15 Pa.C.S. Ch. 23

in effect

15 Pa.C.S. § 2301 Application and effect of chapter.

(a) General rule.--This chapter shall be applicable to a business corporation, other than a management corporation, that: (1) had elected to become a close corporation subject to Chapter B of Article III of the act of May 5, 1933 (P.L.364, No.106), known as the Business Corporation Law of 1933 (relating to close corporations), and that, as of the effective date of this chapter, had not terminated that election in the manner prescribed by statute; or (2) elects to become a statutory close corporation in the manner provided by this chapter. (b) Application of business corporation law generally.--The existence of a provision of this chapter shall not of itself create any implication that a contrary or different rule of law is or would be applicable to a business corporation that is not a statutory close corporation. This chapter shall not affect any statute or rule of law that is or would be applicable to a business corporation that is not a statutory close corporation. (c) Laws applicable to statutory close corporations.--Except as otherwise provided in this chapter, Part I (relating to preliminary provisions) and this subpart shall be generally applicable to all statutory close corporations. The specific provisions of this chapter shall control over the general provisions of Part I and this subpart. Except as otherwise provided in this article, a statutory close corporation may be simultaneously subject to this chapter and one or more other chapters of this article. (d) Transitional provisions.--The following provisions of this chapter shall not apply to a statutory close corporation existing on September 30, 1989, unless otherwise provided in a bylaw adopted in the manner provided by section 2332(b) (relating to procedure): Section 2321(b) (relating to preemptive rights) insofar as such provision authorizes the shareholders to adopt a bylaw eliminating or limiting the preemptive rights provided in that subsection. Section 2322 (relating to share transfer restrictions). Section 2323 (relating to transfer of shares in breach of transfer restrictions). If section 2323 is not applicable to the corporation, transfer restrictions (including a restriction that is held not to be authorized by section 1529 (relating to transfer of securities; restrictions)) shall be enforced in the same manner as if this article had not been enacted. Section 2325 (relating to sale option of estate of shareholder). Section 2336 (relating to fundamental changes). (e) Cross reference.--See the definition of "closely held corporation" in section 1103 (relating to definitions). (Dec. 19, 1990, P.L.834, No.198, eff. imd.; Oct. 22, 2014, P.L.2640, No.172, eff. July 1, 2015) 2014 Amendment. Act 172 amended subsec. (c). 1990 Amendment. Act 198 amended subsec. (d). Cross References. Section 2301 is referred to in section 1106 of this title.

15 Pa.C.S. § 2302 Definition of minimum vote.

(a) General rule.--As used in this chapter, the term "minimum vote" as applied to corporate action means that: (1) The holders of shares of every class shall be entitled to vote on the corporate action regardless of any limitations stated in the articles or bylaws on the voting rights of any class. (2) The corporate action must be approved by vote of the shareholders of each class entitled to cast at least two-thirds of the votes that all shareholders of the class are entitled to cast thereon. (b) Increased vote requirements.--The bylaws of a statutory close corporation adopted by the shareholders may provide that on any corporate action subject to the minimum vote requirement of subsection (a) a vote greater than two-thirds or a vote of all shares of any class shall be required. If the bylaws contain such a provision, that provision shall not be amended, repealed or modified by any vote less than that required to effect such corporation action. Cross References. Section 2302 is referred to in section 1504 of this title.

15 Pa.C.S. § 2303 Formation of statutory close corporations.

A statutory close corporation shall be formed in accordance with Article B (relating to domestic business corporations generally) except that its articles shall contain: (1) A heading stating the name of the corporation and that it is a statutory close corporation. (2) The provision required by section 2304(a) (relating to additional contents of articles of statutory close corporations). Cross References. Section 2303 is referred to in section 2307 of this title.

