KENTUCKY REVISED STATUTES
CHAPTER 271B
BUSINESS CORPORATIONS
SUBTITLE 13. DISSENTERS' RIGHTS
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
271B.13-010. Definitions for subtitle.
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As used in this subtitle:
(1) "Corporation" means the issuer of the shares held by a
dissenter, except that in the case of a merger where the
issuing corporation is not the surviving corporation, then,
after consummation of the merger, "corporation" shall mean
the surviving corporation.
(2) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under KRS 271B.13-020 and who
exercises that right when and in the manner required by KRS
271B.13-200 to 271B.13-280.
(3) "Fair value," with respect to a dissenter's shares, means
the value of the shares immediately before the effectuation
of the corporate action to which the dissenter objects,
excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be
inequitable. In any transaction subject to the requirements
of KRS 271B.12-210 or exempted by KRS 271B.12-220(2), "fair
value" shall be at least an amount required to be paid under
KRS 271B.12-220(2) in order to be exempt from the
requirements of KRS 271B.12-210.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average
rate currently paid by the corporation on its principal bank
loans or, if none, at a rate that is fair and equitable
under all the circumstances.
(5) "Record shareholder" means the person in whose name shares
are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights
granted by a nominee certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a
nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
271B.13-020. Right to dissent.
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(1) A shareholder shall be entitled to dissent from, and obtain
payment of the fair value of his shares in the event of, any
of the following corporate actions:
(a) Consummation of a plan of merger to which the
corporation is a party:
1. If shareholder approval is required for the merger
by KRS 271B.11-030 or the articles of
incorporation and the shareholder is entitled to
vote on the merger; or
2. If the corporation is a subsidiary that is merged
with its parent under KRS 271B.11-040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares
will be acquired, if the shareholder is entitled to
vote on the plan;
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation
other than in the usual and regular course of business,
if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not
including a sale pursuant to court order or a sale for
cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed
to the shareholders within one (1) year after the date
of sale;
(d) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a
dissenter's shares because it:
1. Alters or abolishes a preferential right of the
shares to a distribution or in dissolution;
2. Creates, alters, or abolishes a right in respect
of redemption, including a provision respecting a
sinking fund for the redemption or repurchase, of
the shares;
3. Excludes or limits the right of the shares to vote
on any matter other than a limitation by dilution
through issuance of shares or other securities
with similar voting rights; or
4. Reduces the number of shares owned by the
shareholder to a fraction of a share if the
fractional share so created is to be acquired for
cash under KRS 271B.6-040;
(e) Any transaction subject to the requirements of KRS
271B.12-210 or exempted by KRS 271B.12-220(2); or
(f) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation,
bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their
shares.
(2) A shareholder entitled to dissent and obtain payment for his
shares under this chapter shall not challenge the corporate
action creating his entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or
the corporation.
271B.13-030. Dissent by nominees and beneficial owners.
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(1) A record shareholder may assert dissenters' rights as to
fewer than all the shares registered in his name only if he
shall dissent with respect to all shares beneficially owned
by any one (1) person and notify the corporation in writing
of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial
dissenter under this subsection shall be determined as if
the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:
(a) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights;
and
(b) He does so with respect to all shares of which he is
the beneficial shareholder or over which he has power
to direct the vote.
271B.13-200. Notice of dissenters' rights.
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(1) If proposed corporate action creating dissenters' rights
under KRS 271B.13-020 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters'
rights under this subtitle and the corporation shall
undertake to provide a copy of this subtitle to any
shareholder entitled to vote at the shareholders' meeting
upon request of that shareholder.
(2) If corporate action creating dissenters' rights under KRS
271B.13-020 is taken without a vote of shareholders, the
corporation shall notify in writing all shareholders
entitled to assert dissenters' rights that the action was
taken and send them the dissenters' notice described in KRS
271B.13-220.
271B.13-210. Notice of intent to demand payment.
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(1) If proposed corporate action creating dissenters' rights
under KRS 271B.13-020 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert
dissenters' rights:
(a) Shall deliver to the corporation before the vote is
taken written notice of his intent to demand payment
for his shares if the proposed action is effectuated;
and
(b) Shall not vote his shares in favor of the proposed
action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section shall not be entitled to
payment for his shares under this chapter.
271B.13-220. Dissenters' notice.
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(1) If proposed corporate action creating dissenters' rights
under KRS 271B.13-020 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of
KRS 271B.13-210.
(2) The dissenters' notice shall be sent no later than ten (10)
days after the date the proposed corporate action was
authorized by the shareholders, or, if no shareholder
authorization was obtained, by the board of directors, and
shall:
(a) State where the payment demand must be sent and where
and when certificates for certificated shares must be
deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the
payment demand is received;
(c) Supply a form for demanding payment that includes the
date of the first announcement to news media or to
shareholders of the terms of the proposed corporate
action and requires that the person asserting
dissenters' rights certify whether or not he acquired
beneficial ownership of the shares before that date;
(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty
(30), nor more than sixty (60) days after the date the
notice provided in subsection (1) of this section is
delivered; and
(e) Be accompanied by a copy of this subtitle.
271B.13-230. Duty to demand payment.
