California Assembly Bill AB1680 Amended / Bill

 BILL NUMBER: AB 1680AMENDED BILL TEXT AMENDED IN ASSEMBLY MARCH 19, 2012 INTRODUCED BY Assembly Member Wieckowski FEBRUARY 14, 2012 An act to amend Sections 1300 and 1301 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. 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 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 redefine "dissenting shares" to exclude shares for which the holder is entitled only to 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  the most recent closing price per share 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 action, but adjusted for any stock split, reverse stock split, or share dividend which becomes effective thereafter.   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 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  that come within   to which  all of the following  descriptions   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   (1)     That, with respect to those shares,  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   shall  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. (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.  (d) Dissenting shares do not include any shares with respect to which the holder is required, by the terms of the reorganization or short-form merger agreement, to accept for the shares the following forms of consideration:   (1) Shares of any other corporation the shares of which, at the effective time of the reorganization or short-form merger, are listed on any national securities exchange certified by the commissioner under subdivision (o) of Section 25100.   (2) Cash in lieu of fractional shares described in paragraph (1).   (3) Any combination of the shares or cash in lieu of fractional shares described in paragraphs (1) or (2).  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 pursuant to subdivision (i) 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 the fair market value of those shares as determined pursuant to subdivision (a) of Section 1300.