10A-4-3.02. Death or Disqualification of Stockholder.
(a) Upon the death of a stockholder of a domestic professional corporation, upon a stockholder of a domestic professional corporation becoming a disqualified person, or upon stock of a domestic professional corporation being transferred by operation of law or court decree to a disqualified person, the stock owned by the deceased stockholder or the disqualified person may be transferred to a qualified person and, if not so transferred, shall be purchased by the domestic professional corporation as provided in this section.
(b) If the purchase price of the stock is not determined in accordance with the governing documents of the domestic professional corporation or by private agreement, the domestic professional corporation, within six months after the death or 30 days after the disqualification or transfer, as the case may be, shall make a written offer to pay for the stock at a specified price deemed by the domestic professional corporation to be the fair value of the stock as of the date of the death, disqualification, or transfer. The offer shall be delivered to the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, and shall be accompanied by a balance sheet of the domestic professional corporation, as of the latest available date and not more than 12 months prior to the making of the offer, and a profit and loss statement of the domestic professional corporation for the 12 months’ period ended on the date of the balance sheet.
(c) If the fair value of the stock is agreed upon between the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, and the domestic professional corporation, payment therefor shall be made within 90 days after the date of the offer, or other period as the parties may agree. Upon payment of the agreed value the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, shall cease to have any interest in, or claim to, the stock.
(d) If the fair value of the stock is not agreed upon between the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, and the domestic professional corporation within 30 days of the delivery of the written offer, then either party may commence a civil action in the designated court, and if none, in the circuit court for the county in which the domestic professional corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the domestic professional corporation’s most recent registered office is located requesting that the fair value of the stock be found and determined. If the domestic professional corporation does not deliver a written offer in accordance with subsection (b), then the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, may commence a civil action in the designated court, and if none, in the circuit court for the county in which the domestic professional corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the domestic professional corporation’s most recent registered office is located requesting that the fair value of the stock be found and determined. The personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, wherever residing, shall be made a party to the proceeding as an action against that person’s stock quasi in rem. Service shall be made in accordance with the rules of civil procedure. The personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, shall be entitled to a judgment against the domestic professional corporation for the amount of the fair value of that person’s stock as of the date of death, disqualification, or transfer. The court may, in its discretion, order that the judgment be paid in installments and with interest and on terms as the court may determine. The court may, if it so elects, appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the power and authority as shall be specified in the order of their appointment or an amendment thereof.
(e) The judgment shall include an allowance for interest at the rate the court finds to be fair and equitable in all the circumstances, from the date of death, disqualification, or transfer.
(f)(1) The court in a proceeding commenced under subsection (d) shall determine all court costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the court costs against the domestic professional corporation, except that the court may assess court costs against the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, in amounts which the court finds equitable, to the extent the court finds the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section.
(2) The court in a proceeding commenced under subsection (d) may also assess the expenses of the respective parties in amounts the court finds equitable:
(A) against the domestic professional corporation and in favor of the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, if the court finds the domestic professional corporation did not substantially comply with the requirements of this section; or
(B) against either the domestic professional corporation or the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, in favor of the other party, if the court finds the party against whom expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section.
(3) For purposes of this subsection (f), expenses means reasonable expenses of any kind that are incurred in connection with a proceeding brought under subsection (d).
(g) If a purchase, redemption, or transfer of the stock of a deceased stockholder, disqualified person, or transferee who is a disqualified person is not completed within 12 months after the death of the deceased stockholder or 12 months after the disqualification or transfer, as the case may be, the domestic professional corporation shall forthwith cancel the stock on its books and the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, shall have no further interest as a stockholder in the domestic professional corporation other than that person’s right to payment for the stock under this section.
(h)(1) A professional corporation may acquire its own stock, and, the stock so acquired shall constitute authorized but unissued stock, provided however:
(A) the certificate of incorporation may provide that the acquired stock shall constitute authorized, issued, but not outstanding stock;
(B) the certificate of incorporation may prohibit the reissue of the acquired stock, in which case, the number of authorized shares of stock is reduced by the number of shares of stock acquired; or
(C) if the certificate of incorporation does not (i) provide that the acquired stock shall constitute authorized but unissued stock, (ii) prohibit the reissuance of the acquired stock, or (iii) provide that the acquired stock shall constitute authorized, issued, but not outstanding stock, then the board of directors may determine, at or prior to the time of the acquisition, that the acquired stock will constitute authorized, issued, but not outstanding stock.
(2) If the board of directors determines that any acquired stock was to be authorized, issued, but not outstanding in accordance with subsection (h)(1)(C), then the board of directors may thereafter determine that the acquired stock shall be converted to stock that is authorized but not issued.
(i) This section shall not require a domestic professional corporation to purchase the stock of a disqualified person if the disqualification is for less than 12 months from the date of disqualification. A domestic professional corporation may require the disqualified person to sell the disqualified person’s stock to the domestic professional corporation upon any disqualification.
(j) Any provision regarding purchase, redemption, or transfer of stock of a domestic professional corporation contained in the certificate of incorporation, bylaws, or any private agreement shall be specifically enforceable in the courts of this state.
(k) Nothing in this section shall prevent or relieve a domestic professional corporation from paying pension benefits or other deferred compensation for services rendered to or on behalf of a former stockholder as otherwise permitted by law.
(l) A domestic professional corporation may purchase its own stock from a disqualified person without regard to the availability of capital or surplus for the purchase; however, no purchase of or payment for the stock shall be made at a time when the domestic professional corporation is insolvent or when the purchase or payment would make it insolvent.
(m) The foregoing provisions of this section shall not apply to a domestic nonprofit professional corporation. Any member of a domestic nonprofit corporation who becomes a disqualified person must cease being a member not more than 12 months after the date of disqualification if he or she is then a disqualified person.
(Acts 1983, No. 83-514, p. 763, §10; Acts 1988, 1st Ex. Sess., No. 88-905, p. 474, §1; §10-4-389; amended and renumbered by Act 2009-513, p. 967, §205; Act 2020-73, §10; Act 2024-413, §1; Act 2025-281, §4.)
