
days of entry of the order, the court shall determine the fair 
value of the shares under the provisions of section 302A.473, 
subdivision 7, and may allow interest or costs as provided in 
section 302A.473, subdivisions 1 and 8.  
      The purchase price shall be paid in one or more 
installments as agreed on by the parties, or, if no agreement 
can be reached within 40 days of entry of the order, as ordered 
by the court.  Upon entry of an order for the sale of shares 
under this subdivision and provided that the corporation or the 
moving shareholders post a bond in adequate amount with 
sufficient sureties or otherwise satisfy the court that the full 
purchase price of the shares, plus such additional costs, 
expenses, and fees as may be awarded, will be paid when due and 
payable, the selling shareholders shall no longer have any 
rights or status as shareholders, officers, or directors, except 
the right to receive the fair value of their shares plus such 
other amounts as might be awarded.  
    Subd. 3.  [CONDITION OF CORPORATION.] In determining 
whether to order equitable relief, dissolution, or a buy-out, 
the court shall take into consideration the financial condition 
of the corporation but shall not refuse to order equitable 
relief, dissolution, or a buy-out solely on the ground that the 
corporation has accumulated or current operating profits. 
    Subd. 3a.  [CONSIDERATIONS IN GRANTING RELIEF INVOLVING 
CLOSELY HELD CORPORATIONS.] In determining whether to order 
equitable relief, dissolution, or a buy-out, the court shall 
take into consideration the duty which all shareholders in a 
closely held corporation owe one another to act in an honest, 
fair, and reasonable manner in the operation of the corporation 
and the reasonable expectations of the shareholders as they 
exist at the inception and develop during the course of the 
shareholders' relationship with the corporation and with each 
other. 
    Subd. 3b.  [DISSOLUTION AS REMEDY.] In deciding whether to 
order dissolution, the court shall consider whether lesser 
relief suggested by one or more parties, such as any form of 
equitable relief, a buy-out, or a partial liquidation, would be 
adequate to permanently relieve the circumstances established 
under subdivision 1, clause (b) or (c).  Lesser relief may be 
ordered in any case where it would be appropriate under all the 
facts and circumstances of the case. 
    Subd. 4.  [EXPENSES.] If the court finds that a party to a 
proceeding brought under this section has acted arbitrarily, 
vexatiously, or otherwise not in good faith, it may in its 
discretion award reasonable expenses, including attorneys' fees 
and disbursements, to any of the other parties.  
    Subd. 5.  [VENUE; PARTIES.] Proceedings under this section 
shall be brought in a court within the county in which the 
registered office of the corporation is located.  It is not 
necessary to make shareholders parties to the action or 
proceeding unless relief is sought against them personally. 
    Sec. 4.  Laws 1985, First Special Session chapter 5, 
section 21, is amended to read: 
    Sec. 21.  [EFFECTIVE DATE.] 
    The amendments to Minnesota Statutes, section 302A.671, 
subdivision 1, paragraph (a), made by this act are effective 
August 1, 1986 1987. 
    Approved March 24, 1986