15 Pa.C.S. § 2304 Additional contents of articles of statutory close corporations.

(a) General rule.--In addition to the provisions otherwise required by this subpart, the articles of a statutory close corporation shall provide that neither the corporation nor any shareholder shall make an offering of any of its shares of any class that would constitute a "public offering" within the meaning of the Securities Act of 1933. (b) Number or qualifications of shareholders.--The articles of a statutory close corporation may set forth: (1) The maximum number of persons who are entitled to be record holders or beneficial owners of its shares. (2) The qualifications of shareholders, either by specifying classes of persons who shall be entitled to be holders of record of shares of any class or by specifying classes of persons who shall not be entitled to be holders of shares of any class or both. (c) Aggregation of holdings.--Except as otherwise provided in the articles, for purposes of determining the number of holders of record or beneficial owners of the shares of a statutory close corporation, shares that are held jointly or in common or in a trust, by two or more persons, as fiduciaries or otherwise, or that are held by spouses, shall be treated as held by one shareholder. (Dec. 19, 1990, P.L.834, No.198, eff. imd.) 1990 Amendment. Act 198 amended subsec. (a). Cross References. Section 2304 is referred to in sections 2303, 2305, 2306, 2308, 2309, 2322 of this title.

15 Pa.C.S. § 2305 Election of an existing business corporation to become a statutory close corporation.

(a) General rule.--A business corporation may become a statutory close corporation under this chapter by amending its articles so that they shall contain, in addition to the requirements of section 1911(b) (relating to exceptions): (1) A heading stating the name of the corporation and that it is a statutory close corporation. (2) A statement that it elects to become a statutory close corporation. (3) The provision required by section 2304(a) (relating to additional contents of articles of statutory close corporations). (b) Procedure.--The amendment shall not be effective unless it is adopted by the affirmative vote of all shareholders of the corporation whether or not otherwise entitled to vote thereon.

15 Pa.C.S. § 2306 Limitations on continuation of statutory close corporation status.

A statutory close corporation continues to be such and to be subject to this chapter until: (1) it terminates its status as a statutory close corporation pursuant to section 2307 (relating to voluntary termination of statutory close corporation status by amendment of articles); or (2) the provisions required or permitted by section 2304 (relating to additional contents of articles of statutory close corporations) to be stated in the articles to qualify a business corporation as a statutory close corporation have in fact been breached and neither the corporation nor any of its shareholders takes the steps required by section 2309 (relating to involuntary termination of statutory close corporation status; proceeding to prevent loss of status) to prevent such loss of status or to remedy such breach.

15 Pa.C.S. § 2307 Voluntary termination of statutory close corporation status by amendment of articles.

(a) General rule.--A statutory close corporation may voluntarily terminate its status as such and cease to be subject to this chapter by amending its articles to delete therefrom the additional provision required by section 2303(1) (relating to formation of statutory close corporations) to be stated in the articles of a statutory close corporation. (b) Procedure.--The amendment shall not be effective unless it is adopted by at least the minimum vote. Cross References. Section 2307 is referred to in sections 2306, 2308, 2309 of this title.

15 Pa.C.S. § 2308 Issuance or transfer of shares of a statutory close corporation in breach of qualifying conditions.

(a) Notice of qualifications.--If shares of a statutory close corporation are issued or transferred to any person who is not entitled under any provision of the articles permitted by section 2304(b) (relating to number or qualifications of shareholders) to be a holder of record of shares of the corporation and if the certificate for the shares complies with section 2321(c) (relating to notice of statutory close corporation status) or conspicuously notes the existence of such a provision of the articles, that person shall be conclusively presumed to have notice of the fact of his ineligibility to be a shareholder. (b) Notice of size restrictions.--If the articles of a statutory close corporation state the number of persons who are entitled to be holders or owners of its shares and if the certificate for the shares complies with section 2321(c) or conspicuously notes the existence of such a provision of the articles and if the issuance or transfer of shares to any person would cause the shares to be held by more than that number of persons, the person to whom the shares are issued or transferred shall be conclusively presumed to have notice of that fact. (c) Refusal to register.--Whenever any person to whom shares of a statutory close corporation have been issued or transferred has, or is conclusively presumed under this section to have, notice either: (1) that he is a person not eligible to be a holder of shares of the corporation; or (2) that the transfer of shares to him would cause the shares of the corporation to be held by more than the number of persons permitted by its articles to hold shares of the corporation; the corporation may, at its option, refuse to register the transfer of the shares into the name of the transferee. (d) Exception.--The provisions of subsection (c) shall not be applicable if the transfer of shares, even though otherwise contrary to subsection (a) or (b), has been consented to by all the shareholders of the statutory close corporation or if the statutory close corporation has amended its articles in accordance with section 2307 (relating to voluntary termination of statutory close corporation status by amendment of articles). (e) Rescission rights unaffected.--The provisions of this section do not impair any right of a transferee to rescind the transaction or to recover under any applicable warranty express or implied. (f) Definition.--As used in this section, the term "transfer" is not limited to a transfer for value. Cross References. Section 2308 is referred to in section 2309 of this title.

