CHAPTER 271 General Provisions Concerning Private Corporations [Repealed]

271.005. Definitions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.010. Corporation — Who may establish — Laws applicable. [Repealed.]

Compiler’s Notes.

This section (538, 573) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.015. Application of chapter. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.020. Articles of incorporation — Contents. [Repealed.]

Compiler’s Notes.

This section (539) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.025. Who may form a corporation — Purposes of incorporation — Ownership of stock. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1954, ch. 33, § 1; amend. Acts 1968, ch. 100, § 5) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.030. Articles of incorporation — Filing — Fees — Statement of existence — Constitute evidence. [Repealed.]

Compiler’s Notes.

This section (540 and General Statutes, ch. 56, § 19) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.035. Articles of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.040. Signers of articles to direct affairs until election of directors. [Repealed.]

Compiler’s Notes.

This section (541) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.045. Corporate name. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.050. Corporation to accept Constitution. [Repealed.]

Compiler’s Notes.

This section (570) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.055. Filing and recording articles of incorporation — Issuing certificate of incorporation — Articles and statement of existence of foreign corporation — Copies of articles as evidence. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1958, ch. 51, § 1; amend. Acts 1964, ch. 149, § 1; amend. Acts 1966, ch. 153, § 1) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.060. Corporation — When considered organized — Powers. [Repealed.]

Compiler’s Notes.

This section (542) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.065. When corporate existence begins — Subscribers become shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.068. Retroactive validation of corporate existence — Continuation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1970, ch. 284, § 2, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.070. Failure to begin business in two years forfeits powers. [Repealed.]

Compiler’s Notes.

This section (565) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.072. Acceptance of constitutional provisions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1970, ch. 284, § 3, effective June 18, 1970) was repealed by Acts 1972, ch. 284, § 3, effective July 1, 1972.

271.075. Subscriptions for shares before incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.080. Limitations on business and holding of land — Escheat procedure. [Repealed.]

Compiler’s Notes.

This section (567) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.085. Minimum amount of capital. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.090. Place of business and agent for process to be in state — Statements filed — Fees. [Repealed.]

Compiler’s Notes.

This section (571) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.095. Conditions precedent to beginning business — Liability in case of violation of section. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.100. Want of legal organization no defense. [Repealed.]

Compiler’s Notes.

This section (566) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.105. Validity and effect of certificate of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.110. Fifty percent of stock to be subscribed before business commenced — Collection of delinquent subscriptions. [Repealed.]

Compiler’s Notes.

This section (543) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.115. Effect of filing or recording papers required to be filed. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.120. Corporation not to hold its own capital stock — Exception. [Repealed.]

Compiler’s Notes.

This section (544) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.121. Restatement of articles of incorporation as amended — Acknowledgement — Recording — Effect. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1966, ch. 153, § 5) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.125. Corporate powers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1952, ch. 94, § 1; amend. Acts 1964, ch. 149, § 2; amend. Acts 1970, ch. 263, § 1, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.130. Increase or reduction of capital stock. [Repealed.]

Compiler’s Notes.

This section (553, 564-1) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.135. Acquisition of own shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.140. Classes of stock. [Repealed.]

Compiler’s Notes.

This section (564-1) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.145. Limitations on business and holding of real estate — Escheat procedure. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1962, ch. 210, § 43) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.147. Facsimile signature and seal on debt securities. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1962, ch. 102, § 1; amend. Acts 1970, ch. 127, § 1, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.150. Stock without par value. [Repealed.]

Compiler’s Notes.

This section (564-2) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.155. Shares, classes and series of — Provisions for voting powers, special rights, restrictions, redemption, dividends, and priority on dissolution — Conversion or exchange — Provisions concerning division of classes into series. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1952, ch. 99, § 1; amend. Acts 1970, ch. 263, § 2, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.160. Stock certificates — Issuance — Transfer of stock. [Repealed.]

Compiler’s Notes.

This section (545: amend. Acts 1942, ch. 32, §§ 1 and 2) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.165. Stock certificates — Issuance, contents — Share warrants. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1964, ch. 75, § 1; amend. Acts 1966, ch. 153, § 2) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.170. Corporation books. [Repealed.]

Compiler’s Notes.

This section (546) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.175. Consideration for shares — Amount, payment. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.180. Stockholders’ liability — Effect of transfer. [Repealed.]

Compiler’s Notes.

This section (547) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.185. Payment for shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.190. Enforcement of stockholders’ liability in certain companies. [Repealed.]

Compiler’s Notes.

This section (547a) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.195. Valuation of consideration for shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.200. Fiduciary and pledgor may vote stock — Cumulative voting. [Repealed.]

Compiler’s Notes.

This section (552) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.205. Validity of shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.210. Officer or director issuing false statement — Liability for. [Repealed.]

Compiler’s Notes.

This section (549) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.215. Liability of incorporators, subscribers, shareholders, directors and officers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.220. Directors of insolvent corporation declaring dividends — Liability for. [Repealed.]

Compiler’s Notes.

This section (548) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.225. Transfer of shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1962, ch. 210, § 44) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.230. Corporate directors — Qualifications — Quorum. [Repealed.]

Compiler’s Notes.

This section (551) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.235. Corporation’s lien on shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.240. Election of directors — Term — Vacancies. [Repealed.]

Compiler’s Notes.

This section (551) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.245. Indemnification of officers and directors against liabilities, costs and expenses in connection with litigation in official capacity. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1942, ch. 40, §§ 1 and 2) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.250. Consolidation of corporations — Agreement — Notice to stockholders — Consent. [Repealed.]

Compiler’s Notes.

This section (555: amend. Acts 1944, ch. 173, § 16) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.255. Paid-in surplus. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1970, ch. 263, § 9, effective June 18, 1970.

271.258. Capital, earned surplus, paid-in surplus — Handling of surplus following merger. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1970, ch. 263, § 3, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.260. Rights and duties taken over upon consolidation — Actions pending. [Repealed.]

Compiler’s Notes.

This section (556, 557) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.265. Dividends, authority to pay. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.270. Stockholder objecting to consolidation to be paid for his stock. [Repealed.]

Compiler’s Notes.

This section (558) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.275. Liability of directors and shareholders for dividends unlawfully paid or corporate assets otherwise unlawfully returned. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.280. Change or amendment of articles of incorporation. [Repealed.]

Compiler’s Notes.

This section (559) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.285. Bylaws. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.290. Rights not impaired by sale or consolidation, or amendment of articles. [Repealed.]

Compiler’s Notes.