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(1) A shareholder who is sent a dissenters' notice described in
KRS 271B.13-220 shall demand payment, certify whether he
acquired beneficial ownership of the shares before the date
required to be set forth in the dissenters' notice pursuant
to subsection (2)(c) of KRS 271B.13-220, and deposit his
certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his share
certificates under subsection (1) of this section shall
retain all other rights of a shareholder until these rights
are cancelled or modified by the taking of the proposed
corporate action. (3) A shareholder who does not demand
payment or deposit his share certificates where required,
each by the date set in the dissenters' notice, shall not be
entitled to payment for his shares under this subtitle.
271B.13-240. Share restrictions.
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(1) The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is
received until the proposed corporate action is taken or the
restrictions released under KRS 271B.13-260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares shall retain all other rights of a
shareholder until these rights are cancelled or modified by
the taking of the proposed corporate action.
271B.13-250. Payment.
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(1) Except as provided in KRS 271B.13-270, as soon as the
proposed corporate action is taken, or upon receipt of a
payment demand, the corporation shall pay each dissenter who
complied with KRS 271B.13-230 the amount the corporation
estimates to be the fair value of his shares, plus accrued
interest.
(2) The payment shall be accompanied by:
(a) The corporation's balance sheet as of the end of a
fiscal year ending not more than sixteen (16) months
before the date of payment, an income statement for
that year, a statement of changes in shareholders'
equity for that year, and the latest available interim
financial statements, if any;
(b) A statement of the corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated; and
(d) A statement of the dissenter's right to demand payment
under KRS 271B.13-280.
271B.13-260. Failure to take action.
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(1) If the corporation does not take the proposed action within
sixty (60) days after the date set for demanding payment and
depositing share certificates, the corporation shall return
the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing
transfer restrictions, the corporation takes the proposed
action, it shall send a new dissenters' notice under KRS
271B.13-220 and repeat the payment demand procedure.
271B.13-270. After-acquired shares.
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(1) A corporation may elect to withhold payment required by KRS
271B.13-250 from a dissenter unless he was the beneficial
owner of the shares before the date set forth in the
dissenters' notice as the date of the first announcement to
news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold payment
under subsection (1) of this section, after taking the
proposed corporate action, it shall estimate the fair value
of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full
satisfaction of his demand. The corporation shall send with
its offer a statement of its estimate of the fair value of
the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to
demand payment under KRS 271B.13-280.
271B.13-280. Procedure if shareholder dissatisfied with payment
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or offer.
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(1) A dissenter may notify the corporation in writing of his own
estimate of the fair value of his shares and amount of
interest due, and demand payment of his estimate (less any
payment under KRS 271B.13-250), or reject the corporation's
offer under KRS 271B.13-270 and demand payment of the fair
value of his shares and interest due, if:
(a) The dissenter believes that the amount paid under KRS
271B.13-250 or offered under KRS 271B.13-270 is less
than the fair value of his shares or that the interest
due is incorrectly calculated;
(b) The corporation fails to make payment under KRS 271B.13-
250 within sixty (60) days after the date set for
demanding payment; or
(c) The corporation, having failed to take the proposed
action, does not return the deposited certificates or
release the transfer restrictions imposed on
uncertificated shares within sixty (60) days after the
date set for demanding payment.
(2) A dissenter waives his right to demand payment under this
section unless he shall notify the corporation of his demand
in writing under subsection (1) of this section within
thirty (30) days after the corporation made or offered
payment for his shares.
JUDICIAL APPRAISAL OF SHARES
271B.13-300. Court action.
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(1) If a demand for payment under KRS 271B.13-280 remains
unsettled, the corporation shall commence a proceeding
within sixty (60) days after receiving the payment demand
and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not
commence the proceeding within the sixty (60) day period, it
shall pay each dissenter whose demand remains unsettled the
amount demanded.
(2) The corporation shall commence the proceeding in the circuit
court of the county where a corporation's principal office
(or, if none in this state, its registered office) is
located. If the corporation is a foreign corporation without
a registered office in this state, it shall commence the
proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose
shares were acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters (whether or not
residents of this state) whose demands remain unsettled
parties to the proceeding as in an action against their
shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section shall be
plenary and exclusive. The court may appoint one (1) or more
persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have
the powers described in the order appointing them, or in any
amendment to it. The dissenters shall be entitled to the
same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding shall be
entitled to judgment:
(a) For the amount, if any, by which the court finds the
fair value of his shares, plus interest, exceeds the
amount paid by the corporation; or
(b) For the fair value, plus accrued interest, of his after-
acquired shares for which the corporation elected to
withhold payment under KRS 271B.13-270.
271B.13-310. Court costs and counsel fees.
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(1) The court in an appraisal proceeding commenced under KRS
271B.13-300 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess
the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under KRS 271B.13-280.
(2) The court may also assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court
finds equitable:
(a) Against the corporation and in favor of any or all
dissenters, if the court finds the corporation did not
substantially comply with the requirements of KRS
271B.13-200 to 271B.13-280; or
(b) Against either the corporation or a dissenter, in favor
of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this subtitle.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services
should not be assessed against the corporation, the court
may award to these counsel reasonable fees to be paid out of
the amounts awarded the dissenters who were benefited.