15 Pa.C.S. § 2309 Involuntary termination of statutory close corporation status; proceeding to prevent loss of status.

(a) General rule.--If any event occurs as a result of which the provision included in the articles of a statutory close corporation pursuant to section 2304(a) (relating to additional contents of articles of statutory close corporations) to qualify it as a statutory close corporation has been breached, the status of the business corporation as a statutory close corporation under this chapter shall terminate unless: (1) Within 30 days after the occurrence of the event or within 30 days after the event has been discovered, whichever is later, the corporation: (i) Files in the Department of State a statement executed by the corporation setting forth: (A) The name of the corporation and, subject to section 109 (relating to name of commercial registered office provider in lieu of registered address), the address, including street and number, if any, of its registered office. (B) A statement that the provision included in its articles pursuant to section 2304(a) to qualify it as a statutory close corporation has been breached. (ii) Furnishes a copy of the statement to each shareholder. (2) The corporation concurrently with the filing of the statement takes such steps as are necessary to correct the situation that threatens its status as a statutory close corporation including, without limitation, the refusal to register the transfer of shares that have been wrongfully transferred as provided by section 2308 (relating to issuance or transfer of shares of a statutory close corporation in breach of qualifying conditions) or initiation of a proceeding under subsection (b). (b) Proceeding to cure breach.--Upon the application of the corporation or of any shareholder, the court may issue all orders necessary to prevent the corporation from losing its status as a statutory close corporation or to prevent the violation of any provision of the articles permitted by section 2304(b) to be stated in the articles of a statutory close corporation or to restore its status as a statutory close corporation by enjoining or setting aside any act or threatened act on the part of the corporation or a shareholder that would be inconsistent with any of the provisions required or permitted by section 2304 to be stated in the articles of a statutory close corporation unless it is an act approved in accordance with section 2308(d) (relating to exception). The court may enjoin or set aside any transfer or threatened transfer of shares of a statutory close corporation that is contrary to any of the terms of its articles and may enjoin any public offering, as defined in section 2304(a), or threatened public offering of shares of the statutory close corporation. (c) Notice of cure of breach.--When the situation that threatened the status of the corporation as a statutory close corporation has been remedied and if the corporation has not amended its articles in accordance with section 2307 (relating to voluntary termination of statutory close corporation status by amendment of articles), the corporation shall file in the department a statement executed by the corporation, setting forth: (1) The name of the corporation and, subject to section 109 (relating to name of commercial registered office provider in lieu of registered address), the address, including street and number, if any, of its registered office. (2) A statement that no breach of the provision included in its articles pursuant to section 2304(a) exists. Upon the filing of the statement, the status of the corporation as a statutory close corporation under this chapter, if theretofore terminated by reason of subsection (a), shall be restored. (d) Cross reference.--See section 134 (relating to docketing statement). (Dec. 19, 1990, P.L.834, No.198, eff. imd.) 1990 Amendment. Act 198 amended subsecs. (a) and (c). Cross References. Section 2309 is referred to in section 2306 of this title.

15 Pa.C.S. § 2321 Shares.

(a) Uncertificated shares prohibited.--A statutory close corporation shall not issue uncertificated shares. (b) Preemptive rights.-- (1) Unless otherwise provided in a bylaw adopted by the shareholders, the holders of any class of voting shares of a statutory close corporation shall have a preemptive right to subscribe for or purchase any voting shares (or any option rights or securities having conversion or option rights with respect to any voting shares) issued or sold by the corporation for any form of consideration. (2) Paragraph (1) shall not apply to any issue of voting shares (or of any option rights or securities having conversion or option rights with respect to such voting shares) pursuant to a plan to which Subchapter D of Chapter 15 (relating to dissenters rights) is applicable. (c) Notice of statutory close corporation status.--A legend in substantially the following form shall be set forth conspicuously on each share certificate issued by a statutory close corporation: The rights of shareholders in a statutory close corporation may differ materially from the rights of shareholders in other corporations. Copies of the articles of incorporation and bylaws, agreements among shareholders or other documents, which may restrict transfers and affect voting and other rights, may be obtained by a shareholder on written request to the corporation. This notice shall satisfy all requirements of this subpart that notice of transfer or other restrictions or relative rights be given. All persons claiming an interest in shares of a statutory close corporation: (1) Complying with the notice requirement of this section shall be bound by the documents referred to in the notice. (2) Not complying with the requirement of this section shall be bound only by any documents of which they, or any person through whom they claim, have knowledge or notice. Cross References. Section 2321 is referred to in sections 1504, 1528, 1530, 2301, 2308, 2332, 2337 of this title.