This section (560) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.295. Shareholders’ meetings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.300. Dissolution of corporation — Withdrawal from state — Procedure. [Repealed.]

Compiler’s Notes.

This section (561: amend. Acts 1944, ch. 173, § 17) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.310. Revocation of corporate powers — Causes for. [Repealed.]

Compiler’s Notes.

This section (569) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.315. Voting rights. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1966, ch. 153, § 3) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.320. Sale of corporate franchise and property. [Repealed.]

Compiler’s Notes.

This section (883b-1, 883b-3: amend. Acts 1944, ch. 173. § 18) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.325. Voting trusts. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1962, ch. 210, § 45) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.330. Corporations may purchase assets of other corporations. [Repealed.]

Compiler’s Notes.

This section (883b-2) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.335. Quorum. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.340. Organization of purchaser corporation. [Repealed.]

Compiler’s Notes.

This section (562) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.345. Directors, election, meetings, powers — Action without meeting. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1964, ch. 149, § 3; amend. Acts 1966, ch. 153, § 4) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.350. Sale of corporate property and franchise under court decree. [Repealed.]

Compiler’s Notes.

This section (563) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.355. Officers and agents. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1964, ch. 149, § 4) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.360. Receiver for corporation appointed upon insolvency or violation of law. [Repealed.]

Compiler’s Notes.

This section (616) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.365. Relation of directors and officers to corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.370. Appointment of receiver upon request of creditor or stockholder. [Repealed.]

Compiler’s Notes.

This section (576a-3, 576a-5, 576a-6) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.375. Indemnification of directors, officers against loss due to action taken in official capacity. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1970, ch. 263, § 4, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.380. Receiver — Powers — Duties — Jurisdiction of court. [Repealed.]

Compiler’s Notes.

This section (576a-4) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.385. Registered office and process agent. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1958, ch. 51, § 2; amend. Acts 1970, ch. 284, § 1, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.390. Name to be on place of business — “Incorporated” to be on advertising. [Repealed.]

Compiler’s Notes.

This section (576) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.395. Corporate books and records — Share register — Right of shareholders to inspect books. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.400. Rights not to be exercised until required bond is executed. [Repealed.]

Compiler’s Notes.

This section (1873) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.405. Written consent of shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.410. Charters and grants since 1856 may be repealed. [Repealed.]

Compiler’s Notes.

This section (1987) was repealed by Acts 1946, ch. 141, § 1, effective July 1, 1946.

271.415. Voluntary transfer of corporate assets. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1948, ch. 206, § 1; amend. Acts 1952, ch. 84, § 59, effective July 1, 1953) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.420. Right of burial association or corporation to condemn land for cemetery — Procedure. [Renumbered KRS 416.210.]

Compiler’s Notes.

This section (199a-8, 199a-9), was recompiled as KRS 416.210 by Acts 1946, ch. 141, § 3.

271.425. Power to purchase assets of other corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.430. Board of incorporated cemetery to make annual report. [Renumbered as KRS 273.150.]

Compiler’s Notes.

This section (202, 208a) was recompiled as KRS 273.150 by Acts 1946, ch. 141, § 4.

271.435. Organization of purchaser corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.440. Sale of corporate assets under court decree. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.445. Amendment of articles of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1948, ch. 206, § 2; amend. Acts 1952, ch. 26, § 1, effective June 19, 1952) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.450. Articles of amendment — Contents — Subscription — Recording. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.455. Provisions relating to certain amendments. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.460. Reduction of capital. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1948, ch. 206, § 3) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.461. Limited application of KRS 271.445, 271.455, and 271.460. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1948, ch. 206, § 4) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.465. Merger and consolidation authorized. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1970, ch. 263, § 5, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.468. Merger or consolidation of domestic and foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1970, ch. 263, § 6, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.470. Merger or consolidation, joint agreement for. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1970, ch. 263, § 7, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.475. Consolidation, articles of incorporation for. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.480. When merger or consolidation effective. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1970, ch. 263, § 8, effective June 18, 1970) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.485. Effect of merger or consolidation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.490. Rights of dissenting shareholders on merger or consolidation — Inapplicable when — Abandonment of merger or consolidation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1948, ch. 206, § 5; amend. Acts 1966, ch. 222, § 1) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.495. Voluntary dissolution by incorporators. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.500. Election to dissolve by act of the corporation or by consent of the shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1948, ch. 206, § 7) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.505. Recording of statement of intent to dissolve. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.510. Effect of statement of intent to dissolve. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.515. Proceedings after recording of statement of intent to dissolve. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.520. Method of revoking voluntary dissolution proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.525. Recording statement of revocation of voluntary dissolution proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.530. Effect of statement of revocation of vountary dissolution proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.535. Articles of dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.540. Filing articles of dissolution — Satisfaction of tax liabilities — Recording of articles, issuance of certificate of dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.545. Recording fees in connection with dissolution proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.550. Venue of receivership suits — Parties. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.555. Procedure in receivership suits. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.560. Qualifications of receivers — Bond. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.565. Filing of claims in receivership suits. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.570. Decree of involuntary dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1; amend. Acts 1952, ch. 116, § 1, effective June 19, 1952) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.575. Filing and recording of decree of dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.580. Disposition of distributive portions due shareholders who are unknown or cannot be found. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.585. Survival of remedy after dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.590. Revocation of corporate powers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.595. Requirements as to bond. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.600. Charters and grants since 1856 may be repealed. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.605. Secondary action by shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.610. Service of process on foreign corporation after withdrawal from state, or in case of unauthorized doing of business in state. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.615. Application of chapter to corporations in existence on June 30, 1946. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 1, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

271.990. Penalties. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1946, ch. 141, § 2, effective July 1, 1946) was repealed by Acts 1972, ch. 274, § 165, effective July 1, 1972.

CHAPTER 271A Private Corporations [Repealed]

Preliminary Provisions

271A.005. Title. [Renumbered as KRS 271B.1-010.]

Compiler’s Notes.

This section was renumbered and became KRS 271B.1-010 effective January 1, 1989.

271A.010. Definitions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 2; amend. Acts 1986, ch. 202, § 1, effective March 28, 1986) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989

271A.015. Application and purposes. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 3) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.020. General powers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 4) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.025. Indemnification of officers, directors, employees and agents. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 5) was repealed by Acts 1982, ch. 185, § 2, effective July 15, 1982. For present law, see KRS 271B.8-500 to 271B.8-580 .

