Office of the Revisor of Statutes
Minnesota Session Laws - 1994, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 417-H.F.No. 1934
An act relating to corporations; modifying provisions
for the organization and operation of business
corporations; amending Minnesota Statutes 1992,
sections 302A.135, subdivision 4; 302A.405,
subdivision 1; 302A.471, subdivision 1; 302A.661,
subdivision 1; 302A.725, subdivision 3; and 302A.751,
subdivisions 1, 2, and 3a; Minnesota Statutes 1993
Supplement, sections 302A.401, subdivision 1;
302A.435, subdivision 1; and 302A.673, subdivision 3.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1992, section 302A.135,
subdivision 4, is amended to read:
Subd. 4. [APPROVAL BY SHAREHOLDERS.] (a) The proposed
amendment is adopted when approved by the affirmative vote of
the holders of a majority of the voting power of the shares
present and entitled to vote shareholders required by section
302A.437, except as provided in paragraphs (b) and (c) and
subdivision 5.
(b) For a closely held corporation, if the articles provide
for a specified proportion or number equal to or larger than the
majority necessary to transact a specified type of business at a
meeting, or if it is proposed to amend the articles to provide
for a specified proportion or number equal to or larger than the
majority necessary to transact a specified type of business at a
meeting, the affirmative vote necessary to add the provision to,
or to amend an existing provision in, the articles is the larger
of:
(1) the specified proportion or number or, in the absence
of a specific provision, the affirmative vote necessary to
transact the type of business described in the proposed
amendment at a meeting immediately before the effectiveness of
the proposed amendment; or
(2) the specified proportion or number that would, upon
effectiveness of the proposed amendment, be necessary to
transact the specified type of business at a meeting.
(c) For corporations other than closely held corporations,
if the articles provide for a larger proportion or number to
transact a specified type of business at a meeting, the
affirmative vote of that larger proportion or number is
necessary to amend the articles to decrease the proportion or
number necessary to transact the business.
Sec. 2. Minnesota Statutes 1993 Supplement, section
302A.401, subdivision 1, is amended to read:
Subdivision 1. [BOARD OR SHAREHOLDER MAY AUTHORIZE.]
Subject to any restrictions in the articles, a corporation may
issue securities and rights to purchase securities only when
authorized by the board or by the shareholders.
Sec. 3. Minnesota Statutes 1992, section 302A.405,
subdivision 1, is amended to read:
Subdivision 1. [CONSIDERATION; PROCEDURE.] Subject to any
restrictions in the articles:
(a) Shares may be issued for any consideration, including,
without limitation, money or other tangible or intangible
property received by the corporation or to be received by the
corporation under a written agreement, or services rendered to
the corporation or to be rendered to the corporation under a
written agreement, as authorized by resolution approved by the
affirmative vote of a majority of the directors present, or, if
provided for in the articles, approved by the affirmative vote
of the holders of a majority of the voting power of the shares
present, valuing all nonmonetary consideration and establishing
a price in money or other consideration, or a minimum price, or
a general formula or method by which the price will be
determined; and
(b) Upon authorization in accordance with section 302A.402,
the corporation may, without any new or additional
consideration, issue its own shares in exchange for or in
conversion of its outstanding shares, or issue its own shares
pro rata to its shareholders or the shareholders of one or more
classes or series, to effectuate share dividends, divisions, or
combinations. No shares of a class or series, shares of which
are then outstanding, shall be issued to the holders of shares
of another class or series (except in exchange for or in
conversion of outstanding shares of the other class or series),
unless the issuance either is expressly provided for in the
articles or is approved at a meeting by the affirmative vote of
the holders of a majority of the voting power of all shares of
the same class or series as the shares to be issued.
Sec. 4. Minnesota Statutes 1993 Supplement, section
302A.435, subdivision 1, is amended to read:
Subdivision 1. [TO WHOM GIVEN.] Except as otherwise
provided in this chapter, notice of all meetings of shareholders
shall be given to every holder of shares entitled to vote,
unless:
(1) the meeting is an adjourned meeting to be held not more
than 120 days after the date fixed for the original meeting and
the date, time, and place of the meeting were announced at the
time of the original meeting or any adjournment of the original
meeting; or
(2) the following have been mailed by first class mail to a
shareholder at the address in the corporate records and returned
undeliverable:
(i) two consecutive annual meeting notices and notices of
any special meetings held during the period between the two
annual meetings; or
(ii) all payments of dividends sent during a 12-month
period, provided there are at least two sent during the 12-month
period.