15 Pa.C.S. § 2322 Share transfer restrictions.

(a) General rule.--Unless otherwise provided in a bylaw adopted by the shareholders, no interest in shares of a statutory close corporation may be transferred, by operation of law or otherwise, whether voluntary or involuntary. (b) Exception.--Subsection (a) shall not apply to a transfer: (1) To the corporation or to any other shareholder of the same class of shares. (2) To members of the immediate family of a shareholder or to a trust all of whose beneficiaries are members of the immediate family of a shareholder. The immediate family of a shareholder shall include only his spouse, parents, brothers, sisters, lineal descendants (including descendants related by adoption) and spouses of any lineal descendants. (3) That has been approved by the unanimous vote of the holders of the most junior shares of the corporation having voting rights for the election of directors. (4) To an executor or administrator upon the death of a shareholder or to a trustee or receiver as the result of a bankruptcy, insolvency, dissolution or similar proceeding brought by or against a shareholder. (5) By merger or interest exchange that becomes effective pursuant to section 2336 (relating to fundamental changes) or a reclassification of existing shares. (6) By a pledge as collateral for a loan that does not grant the pledgee any voting rights possessed by the pledgor. (7) Made after termination of the status of the corporation as a statutory close corporation. (8) Permitted by subsection (h). (c) Offer by nonexempt purchaser.--Any person desiring to transfer shares in a transaction not exempt under subsection (b)(1) through (7) shall obtain an offer from a third party who meets the requirements of subsection (d) to purchase the shares for cash and shall deliver written notice of the third-party offer to the corporation at its registered office stating the number and type of shares, the offering price, the other terms of the offer and the name and address of the third-party offeror. (d) Qualifications of transferee.--A transfer shall not be made to a third party unless: (1) The third party is eligible to become a qualified shareholder under the provisions of any Federal or State tax statute that the corporation has elected to be subject to and the third party agrees in writing not to take any action to terminate the election without the approval of the remaining shareholders. (2) The transfer to the third party will not result in the imposition of the personal holding company tax or any similar Federal or State penalty tax on the corporation. (3) The third party is eligible to be a shareholder under any provision of the articles permitted by section 2304(b) (relating to number or qualifications of shareholders). (e) Action on offer by corporation.--The notice specified in subsection (c) shall constitute an offer by the shareholder to sell the shares to the corporation on the terms of the third-party offer. Within 20 days after receipt of the notice by the corporation, the secretary shall call a special meeting of shareholders, which shall be held not more than 40 days after the call, for the purpose of determining whether to purchase all (but not less than all) of the offered shares. Approval of action to purchase shall be by a majority of the votes of all shareholders entitled to vote thereon, excluding the holders of offered shares. With the consent of all the shareholders entitled to vote for the approval, the corporation may allocate some or all of the shares to one or more shareholders, or to other persons, but, if the corporation has more than one class of shares, the remaining holders of the class of shares being offered for sale shall have a first option to purchase the shares that are not purchased by the corporation in proportion to their shareholdings or in such proportion as shall be agreeable to those desiring to participate in the purchase. (f) Notice of action by corporation.--Within 75 days after receipt of the offer, written notice of the acceptance of the offer of the shareholder shall be delivered or sent to the offering shareholder at the address specified in his notice to the corporation or, in the absence of any specification, at his last known address as reflected in the records of the corporation. If the notice contains terms of purchase different from those contained in the offer of the shareholder, the different terms shall be deemed a counteroffer, and, unless the shareholder wishing to transfer his shares accepts in writing the counteroffer or the shareholder and the corporation or other purchaser otherwise resolve by written agreement the difference between the offer and counteroffer within 15 days of receipt by the shareholder of the qualified notice of acceptance, the notice containing the counteroffer shall be ineffective as an acceptance. (g) Delivery and payment.--If a contract to sell is created under subsection (f), the shareholder shall make delivery of all the certificates for the shares so sold, duly endorsed, within 20 days of receipt of the notice of acceptance. Breach of any of the terms of the contract shall entitle the nonbreaching party to any remedy at law or equity allowed for breach of a contract including, without limitation, specific performance. (h) Limited release from restrictions.--If the offer to sell is not accepted pursuant to subsections (e) and (f), the shareholder shall be entitled to transfer to the third-party offeror all (but not less than all) of the offered shares within 120 days after delivery of the notice specified in subsection (c) in accordance with the terms specified therein. (Nov. 3, 2022, P.L.1791, No.122, eff. 60 days) 2022 Amendment. Act 122 amended subsecs. (b)(5) and (c). Cross References. Section 2322 is referred to in sections 1504, 1554, 2301, 2324 of this title.