271A.026. Indemnification of directors. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1982, ch. 185, § 1) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.030. Right of corporation to acquire and dispose of its own shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 6) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.035. Defense of ultra vires. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 7) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.040. Corporate name. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 8) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.045. Reserved name. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 9) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.050. Registered name. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 10) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.055. Renewal of registered name. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 11) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.060. Registered office and registered agent. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 12) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.065. Change of registered office or registered agent. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 235, § 1, and ch. 274, § 13; amend. Acts 1986, ch. 202, § 2, effective March 28, 1986) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.070. Service of process on corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 14; amend. Acts 1974, ch. 315, § 37; amend. Acts 1980, ch. 114, § 58, effective July 15, 1980) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.075. Authorized shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 15) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.080. Issuance of shares of preferred or special classes in series. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 16; amend. Acts 1978, ch. 384, § 431, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.085. Subscriptions for shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 17) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.090. Consideration for shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 18) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.095. Payment for shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 19) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.100. Stock rights and options. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 20) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.105. Determination of amount of stated capital. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 21) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.110. Expenses of organization, reorganization and financing. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 22) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.115. Certificates representing shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 23) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.120. Fractional shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 24) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.125. Liability of subscribers and shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 25) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.130. Shareholders’ preemptive rights. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 26) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.135. By-laws and other powers in emergency. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 27) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.140. Meetings of shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 28) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.145. Notice of shareholders’ meetings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 29) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.150. Closing of transfer books and fixing record date. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 30) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.155. Voting record. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 31) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.160. Quorum of shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 32) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.165. Voting of shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 33; amend. Acts 1982, ch. 141, § 81, effective July 1, 1982) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.170. Voting trusts and agreements among shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 34) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.175. Board of directors. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 35) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.180. Number and election of directors. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 36) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.185. Classification of directors. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 37) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.190. Vacancies. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 38) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.195. Removal of directors. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 39) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.200. Quorum of directors. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 40) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.202. General standards for directors. [Renumbered as KRS 271B.8-300.]

Compiler’s Notes.

This section was renumbered as KRS 271B.8-300 , effective January 1, 1989.

271A.205. Director conflicts of interest. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 41) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989, and ch. 224, § 26, effective July 15, 1988. For present law, see KRS 271B.8-310 .

271A.206. Director conflict of interest. [Renumbered as KRS 271B.8-310.]

Compiler’s Notes.

This section was renumbered as KRS 271B.8-310 , effective January 1, 1989.

271A.210. Executive and other committees. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 42) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.215. Directors’ meetings — Conduct of meetings via telephone or similar communications equipment. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 43; amend. Acts 1982, ch. 155, § 1, effective July 15, 1982) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.220. Action by directors without a meeting. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 44) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.225. Dividends. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 45) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.230. Distributions from capital surplus. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 46) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.235. Loans to employes and directors. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 47) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.240. Liability of directors in certain cases. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 48; amend. Acts 1974, ch. 315, § 38; amend. Acts 1980, ch. 114, § 59; amend. Acts 1984, ch. 111, § 114, effective July 13, 1984) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.245. Provisions relating to actions by shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 49) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.250. Officers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 50) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.255. Removal of officers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 51) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.257. Standards of conduct for officers. [Renumbered as KRS 271B.8-420.]

Compiler’s Notes.

This section was renumbered as KRS 271B.8-420 , effective January 1, 1989.

271A.260. Books and records. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 52) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.265. Incorporators. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 53) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.270. Articles of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 54; amend. Acts 1976, ch. 27, § 5; amend. Acts 1986, ch. 202, § 3, effective March 28, 1986) was repealed by Acts 1988, ch. 224, § 26, effective July 15, 1988 and Acts 1988, ch. 23, § 248, effective January 1, 1989. For present law, see KRS 271B.2-010 to 271B.2-070 .

271A.271. Articles of incorporation. [Renumbered as KRS 271B.2-020.]

Compiler’s Notes.

This section was renumbered as KRS 271B.2-020 , effective January 1, 1989.

271A.275. Filing of articles of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 55; amend. Acts 1978, ch. 384, § 432, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.280. Effect of issuance of certificate of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 56) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.285. Organization meeting of directors. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 57) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.290. Right to amend articles of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 58) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.295. Amendment of articles. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 59) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.300. Class voting on amendments. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 60) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.305. Articles of amendment. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 61) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.310. Filing of articles of amendment. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 62; amend. Acts 1978, ch. 384, § 433, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.315. Effect of certificate of amendment. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 63) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.320. Restated articles of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 64; amend. Acts 1978, ch. 384, § 434, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.325. Amendment of articles of incorporation in reorganization proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 65; amend. Acts 1978, ch. 384, § 435, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.330. Restriction on redemption or purchase of redeemable shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 66) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.335. Cancellation of redeemable shares by redemption or purchase. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 67; amend. Acts 1978, ch. 384, § 436, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.340. Cancellation of other reacquired shares. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 68; amend. Acts 1978, ch. 384, § 437, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.345. Reduction of stated capital in certain cases. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 69; amend. Acts 1978, ch. 384, § 438, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.350. Special provisions relating to surplus and reserves. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 70) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.355. Procedure for merger. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 71) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.360. Procedure for consolidation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 72) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.365. Approval by shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 73) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.370. Articles of merger on consolidation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 74; amend. Acts 1974, ch. 259, § 1; amend. Acts 1978, ch. 384, § 439, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.375. Merger of subsidiary corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 75; amend. Acts 1974, ch. 259, § 2; amend. Acts 1980, ch. 188, § 238, effective July 15, 1980) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.380. Effect of merger or consolidation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 76) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.385. Merger or consolidation of domestic and foreign corporations. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 77; amend. Acts 1986, ch. 88, § 2, effective July 15, 1986) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.390. Sale of assets in regular course of business and mortgage or pledge of assets. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 78) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.395. Sale of assets other than in regular course of business. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 79) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.396. Definitions for KRS 271B.12-210 to 271B.12-230. [Renumbered as KRS 271B.12-200.]

Compiler’s Notes.

This section was renumbered as KRS 271B.12-200 , effective January 1, 1989.

271A.397. Minimum share vote requirements for approval of business combinations — Limitations on business corporation. [Renumbered as KRS 271B.12-210.]

Compiler’s Notes.

This section was renumbered as KRS 271B.12-210 , effective January 1, 1989.

271A.398. Exemptions from minimum share vote requirements. [Renumbered as KRS 271B.12-220.]

Compiler’s Notes.

This section was renumbered as KRS 271B.12-220 , effective January 1, 1989.

271A.399. KRS 271B.12-200 to 271B.12-220 prevail over other provisions of KRS Chapter 271B — Severability of provisions. [Renumbered as KRS 271B.12-230.]

Compiler’s Notes.

This section was renumbered as KRS 271B.12-230 , effective January 1, 1989.

271A.400. Right of shareholders to dissent. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 80; amend. Acts 1984, ch. 355, § 5, effective July 13, 1984) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.405. Rights of dissenting shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 81; amend. Acts 1976, ch. 62, § 110; amend. Acts 1980, ch. 114, § 60; amend. Acts 1984, ch. 355, § 6, effective July 13, 1984) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.410. Voluntary dissolution by incorporators. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 82; amend. Acts 1978, ch. 384, § 440, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.415. Voluntary dissolution by consent of shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 83) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.420. Voluntary dissolution by act of corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 84) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.425. Filing of statement of intent to dissolve. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 85) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.430. Effect of statement of intent to dissolve. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 86) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.435. Procedure after filing of statement of intent to dissolve. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 87) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.440. Revocation of voluntary dissolution proceedings by consent of shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 88) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.445. Revocation of voluntary dissolution proceedings by act of corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 89) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.450. Filing of statement of revocation of voluntary dissolution proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 90; amend. Acts 1978, ch. 384, § 442, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.455. Effect of statement of revocation of voluntary dissolution proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 91) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.460. Articles of dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 92) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.465. Filing of articles of dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 93; amend. Acts 1978, ch. 384, § 443; amend. Acts 1986, ch. 202, § 4, effective March 28, 1986) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.470. Involuntary dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 94) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.475. Jurisdiction of court to liquidate assets and business of corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 95) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.480. Procedure in liquidation of corporation by court. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 96) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.485. Qualifications of receivers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 97) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.490. Filing of claims in liquidation proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 98) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.495. Discontinuance of liquidation proceedings. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 99) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.500. Decree of involuntary dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 100) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.505. Filing of decree of dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 101; amend. Acts 1978, ch. 384, § 444, effective June 17, 1978) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.510. Deposit with department of revenue of amount due certain shareholders. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 102) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.515. Survival of remedy after dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 103) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.520. Admission of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 104) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.525. Powers of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 105) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.530. Corporate name of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 106; amend. Acts 1980, ch. 294, § 3, effective July 15, 1980) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.535. Change of name by foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 107) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.540. Application for certificate of authority. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 108) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.545. Filing of application for certificate of authority. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 109) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.550. Effect of certificate of authority. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 110) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.555. Registered office and registered agent of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 111) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.560. Change of registered office or registered agent of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 112) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.565. Service of process on foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 113; amend. Acts 1978, ch. 384, § 575; amend. Acts 1980, ch. 114, § 61, effective July 15, 1980) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.570. Amendment to articles of incorporation of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 114) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.575. Merger of foreign corporation authorized to transact business in this state. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 115) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.580. Amended certificate of authority. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 116) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.585. Withdrawal of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 117; amend. Acts 1974, ch. 315, § 4; amend. Acts 1980, ch. 114, § 62, effective July 15, 1980) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.590. Filing of application for withdrawal. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 118; amend. Acts 1986, ch. 202, § 5, effective March 28, 1986) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.595. Revocation of certificate of authority. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 119) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.600. Issuance of certificate of revocation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 120) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.605. Application to corporations heretofore authorized to transact business in this state. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 121) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.610. Transacting business without certificate of authority. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 122) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.615. Annual report of domestic and foreign corporations — Reinstatement of certificate of incorporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 123; amend. Acts 1980, ch. 294, § 4; amend. Acts 1986, ch. 202, § 6, effective March 28, 1986) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.620. Filing of annual report of domestic and foreign corporations. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 124) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.625. Fees and charges to be collected by secretary of state. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 125; amend. Acts 1984, ch. 410, § 13, effective July 1, 1984) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.630. Fees for filing documents and issuing certificates. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 126; amend. Acts 1978, ch. 84, § 7, effective June 17, 1978; amend. Acts 1978, ch. 384, § 445, effective June 17, 1978; amend. Acts 1986, ch. 204, § 4, effective July 15, 1986) was repealed by Acts 1988, ch. 85, § 4, effective July 15, 1988 and Acts 1988, ch. 23, § 248, effective January 1, 1989. For present law, see KRS 271B.1-220 .

271A.631. Fees for filing documents and issuing certificates — Miscellaneous charges. [Renumbered as KRS 271B.1-220.]

Compiler’s Notes.

This section was renumbered as KRS 271B.1-220 , effective January 1, 1989.

271A.635. Miscellaneous charges. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 127; amend. Acts 1986, ch. 204, § 5, effective July 15, 1986) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989 and Acts 1988, ch. 85, § 4, effective July 15, 1988. For present law, see KRS Ch. 271B.

271A.640. Penalties imposed upon corporations. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 128) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.645. Certificates and certified copies to be received in evidence. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 129) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.650. Forms to be furnished by Secretary of State. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 130) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.655. Greater voting requirements. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 131) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.660. Waiver of notice. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 132) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.665. Action by shareholders without a meeting. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 133) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.670. Unauthorized assumption of corporate powers. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 134) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.675. Application to existing corporations. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 135) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.680. Effect of repeal of prior acts. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 136) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989.

271A.685. Validity of facsimile signature for corporation debt security. [Renumbered as KRS 271B.18-010.]

Compiler’s Notes.

This section was renumbered as KRS 271B.18-010 , effective January 1, 1989.

271A.690. Retroactive validation of existing domestic corporations. [Renumbered as KRS 271B.18-020.]

Compiler’s Notes.

This section was renumbered as KRS 271B.18-020 , effective January 1, 1989.

271A.695. Acceptance of present Constitution. [Renumbered as KRS 271B.18-030.]

Compiler’s Notes.

This section was renumbered as KRS 271B.18-030 , effective January 1, 1989.

271A.700. Purpose of filing articles of incorporation. [Renumbered as KRS 271B.18-040.]

Compiler’s Notes.

This section was renumbered as KRS 271B.18-040 , effective January 1, 1989.

271A.705. Limitation on business and holding of real estate; escheat. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1972, ch. 274, § 142) was repealed by Acts 1988, ch. 23, § 248, effective January 1, 1989. For present law, see KRS Ch. 271B.

271A.710. Revocation of charters and grants since 1856. [Renumbered as KRS 271B.18-050.]

Compiler’s Notes.

This section was renumbered as KRS 271B.18-050 , effective January 1, 1989.

271A.715. Incorporation for purposes of establishing a foreign trade zone within this state. [Renumbered as KRS 271B.18-060.]

Compiler’s Notes.

This section was renumbered as KRS 271B.18-060 , effective January 1, 1989.

CHAPTER 271B Business Corporations

Subtitle 1. General Provisions

Title

271B.1-010. Title.

This chapter shall be known and may be cited as the “Kentucky Business Corporation Act.”

History. Enact. Acts 1972, ch. 274, § 1.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.005 and was renumbered by the Reviser of Statutes pursuant to KRS 7.136 .

NOTES TO DECISIONS

Cited:

Simpson v. JOC Coal, Inc., 677 S.W.2d 305, 1984 Ky. LEXIS 271 ( Ky. 1984 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Kuehn, Shareholders, 61 Ky. L.J. 158 (1972).

Kentucky Law Survey, Ham, Corporations, 69 Ky. L.J. 453 (1980-81).

Article: Say on Pay’s Bundling Problems, 99 Ky. L.J. 119 (2010/2011).

Note: Corporate Gatekeepers: An Examination of the Transactional Lawyer’s Role, 99 Ky. L.J. 555 (2010/2011).

Article: Beyond Public/Private: Understanding Excessive Corporate Prerogative, 100 Ky. L.J. 43 (2011/2012).

Article: Tackling Shareholder Short-Termism and Managerial Myopia, 100 Ky. L.J. 531 (2011/2012).

Northern Kentucky Law Review.

Note, Facing the Economic Challenges of the Eighties — The Kentucky Constitution and Hayes v. The State Property and Buildings Commission of Kentucky, 15 N. Ky. L. Rev. 645 (1988).

Tobergte, Regulating the Nonprofit Corporation, 16 N. Ky. L. Rev. 325 (1989).

Filing Documents

271B.1-200. Filing requirements.

  1. Each document delivered by a domestic or foreign corporation to the Secretary of State for filing shall satisfy the requirements of KRS 14A.2-010 to 14A.2-150
  2. Whenever a provision of KRS Chapter 271B permits any of the terms of a plan or a filed document to be dependent on facts objectively ascertainable outside the plan or filed document, the following provisions apply:
    1. The manner in which the facts will operate upon the terms of the plan or filed document shall be set forth in the plan or filed document;
    2. The facts may include but are not limited to:
      1. Any of the following that is available in a nationally recognized news or information medium either in print or electronically:
        1. Statistical or market indices;
        2. Market prices of any security or group of securities;
        3. Interest rates;
        4. Currency exchange rates; or
        5. Similar economic or financial data;
      2. A determination or action by any person or body, including the corporation or any other party to a plan or filed document; or
      3. The terms of, or actions taken under, an agreement to which the corporation is a party, or any other agreement or document;
    3. As used in this subsection:
      1. “Filed document” means a document filed with the Secretary of State under any provision of KRS Chapter 271B except an annual report or a filing pursuant to Subtitle 15 of KRS Chapter 271B; and
      2. “Plan” means a plan of nonprofit conversion as provided for in KRS 273.382 , conversion into an LLC as provided for in KRS 275.376 , merger, or of share exchange;
    4. The following provisions of a plan or filed document shall not be made dependent on facts outside the plan or filed document:
      1. The name and address of any person required in a filed document;
      2. The registered office of any entity required in a filed document;
      3. The registered agent of any entity required in a filed document;
      4. The number of authorized shares and designation of each class or series of shares;
      5. The effective date of a filed document; or
      6. Any required statement in a filed document of the date on which the underlying transaction was approved or the manner in which that approval was given; and
    5. If a provision of a filed document is made dependent on a fact ascertainable outside of the filed document, and that fact is not ascertainable by reference to a source described in paragraph (b)1. of this subsection or a document that is a matter of public record, or the affected shareholders have not received notice of the fact from the corporation, then the corporation shall file with the Secretary of State articles of amendment setting forth the fact promptly after the time when the fact referred to is first ascertainable or thereafter changes. Articles of amendment under this paragraph are deemed to be authorized by the authorization of the original filed document or plan to which they relate and may be filed by the corporation without further action by the board of directors or the shareholders.

History. Enact. Acts 1988, ch. 23, § 1, effective January 1, 1989; 2002, ch. 102, § 1, effective July 15, 2002; 2007, ch. 137, § 46, effective June 26, 2007; repealed and reenact., 2010 Ky. Acts ch. 51, § 46, effective July 15, 2010; repealed, reenacted, and amended ch. 151, § 50, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed, reenacted, and amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear to be in conflict, therefore, they have been codified together.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

Northern Kentucky Law Review.

Mellen, Myre and Lee, Limited Liability Companies and Registered Limited Liability Partnerships in Kentucky: A Practical Analysis, 22 N. Ky. L. Rev. 229 (1995).

271B.1-210. Forms. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 47) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.2-050 .

271B.1-220. Fees for filing documents and issuing certificates — Miscellaneous charges.

  1. The Secretary of State shall collect the following fees when the documents described in this subsection are delivered to him for filing:

(1) Articles of incorporation $40 (2) Amendment of articles of incorporation $40 (3) Restatement of articles of incorporation $40 (4) Amended and restated articles $80 (5) Articles of merger or share exchange $50 (6) Articles of dissolution $40 (7) Articles of revocation of dissolution $15 (8) Any other document required or permitted to be filed by this chapter $15

Click to view

History. Enact. Acts 1988, ch. 23, § 3, effective January 1, 1989; 1988, ch. 85, § 3, effective July 15, 1988; 1998, ch. 341, § 3, effective July 15, 1998; 2007, ch. 137, § 48, effective June 26, 2007; repealed and reenact., 2010 Ky. Acts ch. 51, § 48, effective July 15, 2010; and repealed, reenact., and amended ch. 151, § 51, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed, reenacted, and amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear to be in conflict, therefore, they have been codified together.

Similar versions of this section were created by 1988 Acts Chapter 85, Section 3, and 1988 Acts Chapter 23, Section 3, which conflict in regard to the amount of fees to be charged by Secretary of State. Pursuant to KRS 446.250 , the fees set forth in Chapter 85 prevail as the later enactment. The remaining provisions do not appear to be in conflict and have been compiled together.

Opinions of Attorney General.

The payment of the filing fee is a condition precedent for filing documents with the Secretary of State, and the Secretary of State may void the filing and return a document after it has been received, stamped, and filed, if the check for payment of that fee has been dishonored. OAG 89-94 .

Research References and Practice Aids

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.1-230. Effective time and date of filing. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 4; 2002, ch. 102, § 2) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.2-070 .

271B.1-240. Correcting filed documents. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 5; 2002, ch. 102, § 3) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.2-090 .

271B.1-250. Filing duty of Secretary of State. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 49) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.2-100 .

NOTES TO DECISIONS

1.Duty of Secretary of State.

It was the duty of the Secretary of State to record only such articles of incorporation as the statute provided for. McChesney v. Batman, 121 Ky. 303 , 89 S.W. 198, 28 Ky. L. Rptr. 281 , 1905 Ky. LEXIS 205 ( Ky. 1905 )(decided under prior law); Cheaney v. Bruner, 141 Ky. 32 , 132 S.W. 167, 1910 Ky. LEXIS 412 ( Ky. 1910 )(decided under prior law).

2.Refusal.

If the articles were deficient the Secretary of State could refuse to file them. Cheaney v. Bruner, 141 Ky. 32 , 132 S.W. 167, 1910 Ky. LEXIS 412 ( Ky. 1910 )(decided under prior law).

If incorporators fail to comply with the law the Secretary of State may refuse to file their articles of incorporation, however, if such articles are filed, then failure to comply with any law in organizing can only be taken advantage of in a direct proceeding by the Commonwealth to annul the charter. Dorman v. Bankers' Trust Co.'s Receiver, 259 Ky. 430 , 82 S.W.2d 494, 1935 Ky. LEXIS 333 ( Ky. 1935 )(decided under prior law).

271B.1-260. Appeal from Secretary of State’s refusal to file document. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 7) was repealed by Acts 2011, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.2-110 .

271B.1-270. Evidentiary effect of filed document. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 8; 2002, ch. 102, § 5) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.2-120 .

271B.1-280. Certificate of existence. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 9) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.2-130 .

NOTES TO DECISIONS

1.Proof of Existence.

When the existence of a corporation was questioned collaterally, strict proof of due incorporation was not required, and parol proof, such as the testimony of the president of the corporation, was sufficient. Strunks Lane & Jellico Mountain Coal & Coke Co. v. Anderson, 276 Ky. 576 , 124 S.W.2d 779, 1939 Ky. LEXIS 552 ( Ky. 1939 ) (decided under prior law).

271B.1-290. Penalty for signing false document.

  1. A person commits an offense by signing a document knowing it is false in any material respect with intent that the document be delivered to the Secretary of State for filing.
  2. An offense under this section shall be a misdemeanor punishable by a fine not to exceed one hundred dollars ($100).

History. Enact. Acts 1988, ch. 23, § 10, effective January 1, 1989; 2007, ch. 137, § 50, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 50, effective July 15, 2010.

Secretary of State

271B.1-300. Powers.

The Secretary of State shall have the power reasonably necessary to perform the duties required of him by this chapter.

History. Enact. Acts 1988, ch. 23, § 11, effective January 1, 1989.

Definitions

271B.1-400. Definitions for chapter.

As used in this chapter:

  1. “Appropriate court” means the Circuit Court for the county within the Commonwealth in which the corporation maintains its principal office or, if none, the county in which the registered office is located;
  2. “Articles of incorporation” include amended and restated articles of incorporation and articles of merger;
  3. “Authorized shares” means the shares of all classes a domestic or foreign corporation is authorized to issue;
  4. “Conspicuous” means so written that a reasonable person against whom the writing is to operate should have noticed it. For example, printing in italics or boldface or contrasting color, or typing in capitals or underlining, shall be considered conspicuous;
  5. “Corporation” or “domestic corporation” means a corporation for profit, which is not a foreign corporation, incorporated under or subject to the provisions of this chapter, and includes a professional service corporation and a public benefit corporation;
  6. “Deliver” or “delivery” means any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery, and electronic transmission;
  7. “Distribution” means a direct or indirect transfer of money or other property (except its own shares) or incurrence of indebtedness by a corporation to or for the benefit of its shareholders in respect of any of its shares. A distribution may be in the form of a declaration or payment of a dividend; a purchase, redemption, or other acquisition of shares; a distribution of indebtedness; or otherwise;
  8. “Effective date of notice” is defined in KRS 271B.1-410 ;
  9. “Electronic transmission” or “electronically transmitted” means any process of communication not directly involving the physical transfer of paper that is suitable for the retention, retrieval, and reproduction of information by the recipient;
  10. “Employee” includes an officer but not a director. A director may accept duties that make him also an employee;
  11. “Entity” includes a domestic or foreign corporation; not-for-profit corporation; profit and not-for-profit unincorporated association; business trust, estate, partnership, trust, and two (2) or more persons having a joint or common economic interest; and state, United States, and foreign government;
  12. “Foreign corporation” means a corporation for profit incorporated under a law other than the law of this state;
  13. “Governmental subdivision” includes authority, county, district, and municipality;
  14. “Includes” denotes a partial definition;
  15. “Individual” means a natural person and includes the estate of an incompetent or deceased individual;
  16. “Means” denotes an exhaustive definition;
  17. “Name of record with the Secretary of State” means any real, fictitious, reserved, registered, or assumed name of an entity;
  18. “Notice” is defined in KRS 271B.1-410 ;
  19. “Person” includes individual and entity;
  20. “Principal office” means the office in or out of this state, so designated in writing to the Secretary of State where the principal executive offices of a domestic or foreign corporation are located;
  21. “Proceeding” includes civil suit and criminal, administrative, and investigatory action;
  22. “Public benefit” means a positive effect or reduction of negative effects on one (1) or more categories of persons, entities, communities, or interests other than stockholders in their capacities as stockholders;
  23. “Public benefit corporation” means a for-profit corporation that is intended to produce a public benefit and to operate in a responsible manner, balancing the stockholders’ pecuniary interests, the best interests of those materially affected by the corporation’s conduct, and the public benefit identified in its articles of incorporation;
  24. “Public benefit provisions” means the provisions of articles of incorporation authorized by KRS 271B.2-020 (4);
  25. “Real name” shall have the meaning set forth in KRS 365.015 ;
  26. “Record date” means the date established under Subtitle 6 or 7 of this chapter on which a corporation determines the identity of its shareholders and their shareholdings for purposes of this chapter. The determinations shall be made as of the close of business on the record date, unless another time for doing so is specified when the record date is fixed;
  27. “Secretary” means the corporate officer to whom the board of directors has delegated responsibility under KRS 271B.8-400 (3) for custody of the minutes of the meetings of the board of directors and of the shareholders and for authenticating records of the corporation;
  28. “Share” means the unit into which the proprietary interests in a corporation are divided;
  29. “Shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation;
  30. “Sign” or “signature” includes any manual, facsimile, or conformed or electronic signature;
  31. “State,” when referring to a part of the United States, includes a state and Commonwealth and their agencies and governmental subdivisions, and a territory and insular possession and their agencies and governmental subdivisions of the United States;
  32. “Subscriber” means a person who subscribes for shares in a corporation, whether before or after incorporation;
  33. “United States” includes district, authority, bureau, commission, department, and any other agency of the United States; and
  34. “Voting group” means all shares of one (1) or more classes or series that under the articles of incorporation or this chapter are entitled to vote and be counted together collectively on a matter at a meeting of shareholders. All shares entitled by the articles of incorporation or this chapter to vote generally on the matter are for that purpose a single voting group.

HISTORY: Enact. Acts 1988, ch. 23, § 12, effective January 1, 1989; 1998, ch. 341, § 4, effective July 15, 1998; 2002, ch. 102, § 6, effective July 15, 2002; 2007, ch. 137, § 51, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 51, effective July 15, 2010; 2015 ch. 34, § 6, effective June 24, 2015; 2017 ch. 28, § 2, effective June 29, 2017.

Legislative Research Commission Note.

(6/26/2007). 2007 Ky. Acts ch. 137, sec. 51, subsection (21) cited “Section 164 of this Act.” It is apparent from context that the section referred to should have been Section 163 of the Act, KRS 365.015 . The Reviser of Statutes has made this change under the authority of KRS 7.136 .

NOTES TO DECISIONS

Cited:

Conlon v. Haise, 2016 Ky. App. LEXIS 172 (Ky. Ct. App. Sept. 30, 2016).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.1-410. Written or oral notice — How given — When effective.

  1. Notice under this chapter shall be in writing unless oral notice is reasonable under the circumstances. Notice by electronic transmission is written notice.
  2. Notice may be communicated in person; by mail or other method of delivery; or by telephone, voice mail, or other electronic means. If these forms of personal notice are impracticable, notice may be communicated by a newspaper of general circulation in the area where published; or by radio, television, or other form of public broadcast communication.
  3. Written notice by a domestic or foreign corporation to its shareholder, if in a comprehensible form, shall be effective:
    1. Upon deposit in the United States mail, if mailed postpaid and correctly addressed to the shareholder’s address shown in the corporation’s current record of shareholders; or
    2. When electronically transmitted to the shareholder in a manner authorized and in accordance with the shareholder’s instructions, if any.
  4. Written notice to a domestic or foreign corporation authorized to transact business in this state may be addressed to its registered agent at its registered office or to the corporation or its secretary at its principal office address of record with the Secretary of State.
  5. Except as provided in subsections (3) and (4) of this section, written notice, if in a comprehensible form, shall be effective at the earliest of the following:
    1. When received;
    2. Five (5) days after its deposit in the United States mail, if mailed postpaid and correctly addressed; or
    3. On the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee.
  6. Oral notice shall be effective when communicated, if communicated in a comprehensible manner.
  7. If this chapter prescribes notice requirements for particular circumstances, those requirements, shall govern. If articles of incorporation or bylaws prescribe notice requirements not inconsistent with this section or other provisions of this chapter, those requirements shall govern.

History. Enact. Acts 1988, ch. 23, § 13, effective January 1, 1989; 2002, ch. 102, § 7, effective July 15, 2002; 2007, ch. 137, § 52, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 52, effective July 15, 2010; 2013, ch. 106, § 5, effective June 25, 2013.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.1-420. Number of shareholders.

  1. For purposes of this chapter, the following identified as a shareholder in a corporation’s current record of shareholders shall constitute one (1) shareholder:
    1. Three (3) or fewer co-owners;
    2. A corporation, partnership, trust, estate, or other entity;
    3. The trustees, guardians, custodians, or other fiduciaries of a single trust, estate, or account.
  2. For purposes of this chapter, shareholdings registered in substantially similar names shall constitute one (1) shareholder if it is reasonable to believe that the names represent the same person.

History. Enact. Acts 1988, ch. 23, § 14, effective January 1, 1989.

271B.1-430. Independent legal significance.

Action validly taken pursuant to one (1) provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one (1) or more requirements prescribed by such other provision.

History. Enact. Acts 2010, ch. 133, § 1, effective July 15, 2010.

Research References and Practice Aids

Northern Kentucky Law Review.

Kentucky Survey Issue: Article: The 2010 Amendments to Kentucky’s Business Entity Laws, 38 N. Ky. L. Rev. 383 (2011).

Subtitle 2. Incorporation

271B.2-010. Incorporators.

One (1) or more persons may act as the incorporator or incorporators of a corporation by delivering articles of incorporation to the Secretary of State for filing.

History. Enact. Acts 1988, ch. 23, § 15, effective January 1, 1989.

271B.2-020. Articles of incorporation.

  1. The articles of incorporation shall set forth:
    1. A corporate name for the corporation that satisfies the requirements of KRS 14A.3-010 ;
    2. The number of shares the corporation is authorized to issue;
    3. The corporation’s initial registered office and initial registered agent that satisfy the requirements of KRS 14A.4-010 ;
    4. The mailing address of the corporation’s principal office; and
    5. The name and mailing address of each incorporator.
  2. The articles of incorporation may set forth:
    1. The names and mailing addresses of the individuals who are to serve as the initial directors;
    2. Provisions not inconsistent with law regarding:
      1. The purpose or purposes for which the corporation is organized;
      2. Managing the business and regulating the affairs of the corporation;
      3. Defining, limiting, and regulating the powers of the corporation, its board of directors, and shareholders;
      4. A par value for authorized shares or classes of shares; and
      5. The imposition of personal liability on shareholders for the debts of the corporation to a specified extent and upon specified conditions;
    3. Any provision that under this chapter is required or permitted to be set forth in the bylaws; and
    4. A provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of his duties as a director, provided that such provision shall not eliminate or limit the liability of a director:
      1. For any transaction in which the director’s personal financial interest is in conflict with the financial interests of the corporation or its shareholders;
      2. For acts or omissions not in good faith or which involve intentional misconduct or are known to the director to be a violation of law;
      3. For any vote for or assent to an unlawful distribution to shareholders as prohibited under KRS 271B.8-330 ; or
      4. For any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of any director for any act or omission occurring prior to the date when such provision becomes effective. In no case shall this subsection or any such provision be construed to expand the liability of any director as determined pursuant to KRS 271B.8-300 .
  3. The articles of incorporation need not set forth any of the corporate powers enumerated in this chapter.
  4. In addition to the information otherwise required, the articles of incorporation for a public benefit corporation shall state:
    1. That the corporation is a public benefit corporation; and
    2. The purpose or purposes of the corporation, which shall include one (1) or more public benefits.