If notice of an adjourned meeting is required under clause
(1), then the date for determination of shares entitled to
notice of and entitled to vote at the adjourned meeting must
comply with section 302A.445, subdivision 1, except that if the
date of the meeting is set by court order, the court may provide
that the original date of determination will continue in effect
or may fix a new date.
An action or meeting that is taken or held without notice
under clause (2) has the same force and effect as if notice was
given. If the shareholder delivers a written notice of the
shareholder's current address to the corporation, the notice
requirement is reinstated.
Sec. 5. Minnesota Statutes 1992, section 302A.471,
subdivision 1, is amended to read:
Subdivision 1. [ACTIONS CREATING RIGHTS.] A shareholder of
a corporation may dissent from, and obtain payment for the fair
value of the shareholder's shares in the event of, any of the
following corporate actions:
(a) An amendment of the articles that materially and
adversely affects the rights or preferences of the shares of the
dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a
sinking fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of
the shares to acquire shares, securities other than shares, or
rights to purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote
on a matter, or to cumulate votes, except as the right may be
excluded or limited through the authorization or issuance of
securities of an existing or new class or series with similar or
different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that
section 302A.671 does not apply to a control share acquisition
does not give rise to the right to obtain payment under this
section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation
not made in the usual or regular course of its business, but not
including a transaction permitted without shareholder approval
in section 302A.661, subdivision 1, or a disposition in
dissolution described in section 302A.725, subdivision 2, or a
disposition pursuant to an order of a court, or a disposition
for cash on terms requiring that all or substantially all of the
net proceeds of disposition be distributed to the shareholders
in accordance with their respective interests within one year
after the date of disposition;
(c) A plan of merger, whether under this chapter or under
chapter 322B, to which the corporation is a party, except as
provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under
chapter 322B, to which the corporation is a party as the
corporation whose shares will be acquired by the acquiring
corporation, if the shares of the shareholder are entitled to be
voted on the plan; or
(e) Any other corporate action taken pursuant to a
shareholder vote with respect to which the articles, the bylaws,
or a resolution approved by the board directs that dissenting
shareholders may obtain payment for their shares.
Sec. 6. Minnesota Statutes 1992, section 302A.661,
subdivision 1, is amended to read:
Subdivision 1. [SHAREHOLDER APPROVAL; WHEN NOT REQUIRED.]
A corporation may, by affirmative vote of a majority of the
directors present, may sell, lease, transfer, or otherwise
dispose of all or substantially all of its property and assets
in the usual and regular course of its business and grant a
security interest in all or substantially all of its property
and assets whether or not in the usual and regular course of its
business, upon those terms and conditions and for those
considerations, which may be money, securities, or other
instruments for the payment of money or other property, as the
board deems expedient, in which case no and without shareholder
approval is required.:
(1) sell, lease, transfer, or otherwise dispose of all or
substantially all of its property and assets in the usual and
regular course of its business;
(2) grant a security interest in all or substantially all
of its property and assets whether or not in the usual and
regular course of its business; or
(3) transfer any or all of its property to a corporation
all the shares of which are owned by the corporation.
Sec. 7. Minnesota Statutes 1993 Supplement, section
302A.673, subdivision 3, is amended to read:
Subd. 3. [APPLICATION.] (a) Unless by express provision
electing to be subject to this section contained in the articles
or in bylaws approved by the shareholders of an issuing public
corporation, this section does not apply to any business
combination of an issuing public corporation, that is not, at
any time during the period from June 1, 1987, until adoption of
the article or bylaw provision, a publicly held corporation.
This section shall not apply to any business combination with an
interested shareholder whose share acquisition date is either
before the effective date of the article or bylaw provision or
on the effective date, but prior to the effective time of the
article or bylaw provision.