15 Pa.C.S. § 2323 Transfer of shares in breach of transfer restrictions.

Any attempted transfer of shares of a statutory close corporation in violation of any transfer restriction binding on the transferee shall be ineffective. Any attempted transfer of shares of a statutory close corporation in violation of any transfer restriction not binding on the transferee shall give the corporation the option, exercisable by notice and payment within 30 days after presentation of the shares for registration in the name of the transferee, to purchase the shares from the transferee for the same price and terms as contemplated for the ineffective transfer, unless such transfer was not intended to be a transfer for value. Cross References. Section 2323 is referred to in section 2301 of this title.

15 Pa.C.S. § 2324 Corporation option where a restriction on transfer of a security is held invalid.

If the bylaws contain provisions pursuant to section 2322(a) (relating to share transfer restrictions) and a restriction on transfer of a security of a statutory close corporation is held not to be authorized by section 1529 (relating to transfer of securities; restrictions), the corporation shall nevertheless have an option, for a period of 30 days after the judgment setting aside the restriction becomes final, to acquire the restricted security at a price that is agreed upon by the parties or, if an agreement is not reached, at the fair value as determined under Subchapter D of Chapter 15 (relating to dissenters rights). Cross References. Section 2324 is referred to in section 1571 of this title.

15 Pa.C.S. § 2325 Sale option of estate of shareholder.

(a) General rule.--Unless otherwise provided in a bylaw adopted by the shareholders, the personal representative of any deceased holder or owner of shares shall have the right to require a statutory close corporation to elect either to purchase or cause the purchase of all, but not less than all, of the shares owned by the decedent pursuant to subsections (c) through (e) or to be dissolved. (b) Minimum vote requirement.--An amendment to the bylaws to provide that this section shall apply or to delete or modify the provisions of this section shall require at least the minimum vote for approval. Any shareholder who votes against an amendment to delete or modify the provisions of this section shall, if the amendment terminates or substantially alters the existing rights of the shareholder pursuant to this section to have his shares purchased, be entitled to receive the fair value of his shares upon compliance with the provisions of Subchapter D of Chapter 15 (relating to dissenters rights). (c) Initial procedure.--Within six months after the death of the holder or owner of shares, the personal representative shall deliver a written notice to the corporation at its registered office specifying the number and class of all shares beneficially owned by the deceased shareholder and stating that an offer by the corporation to purchase the shares is being solicited pursuant to this section. Within 20 days after receipt of the notice by the corporation, the secretary shall call a special meeting of shareholders, which shall be held not more than 40 days after the call, for the purpose of determining whether to offer to purchase the shares. Approval of action to offer to purchase the shares shall be by vote of a majority of the shares entitled to vote, excluding the shares covered by the notice. With the consent of all the shareholders entitled to vote for the approval, the corporation may allocate some or all of the shares to one or more shareholders, or to other persons, but if the corporation has more than one class of shares, the remaining holders of the class of shares being offered for sale shall have a first option to purchase the shares that are not purchased by the corporation in proportion to their shareholdings or in such proportion as shall be agreeable to those desiring to participate in the purchase. (d) Notice of action by corporation.--Written notice of the approval by the shareholders of an offer to purchase, or that no offer to purchase was approved, shall be delivered or sent to the personal representative within 75 days after receipt of the notice soliciting the offer to purchase. Any offer to purchase shall be accompanied by copies of the balance sheets as of the end of, and profit and loss statements for, the preceding two fiscal years of the corporation and any available interim balance sheet and profit and loss statement. Any offer to purchase shall be accepted or rejected in writing within 15 days. (e) Price and other terms of purchase.