A. Any shareholder of a corporation may dissent from, and obtain payment for the shareholder's shares in the event of, any of the following corporate actions:
(1) any plan of merger or consolidation to which the corporation is a party, except as provided in Subsection C of this section;
(2) any sale or exchange of all or substantially all of the property and assets of the corporation not made in the usual and regular course of its business, including a sale in dissolution, but not including a sale pursuant to an order of a court having jurisdiction in the premises or a sale for cash on terms requiring that all or substantially all of the net proceeds of sale be distributed to the shareholders in accordance with their respective interests within one year after the date of sale;
(3) any plan of exchange to which the corporation is a party as the corporation the shares of which are to be acquired;
(4) any amendment of the articles of incorporation which materially and adversely affects the rights appurtenant to the shares of the dissenting shareholder in that it:
(a) alters or abolishes a preferential right of such shares;
(b) creates, alters or abolishes a right in respect of the redemption of such shares, including a provision respecting a sinking fund for the redemption or repurchase of such shares;
(c) alters or abolishes an existing preemptive right of the holder of such shares to acquire shares or other securities; or
(d) excludes or limits the right of the holder of such shares to vote on any matter, or to cumulate his votes, except as such right may be limited by dilution through the issuance of shares or other securities with similar voting rights; or
(5) any other corporate action taken pursuant to a shareholder vote with respect to which the articles of incorporation, the bylaws or a resolution of the board of directors directs that dissenting shareholders shall have a right to obtain payment for their shares.
B. (1) A record holder of shares may assert dissenters' rights as to less than all of the shares registered in his name only if the holder dissents with respect to all the shares beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf the holder dissents. In that event, his rights shall be determined as if the shares as to which he has dissented and his other shares were registered in the names of different shareholders.
(2) A beneficial owner of shares who is not the record holder may assert dissenters' rights with respect to shares held on his behalf, and shall be treated as a dissenting shareholder under the terms of this section and Section 53-15-4 NMSA 1978 if he submits to the corporation at the time of or before the assertion of these rights a written consent of the record holder.
C. The right to obtain payment under this section shall not apply to the shareholders of the surviving corporation in a merger if a vote of the shareholders of such corporation is not necessary to authorize such merger.
D. A shareholder of a corporation who has a right under this section to obtain payment for his shares shall have no right at law or in equity to attack the validity of the corporate action that gives rise to his right to obtain payment, nor to have the action set aside or rescinded, except when the corporate action is unlawful or fraudulent with regard to the complaining shareholder or to the corporation.
History: 1953 Comp., § 51-28-3, enacted by Laws 1967, ch. 81, § 77; 1975, ch. 64, § 36; 1983, ch. 304, § 60.
ANNOTATIONSCompiler's notes. — This section is derived from Section 80 of the ABA Model Business Corporation Act.
The 1983 amendment, effective June 17, 1983, added "and obtain payment for shares" at the end of the catchline, inserted "and obtain payment for the shareholder's shares in the event of" in the introductory language of Subsection A, inserted "except as provided in Subsection C of this section" in Paragraph (1) of Subsection A, added Paragraphs (3) to (5) of Subsection A, designated former Subsection B as present Paragraph (1) of Subsection B, rewrote the first sentence of Paragraph (1) of Subsection B, which formerly read: "A shareholder may dissent as to less than all of the shares registered in his name," added Paragraph (2) of Subsection B, substituted "The right to obtain payment under" for "The provisions of" at the beginning of Subsection C, and added Subsection D.
Duty of majority shareholder. — A majority shareholder, as well as an officer or director of a close corporation, when purchasing the stock of a minority shareholder, has a fiduciary duty to disclose material facts affecting the value of the stock which are known to the purchasing shareholder, officer or director by virtue of their position, but not known to the selling shareholder. Walta v. Gallegos Law Firm, P.C., 2002-NMCA-015, 131 N.M. 544, 40 P.3d 449, cert. denied, 131 N.M. 619, 41 P.3d 345.
Appraisal is not exclusive remedy. — Where the interest of a non-controlling shareholder in a closely-held corporation is eliminated by the controlling shareholders through the use of a freeze out merger transaction, the determination of the fair cash value of the non-controlling shareholder's shares in an appraisal proceeding does not provide the exclusive remedy and does not eliminate common law actions for breach of fiduciary duty. McMinn v. MBF Operating Acquisition Corp., 2007-NMSC-040, 142 N.M. 160, 164 P.3d 41.
Where plaintiff, who was a shareholder in a corporation that had been merged out of existence, claimed that the merger was unfair and resulted in an unfair share price paid to shareholders because the directors of the corporation breached fiduciary duties by engaging in self-interested negotiations with potential buyers of the corporation, devaluing the corporation for personal gain, and conducting unfair and misleading voting processes, plaintiff's claim fell within the exception for unlawful or fraudulent corporate action. Rael v. Page, 2009-NMCA-123, 147 N.M. 306, 222 P.3d 678, cert. denied, 2009-NMCERT-009, 147 N.M. 421, 224 P.3d 648.
Right of appraisal not adequate. — Where plaintiff, who was a shareholder in a corporation that had been merged out of existence, claimed that the merger was unfair and resulted in an unfair share price paid to shareholders because the directors of the corporation breached fiduciary duties by engaging in self-interested negotiations with potential buyers of the corporation, devaluing the corporation for personal gain, and conducting unfair and misleading voting processes, plaintiff's claim should not have been dismissed because, to the extent plaintiff had been injured as alleged, mere valuation would not, as a matter of law, provide adequate redress. Rael v. Page, 2009-NMCA-123, 147 N.M. 306, 222 P.3d 678, cert. denied, 2009-NMCERT-009, 147 N.M. 421, 224 P.3d 648.
Law reviews. — For article, "1975 Amendments to the New Mexico Business Corporation Act," see 6 N.M.L. Rev. 57 (1975).
For article, "1983 Amendments to the New Mexico Business Corporation Act and Related Statutes," see 14 N.M.L. Rev. 371 (1984).
For article, "Too Close for Comfort: Minority Shareholder Litigation Against Close Corporations after McMinn v. MBF Operating Acquisition Corp. and The Peters Corp. v. N.M. Banquest Investors Corp.," see 39 N.M. L. Rev. 319 (2009).
For note, "The Fiduciary Duties Owed in a New Mexico Closely Held Corporation: Walta v. Gallegos Law Firm, P.C.," see 34 N.M. L. R.ev. 181 (2004)
Am. Jur. 2d, A.L.R. and C.J.S. references. — 18A Am. Jur. 2d Corporations § 836; 19 Am. Jur. 2d Corporations §§ 2574, 2582 to 2586.
19 C.J.S. Corporations §§ 799 to 801.