Introduced By: Senators Roberts, Bates and Gallo
Date Introduced : February 9, 1999
It is enacted by the General Assembly as follows:
SECTION 1. Section 7-5.1-5 of the General Laws in Chapter 7-5.1 entitled "Professional Service Corporations" is hereby amended to read as follows:
7-5.1-5. Eligibility of personnel -- Transfer of stock. -- (a) If any shareholder shall become ineligible, he or she shall transfer his or her shares to an eligible person, or offer them to the corporation for redemption at their fair market value. If the articles of incorporation or the by-laws of the corporation restrict transfer of its shares, and transfer of the shares to an eligible person is thereby prevented, the corporation shall redeem the shares of the ineligible shareholder, and shall compensate the ineligible shareholder in full for the fair market value of his or her shares determined as of the date that the ineligibility occurred. Nothing herein contained shall be interpreted to prevent a shareholder and the corporation from making a binding agreement as to a method for determining the fair market value or for determining what constitutes the fair market value of his or her shares. In the event the corporation and an ineligible shareholder cannot agree as to the fair market value, the regulatory agency {ADD excluding the division of professional regulation ADD} shall, upon application by either party, appoint a board of not less than three (3) qualified persons engaged in performing similar professional services to determine the fair market value of the shares, and the decision of the board shall be final and binding upon the parties. {ADD The division of professional regulation shall, upon application by either party, appoint a neutral arbitrator with experience in business valuation whose fees will be paid by the corporation petitioner to determine the fair market value of the shares, and the decision of the arbitrator shall be final and binding upon the parties. ADD} The redemption of its shares by a professional service corporation shall not be effected at a time or in a manner so as to impair or prejudice the rights or remedies of any creditor of the corporation. As used in this chapter, "ineligible shareholder" includes a shareholder electing to retire or withdraw from active employment in the corporation. Nothing herein contained shall be interpreted to prohibit the temporary exercise of incidence of ownership of stock in any corporation by persons or corporate fiduciaries not authorized to practice, solely for purposes of administering estates of shareholders deceased or under legal disability to transfer their shares. For purposes of this section, "temporary incidence of ownership" shall mean any period of time not exceeding two (2) years.
(b) Every shareholder of a corporation organized under this chapter entitled to vote at a meeting of the shareholders or to express consent without a meeting may authorize any other shareholder of the corporation to act for him or her by proxy executed in writing by the shareholder or by his or her duly authorized attorney in fact.
SECTION 2. This act shall take effect upon passage.