--To the extent the price and other terms for purchasing the shares by the corporation or remaining shareholders are fixed or are to be determined pursuant to provisions in the bylaws or in a written agreement, those provisions shall be binding except that, in the event of a default in any payment due, subsection (i) shall apply and the person exercising his rights under this section shall have the right to petition for dissolution of the corporation. (f) Judicial proceedings in absence of agreement to purchase.--If an offer to purchase is rejected, or if an offer to purchase is not made under this section, the personal representative may commence an action or proceeding in court under this subsection. The jurisdiction of the court shall be plenary and exclusive. The corporation shall be made a party defendant in the action and shall, at its expense, give notice of the commencement of the action to all shareholders and to such other persons as the court may direct. The court shall proceed to determine the fair value of the shares considering the going concern value of the corporation, any agreement among some or all of the shareholders fixing a price or specifying a formula for determining the value of shares of the corporation for any purpose, the recommendations of any appraiser appointed by the court, any legal constraint on the ability of the corporation to acquire the shares and other relevant evidence. The court shall enter an order requiring the corporation to cause the purchase of the shares at fair value including such provisions as are deemed proper concerning payment of the purchase price in two or more installments, payment of interest on the installments, subordination of the obligation to the rights of other creditors of the corporation and security for payment of the deferred purchase price. (g) Costs and expenses.--Except as otherwise prescribed by general rules: (1) If the fair value of the shares as determined by the court does not materially exceed the last offer made by the corporation prior to the commencement of an action pursuant to subsection (f) and the court finds that the failure of the personal representative to accept the last offer of the corporation was dilatory, arbitrary, obdurate, vexatious or in bad faith, the court may assess all or a portion of the costs and expenses of the action against the estate of the deceased shareholder. (2) If the fair value of the shares as determined by the court materially exceeds the amount of the last offer made by the corporation prior to the time an action or proceeding was commenced pursuant to subsection (f) and the court finds that the last offer of the corporation was dilatory, arbitrary, obdurate, vexatious or in bad faith, the court may assess all or a portion of the costs and expenses of the action against the corporation. (3) Expenses assessable under paragraphs (1) and (2) shall include reasonable compensation for and reasonable expenses of any appraiser appointed by the court and the reasonable fees and expenses of counsel for and experts employed by any party. (4) Except as provided in paragraphs (1) and (2), the costs of an action commenced pursuant to subsection (f) shall be assessed on an equal basis between the corporation and the estate of the deceased shareholder and all other fees and expenses shall be borne by the party incurring the fees and expenses. (h) Subsequent modification of order.--Upon application of the corporation, the court may modify its order to change the terms of payment if it finds that the changed financial or legal ability of the corporation or other purchasers of the shares to complete the purchase justifies a modification. Any person making a payment in order to prevent or cure any default by any purchaser shall be entitled to recover the excess payment from the defaulting person. (i) Failure to make payment.--If the corporation or other purchaser fails for any reason to make any payment specified in the order within 30 days after the due date for the payment, the court shall, upon application of the person to whom the payment is due and in the absence of good cause shown by the corporation, enter an order directing that the corporation be dissolved. (j) Waiver.--Any shareholder may waive in writing the rights of his personal representative under this section. (k) Section nonexclusive.--This section shall not be construed to prohibit any other agreement not prohibited by law that provides for the purchase of shares of the corporation nor shall it prevent a shareholder from enforcing any other remedy he may have. Cross References. Section 2325 is referred to in sections 1504, 1571, 2301 of this title.

