RS 1-1435 - Oppressed shareholder's right to withdraw
A. If a corporation engages in oppression of a shareholder, the shareholder may withdraw from the corporation and require the corporation to buy all of the shareholder's shares at their fair value.
B. A corporation engages in oppression of a shareholder if the corporation's distribution, compensation, governance, and other practices, considered as a whole over an appropriate period of time, are plainly incompatible with a genuine effort on the part of the corporation to deal fairly and in good faith with the shareholder. Conduct that is consistent with the good faith performance of an agreement among all shareholders is presumed not to be oppressive. The following factors are relevant in assessing the fairness and good faith of the corporation's practices:
(1) The conduct of the shareholder alleging oppression.
(2) The treatment that a reasonable shareholder would consider fair under the circumstances, considering the reasonable expectations of all shareholders in the corporation.
C.(1) The term "fair value" has the same meaning in this Section and in R.S. 12:1-1436 as it does in R.S. 12:1-1301(4) concerning appraisal rights, except that the value of a withdrawing shareholder's shares is to be determined as of the effective date of the notice of withdrawal pursuant to Subsection D of this Section.
(2) The context of the transaction requiring appraisal, as described in R.S. 12:1-1301(4), is a sale of the entire corporation in an arm's-length transaction by a person who owns all of the shares in the corporation.
D. A shareholder may assert a right to withdraw under this Section by giving written notice to the corporation that the shareholder is withdrawing from the corporation on grounds of oppression. When the notice becomes effective it operates as an offer by the shareholder, irrevocable for sixty days, to sell to the corporation at fair value the entirety of the shareholder's shares in the corporation. The notice need not specify the price that the withdrawing shareholder proposes as the fair value of the shares, but if the notice does specify a price, the price shall be part of the offer to sell made by the shareholder.
E. The corporation may accept the offer to sell made in the shareholder's notice of withdrawal by giving the withdrawing shareholder written notice of its acceptance during the sixty days that the offer is irrevocable. If the shareholder's notice of withdrawal specifies a price for the shares, the corporation's notice of acceptance operates as an acceptance of both the offer to sell and the proposed price unless the notice states that the corporation is accepting the offer to sell, but not the price; in that case the notice of acceptance operates only as an acceptance of the shareholder's offer to sell the shares at their fair value. The corporation's acceptance of the shareholder's offer does not operate as an admission or as evidence that the corporation has engaged in oppression of the shareholder.
F. A notice of acceptance that operates as an acceptance of both the shareholder's offer to sell and the shareholder's proposed price forms a contract of sale of the shares at that price, payable in cash. The contract includes the warranties of a seller of investment securities under the Uniform Commercial Code and imposes a duty on the selling shareholder to deliver any certificates issued by the corporation for the withdrawing shareholder's shares or, if a certificate has been lost, stolen, destroyed, or previously delivered to the corporation, an affidavit to that effect. Either party may file an action to enforce the contract at the specified price if the contract is not fully performed within thirty days after the effective date of the notice of acceptance. If a withdrawing shareholder fails to deliver the certificate for a share purchased by the corporation under a contract formed under this Subsection, the shareholder owes the same indemnity obligation as a shareholder who sells shares as described in R.S. 12:1-1436(F).
G. If the corporation does not accept the withdrawing shareholder's offer as provided in Subsection E of this Section, the shareholder may file an ordinary proceeding against the corporation in district court to enforce the shareholder's right to withdraw. A judgment in the action that recognizes the right of the shareholder to withdraw on grounds of oppression is a partial judgment under Code of Civil Procedure Article 1915(B). The trial on the valuation of the shares is governed by R.S. 12:1-1436.
H. Venue for an action filed under Subsection F or G of this Section lies in the district court of the parish where the corporation's principal office or, if none in this state, where its registered office is located.
I. A corporation's obligation to purchase a withdrawing shareholder's shares as provided in this Section or R.S. 12:1-1436 is subject to any limitation or requirement respecting a corporation's acquisition of its own shares as imposed by R.S. 12:1-631, R.S. 12:1-640, or any other provision of state or federal law applicable to the corporation, including any order, plan, directive, or enforcement action issued by an administrative or regulatory agency pursuant to state or federal law.
J.(1) The shareholders of a corporation may waive the right to withdraw under this Section by unanimous written consent, provided in accordance with R.S. 12:1-704, stating that the shareholders are waiving the right provided by law to withdraw from the corporation on grounds of oppression. The waiver takes effect when the last consent required to make the consent effective under R.S. 12:1-704 is delivered to the corporation, and the corporation shall send written notice to the shareholders of that date promptly after it is known. The waiver remains in effect for fifteen years from the date that it becomes effective, or for any shorter period stated in the waiver to which the shareholders consent.
(2) The existence of the waiver shall be noted on each share certificate in the same way that the existence of a unanimous governance agreement is required to be noted under R.S. 12:1-732(C), and the failure to note the existence of the waiver on a share certificate has the same effect with respect to the waiver as a failure to note a unanimous governance agreement has with respect to that agreement. Except as stated in this Subsection and in Subsection K of this Section, the right of an oppressed shareholder to withdraw from a corporation under this Section may not be diminished.
K. This Section shall not apply in the case of a corporation that, on the effective date of the withdrawal notice under Subsection C of this Section, has shares that are covered securities under Section 18(b)(1)(A) or (B) of the Securities Act of 1933, as amended.
L. Without limiting any remedy available on other grounds, the right to withdraw in accordance with this Section and R.S. 12: 1-1436 is the exclusive remedy for oppression. An allegation of oppression, as such, does not provide an independent or additional basis for an action by a shareholder to recover damages from the corporation or its directors, officers, employees, agents, or controlling persons.
Acts 2014, No. 328, §1, eff. Jan. 1, 2015; Acts 2015, No. 356, §1; Acts 2016, No. 442, §1; Acts 2017, No. 57, §1.