R.I. Gen. Laws § 7-1.2-1701 Close corporations.
7-1.2-1701. Close corporations.
(a) Provisions of the articles of incorporation or bylaws of a corporation organized under
this chapter, or provisions of an agreement relating to a corporation, which would
otherwise be invalid because they:
(1) Restrict, or assign to one or more shareholders or other individuals, any or all of
the powers normally vested in the board of directors or provide that there is no board
of directors; or
(2) Grant the right to one or more shareholders to dissolve the corporation at will or
on the occurrence of a specified contingency; or
(3) Impose too great a restraint on the transfer of shares of the corporation; are nevertheless
valid if the provisions have been approved by all the shareholders of the corporation
and if the corporation’s original or amended articles of incorporation contain a heading
immediately after the name of the corporation stating that it is a close corporation
pursuant to § 7-1.2-1701. This subsection does not invalidate any provision in articles of incorporation,
bylaws, or agreements that would otherwise be valid.
(b) The provisions of § 7-1.2-709 limiting the duration of a voting trust or shareholders’ agreement to ten (10) years
is not applicable to a close corporation that complies with subsection (a). If close
corporation status is terminated pursuant to subsection (d), the effective term of
a voting trust or shareholders’ agreement is ten (10) years from the termination or
the term provided therein, whichever is shorter.
(c) The effect of any provision authorized by subsection (a)(1) is to relieve the directors
and to impose on the individual or individuals undertaking to exercise responsibility
the liability for managerial acts or omissions that would otherwise be imposed on
directors to the extent that and so long as the discretion or powers of the board
in its management of corporate affairs is controlled by any such provision. Action
which is valid pursuant to subsection (a)(1) is deemed to be action by the board of
directors for purposes of compliance with any provision of this chapter providing
for action by the board of directors.
(d) If a close corporation’s original or amended articles of incorporation so provide,
the corporation need not hold an annual meeting of shareholders unless one or more
shareholders deliver written notice to the corporation requesting a meeting at least
thirty (30) days before the meeting date stated or fixed in accordance with the bylaws
of the corporation.
(e)(1) The articles of incorporation must be amended to terminate close corporation status
pursuant to this section if:
(i) All of the shareholders, or such lessor number as may be specified in the articles
of incorporation, the bylaws, or an agreement relating to the corporation, approve
the termination; or
(ii) There are more than thirty (30) shareholders of record and any shareholder, after
thirty (30) days’ notice to the corporation of his or her intention to do so during
which time the number is not reduced to thirty (30) or less, demands termination;
or
(iii) Any individual who acquires of record shares of the corporation without notice or
knowledge of its close corporation status demands termination; provided, that notice
shall be conclusively presumed if certificates representing the shares so acquired
state on their face, under the name of the corporation, that it is a close corporation
pursuant to this section.
(2) If the directors and shareholders fail to effect the amendment promptly, the superior
court shall have jurisdiction to enter whatever order is necessary to effect the amendment.
The termination shall not affect the validity of any provision relating to the corporation
or its management which would be valid, notwithstanding the provisions of this section.
P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005,
ch. 130, § 1.