15 Pa.C.S. § 2331 Directors.

(a) Agreements restricting discretion of directors.--A written agreement among the shareholders of a statutory close corporation entitled to cast at least a majority of the votes that all shareholders are entitled to cast for the election of directors, whether solely among themselves or with a party not a shareholder, is not invalid, as between the parties to the agreement or the shareholders of the corporation, on the ground that it so relates to the conduct of the business and affairs of the corporation as to restrict or interfere with the discretion or powers of the board of directors. (b) Effect of agreement.--The effect of any such agreement shall be to relieve the directors and impose upon the shareholders who are parties to the agreement the liability for acts or omissions that is imposed by law on directors to the extent and so long as the discretion or powers of the board in its direction of the management of corporate affairs is controlled by the agreement. Shareholders upon whom the liabilities of directors are imposed by this section shall to that extent be entitled to the rights and immunities conferred by this part and other provisions of law upon directors of a corporation.

15 Pa.C.S. § 2332 Management by shareholders.

(a) General rule.--A bylaw of a statutory close corporation adopted by the shareholders may provide that the business and affairs of the corporation shall be managed by or under the direction of the shareholders of the corporation rather than by or under the direction of a board of directors. So long as such a provision continues in effect: (1) Meetings of shareholders need not be called to elect directors. (2) Unless the context clearly requires otherwise, the shareholders of the corporation shall be deemed to be directors for purposes of applying provisions of this subpart. (3) The shareholders of the corporation shall be subject to all liabilities imposed and shall enjoy all rights and immunities conferred by law on directors. (b) Procedure.--Such a provision may be inserted in the articles or bylaws by amendment if all incorporators or all shareholders, regardless of any limitations stated in the articles or bylaws on the voting rights of any class, authorize the provision. An amendment to the articles or bylaws to delete the provision shall be adopted and shall become effective in accordance with Subchapter B of Chapter 19 (relating to amendment of articles) or section 1504 (relating to adoption, amendment and contents of bylaws) except that the holders of shares of every class shall be entitled to vote on the amendment regardless of any limitations stated in the articles or bylaws on the voting rights of any class. (c) Notice on shares.--If the articles or bylaws contain a provision authorized by this section, the existence of the provision shall be noted conspicuously on every share certificate issued by the corporation unless the certificate complies with section 2321(c) (relating to notice of statutory close corporation status). Cross References. Section 2332 is referred to in sections 102, 1504, 2301 of this title.

15 Pa.C.S. § 2333 Appointment of custodian for statutory close corporation.

(a) General rule.--In addition to the provisions of section 1767 (relating to appointment of custodian of corporation on deadlock or other cause), the court, upon application of any shareholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers of any statutory close corporation when: (1) pursuant to this subchapter, the business and affairs of the corporation are managed by or under the direction of the shareholders and they are so divided that the business of the corporation is suffering or is threatened with immediate and irreparable injury and any remedy with respect to such deadlock provided in the bylaws or in any written agreement of the shareholders has failed; or (2) the applicant shareholder has the right to the dissolution of the corporation under a provision of the articles permitted by section 2337 (relating to option of shareholder to dissolve corporation). A custodian appointed under paragraph (2) shall have the authority to liquidate the affairs of the corporation and distribute its assets. (b) Provisional director.--In lieu of appointing a custodian for a statutory close corporation under subsection (a)(1) or section 1767 or a receiver under Subchapter G of Chapter 19 (relating to involuntary liquidation and dissolution), the court may appoint a provisional director, whose powers and status shall be as provided in section 2334 (relating to appointment of provisional director in certain cases), if the court determines that it would be in the best interest of the corporation. The appointment shall not preclude any subsequent order of the court appointing a custodian or receiver for the corporation. Cross References. Section 2333 is referred to in section 2334 of this title.