(b) Except as provided in paragraph (c), this section does
not apply to any business combination of an issuing public
corporation:
(1) if, prior to the time the issuing public corporation
becomes a publicly held corporation or becomes subject to this
section by virtue of an election under paragraph (a), including
any time prior to the time that the corporation becomes an
issuing public corporation, articles or bylaws of the
corporation contain a provision expressly electing not to be
subject to this section;
(2) if the board of the issuing public corporation adopts,
prior to September 1, 1987, an amendment to the issuing public
corporation's bylaws expressly electing not to be subject to
this section;
(3) if an amendment to the articles or bylaws of the
issuing public corporation is approved by the shareholders,
other than interested shareholders and their affiliates and
associates, holding a majority of the outstanding voting power
of all shares entitled to vote, excluding the shares of
interested shareholders and their affiliates and associates,
expressly electing not to be subject to this section and the
amendment provides that it is not to be effective until 18
months after the vote of shareholders and provides that, except
as provided in paragraph (c), it does not apply to any business
combination of the issuing public corporation with an interested
shareholder whose share acquisition date is on or before the
effective date of the amendment; or
(4) if the business combination was consummated before, or
if a binding agreement for the business combination was entered
into before, the day following June 1, 1987.
(c) This section does not apply to any business combination
of an issuing public corporation with, with respect to, proposed
by or on behalf of, or pursuant to any written or oral
agreement, arrangement, relationship, understanding, or
otherwise with:
(1) any person that would have been an interested
shareholder on June 1, 1987, had this section been in effect on
this date and had the issuing public corporation been an issuing
public corporation on this date.;
(2) any interested shareholder whose share acquisition date
is either before the effective date of the article or bylaw
provision by which an issuing public corporation that was not
subject to this section immediately prior to the election
elected to be subject to this section, or on the effective date,
but prior to the effective time of the article or bylaw
provision; or
(3) in the case of a corporation that was not subject to
this section immediately prior to becoming a publicly held
corporation, any interested shareholder whose share acquisition
date is either before the date on which the corporation becomes
a publicly held corporation or on that date, but prior to the
time the corporation becomes a publicly held corporation, and to
whom the application of this section is expressly excluded by an
amendment to the articles or bylaws of the corporation approved
by the shareholders before the corporation becomes a publicly
held corporation.
This section applies to any business combination of an
issuing public corporation to which it previously did not apply
because of provisions in articles or bylaws adopted or approved
under paragraph (b), clause (1), (2), or (3), upon an amendment
to the articles or bylaws approved by shareholders holding a
majority of the outstanding voting power of all shares entitled
to vote expressly electing to be subject to this section
becoming effective. Also, this section does not apply to any
business combination of the corporation with, with respect to,
proposed by or on behalf of, or pursuant to any written or oral
agreement, arrangement, relationship, understanding, or
otherwise with any person that would have been an interested
shareholder at the effective time of the amendment if this
section had been applicable.
Sec. 8. Minnesota Statutes 1992, section 302A.725,
subdivision 3, is amended to read:
Subd. 3. [DISTRIBUTION TO SHAREHOLDERS.] All tangible or
intangible property, including money, remaining after the
discharge of, or after making adequate provision for the
discharge of, the debts, obligations, and liabilities of the
corporation shall be distributed to the shareholders in
accordance with section 302A.551, subdivision 4.
Sec. 9. Minnesota Statutes 1992, section 302A.751,
subdivision 1, is amended to read:
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, or illegally, or in a manner unfairly
prejudicial toward one or more shareholders in their capacities
as shareholders, or directors, or as officers, or as employees
of a closely held corporation;
(3) the directors or those in control of the corporation
have acted in a manner unfairly prejudicial toward one or more
shareholders in their capacities as shareholders or directors of
a corporation that is not a publicly held corporation, or as
officers or employees of a closely held corporation;
(4) 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) (5) the corporate assets are being misapplied or
wasted; or
(5) (6) 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.
Sec. 10. Minnesota Statutes 1992, section 302A.751,
subdivision 2, is amended to read:
Subd. 2. [BUY-OUT ON MOTION.] In an action under
subdivision 1, clause (b), involving a closely corporation that
is not a publicly 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.
Sec. 11. Minnesota Statutes 1992, section 302A.751,
subdivision 3a, is amended to read:
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 all shareholders as they
exist at the inception and develop during the course of the
shareholders' relationship with the corporation and with each
other. For purposes of this section, any written agreements,
including employment agreements and buy-sell agreements, between
or among shareholders or between or among one or more
shareholders and the corporation are presumed to reflect the
parties' reasonable expectations concerning matters dealt with
in the agreements.
Presented to the governor April 11, 1994
Signed by the governor April 13, 1994, 1:04 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes