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1994 Minnesota Session Laws

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                            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.

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