15 Pa.C.S. § 2334 Appointment of provisional director in certain cases.

(a) General rule.--Notwithstanding any contrary provision of the articles or the bylaws or agreement of the shareholders, the court may appoint a provisional director for a statutory close corporation if the directors are so divided respecting the management of the business and affairs of the corporation that the votes required for action by the board of directors cannot be obtained with the consequence that the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally. (b) Application for relief.-- (1) An application for relief under this section must be filed by or on behalf of: (i) at least one-half of the number of directors then in office; (ii) the holders of shares entitled to cast at least one-third of the votes that all shareholders are entitled to cast for the election of directors; or (iii) shareholders entitled to cast at least two-thirds of the votes that all shareholders of any class entitled to elect one or more directors are entitled to cast for the election of directors, if there is more than one class of shares then entitled to elect one or more directors. A bylaw of a statutory close corporation adopted by the shareholders may provide that a lesser proportion of the directors or of the shareholders or of a class of shareholders may apply for relief under this section. (2) Even though the requirements of paragraph (1) are not satisfied, the court may nevertheless appoint a provisional director if permitted by section 2333(b) (relating to provisional director). (c) Qualifications.--A provisional director shall be an impartial individual who is neither a shareholder nor a creditor of the corporation or of any subsidiary or affiliate of the corporation and whose further qualifications, if any, may be determined by the court. (d) Status and powers.--A provisional director is not a receiver of a corporation and does not have the title and powers of a custodian or receiver appointed under section 1767 (relating to appointment of custodian of corporation on deadlock or other cause) or Subchapter G of Chapter 19 (relating to involuntary liquidation and dissolution). A provisional director shall have all the rights and powers of a duly elected director of the corporation, including the right to notice of and to vote at meetings of directors, until such time as he is removed by order of the court or by the shareholders entitled to cast at least two-thirds of the votes that all shareholders of that class of voting shares that filed the application for appointment of a provisional director are entitled to cast for directors, or by the shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast for the election of directors, in any other case. (e) Compensation.--The compensation of the provisional director shall be determined by agreement between him and the corporation subject to approval of the court. The court may fix his compensation in the absence of agreement or in the event of disagreement between the provisional director and the corporation. (Dec. 19, 1990, P.L.834, No.198, eff. imd.) 1990 Amendment. Act 198 amended subsec. (b). Cross References. Section 2334 is referred to in sections 1504, 2333 of this title.

15 Pa.C.S. § 2335 Operating corporation as partnership.

A written agreement among shareholders of a statutory close corporation, or any provision of the articles or bylaws of the corporation, which agreement or provision relates to any phase of the affairs of such corporation, including, but not limited to, the management of its business or declaration and payment of dividends or other division of profits or the election of directors or officers or the employment of shareholders by the corporation or the arbitration of disputes, shall not be invalid on the ground that it is an attempt by the parties to the agreement or by the shareholders of the corporation to treat the corporation as if it were a partnership or to arrange relations among the shareholders or between the shareholders and the corporation in a manner that would be appropriate only among partners and shall not be grounds for imposing personal liability on the shareholders for obligations of the corporation.

15 Pa.C.S. § 2336 Fundamental changes.

Except as permitted or required by this chapter, a statutory close corporation shall not effect any corporate action that under Chapter 3 (relating to entity transactions) or 19 (relating to fundamental changes) requires the approval of shareholders unless the action is adopted by at least the minimum vote. (Nov. 3, 2022, P.L.1791, No.122, eff. 60 days) Cross References. Section 2336 is referred to in sections 2301, 2322 of this title.

15 Pa.C.S. § 2337 Option of shareholder to dissolve corporation.

(a) General rule.--A bylaw of a statutory close corporation adopted by the shareholders may include a provision granting to any shareholder, or to the holders of any specified number or percentage of shares of any class of shares, an option to have the corporation dissolved at will or upon the occurrence of any specified event or contingency. Whenever the option to dissolve is exercised, the shareholders exercising the option shall give written notice thereof to all other shareholders. After the expiration of 30 days following the sending of the notice, the dissolution of the corporation shall proceed as if the required number of shareholders having voting rights had consented in writing to dissolution of the corporation as provided by Subchapter F of Chapter 19 (relating to voluntary dissolution and winding up). (b) Amendment adding option.--If the bylaws do not contain a provision authorized by subsection (a), the bylaws may be amended to include such a provision if adopted by the unanimous vote of all the shareholders, regardless of any limitations stated in the bylaws on the voting rights of any class, unless the original bylaws, or bylaws adopted by such a unanimous vote, specifically authorize such an amendment to be adopted by a specified vote of shareholders, which shall not be less than the minimum vote. (c) Notice on shares.--If the bylaws contain a provision authorized by this section, the existence of the provision shall be noted conspicuously on every share certificate issued by the corporation unless the certificate complies with section 2321(c) (relating to notice of statutory close corporation status). Cross References. Section 2337 is referred to in sections 1504, 2333 of this title.

Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://www.palegis.us/statutes/consolidated/view-statute?txtType=HTM&ttl=15Fetched: 10/16/2026