HISTORY: Enact. Acts 1988, ch. 23, § 16, effective January 1, 1989; 1988, ch. 224, § 7, effective July 15, 1988; 1998, ch. 341, § 5, effective July 15, 1998; 2010, ch. 151, § 52, effective January 1, 2011; 2017 ch. 28, § 4, effective June 29, 2017.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.271 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

NOTES TO DECISIONS

1.Knowledge of Articles.

Incorporators, stockholders, directors and officers were chargeable with knowledge of all provisions of the corporate articles. Oil City Land & Imp. Co. v. Porter, 16 Ky. L. Rptr. 397 (1894) (decided under prior law); Oil City Land & Improv. Co. v. Porter, 99 Ky. 254 , 35 S.W. 643, 18 Ky. L. Rptr. 151 , 1896 Ky. LEXIS 81 ( Ky. 1896 ) (decided under prior law); Croninger v. Behtel Grove Camp Ground Ass'n, 156 Ky. 356 , 161 S.W. 230, 1913 Ky. LEXIS 454 ( Ky. 1913 ) (decided under prior law); Federal Chemical Co. v. Paddock, 264 Ky. 338 , 94 S.W.2d 645, 1936 Ky. LEXIS 309 ( Ky. 1936 ) (decided under prior law).

2.Period of Corporate Existence.

Stockholders impliedly agreed that the business should continue for the entire period named in the articles unless sooner dissolved by operation of law. Manufacturers' Land & Improv. Co. v. Cleary, 121 Ky. 403 , 89 S.W. 248, 28 Ky. L. Rptr. 359 , 1905 Ky. LEXIS 219 ( Ky. 1905 ) (decided under prior law).

Research References and Practice Aids

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Northern Kentucky Law Review.

Comment, A Survey of Kentucky Tort Reform, 17 N. Ky. L. Rev. 473 (1990).

ALR

Construction and application of provisions of articles, bylaws, statutes, or agreements restricting alienation or transfer of corporate stock. 2 A.L.R.2d 745.

Validity, construction, and effect of provisions of articles of incorporation or stock certificates relating to call, redemption, or retirement of common stock. 48 A.L.R.2d 392.

Construction and effect of corporate articles, charter, or bylaws limiting duration or maturity of its indebtedness. 55 A.L.R.2d 949.

Construction and effect of corporate bylaws or articles relating to change in number of directors. 3 A.L.R.3d 623.

When Is Corporation Close, or Closely-Held, Corporation Under Common or Statutory Law, 111 A.L.R.5th 207.

271B.2-030. Incorporation.

  1. Unless a delayed effective date is specified, the corporate existence shall begin when the articles of incorporation are filed by the Secretary of State.
  2. The Secretary of State’s filing of the articles of incorporation shall be conclusive proof that the incorporators satisfied all conditions precedent to incorporation, except in a proceeding by the state to cancel or revoke the incorporation or involuntarily dissolve the corporation.

History. Enact. Acts 1988, ch. 23, § 17, effective January 1, 1989; 2007, ch. 137, § 53, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 53, effective July 15, 2010.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

271B.2-040. Liability for preincorporation transactions.

All persons purporting to act as or on behalf of a corporation, knowing there was no incorporation under this chapter, shall be jointly and severally liable for all liabilities created while so acting.

History. Enact. Acts 1988, ch. 23, § 18, effective January 1, 1989.

NOTES TO DECISIONS

1.Liability for Post-dissolution Actions.

Insurer’s claim against a debtor/sole shareholder for worker’s compensation insurance premiums owed by a corporation following its dissolution was disallowed because although KRS 271B.2-040 , which imposed personal liability on those purporting to act on behalf of a nonexistent corporation, might have applied to actions taken following administrative dissolution of a corporation that went beyond what was necessary to wind up and liquidate its business and affairs, the evidence did not indicate that the indebtedness in question resulted from any act that the debtor purported to take on behalf of the corporation after its dissolution. In re Young, 2004 Bankr. LEXIS 736 (Bankr. E.D. Ky. Apr. 27, 2004).

271B.2-050. Organization of corporation.

  1. After incorporation:
    1. If initial directors are named in the articles of incorporation, the initial directors shall hold an organizational meeting, at the call of a majority of the directors, to complete the organization of the corporation by appointing officers, adopting bylaws, and carrying on any other business brought before the meeting;
    2. If initial directors are not named in the articles, the incorporator or incorporators shall hold an organizational meeting at the call of a majority of the incorporators:
      1. To elect directors and complete the organization of the corporation; or
      2. To elect a board of directors who shall complete the organization of the corporation.
  2. Action required or permitted by this chapter to be taken by incorporators at an organizational meeting may be taken without a meeting if the action taken is evidenced by one (1) or more written consents describing the action taken and signed by each incorporator.
  3. An organizational meeting may be held in or out of this state.

History. Enact. Acts 1988, ch. 23, § 19, effective January 1, 1989; 2007, ch. 137, § 54, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 54, effective July 15, 2010.

Research References and Practice Aids

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.2-060. Bylaws.

  1. The incorporators or board of directors of a corporation shall adopt initial bylaws for the corporation.
  2. The bylaws of a corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.

History. Enact. Acts 1988, ch. 23, § 20, effective January 1, 1989.

Research References and Practice Aids

ALR

Conflict of laws as to validity and effect of corporate bylaw. 27 A.L.R.2d 435.

Construction and effect of corporate articles, charter, or bylaws limiting duration or maturity of its indebtedness. 55 A.L.R.2d 949.

Construction and effect of corporate bylaws or articles relating to change in number of directors. 3 A.L.R.3d 623.

271B.2-070. Emergency bylaws.

  1. Unless the articles of incorporation provide otherwise, the board of directors of a corporation may adopt bylaws to be effective only in an emergency defined in subsection (4) of this section. The emergency bylaws, which are subject to amendment or repeal by the shareholders, may make all provisions necessary for managing the corporation during the emergency, including:
    1. Procedures for calling a meeting of the board of directors;
    2. Quorum requirements for the meeting; and
    3. Designation of additional or substitute directors.
  2. All provisions of the regular bylaws consistent with the emergency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends.
  3. Corporate action taken in good faith in accordance with the emergency bylaws:
    1. Shall bind the corporation; and
    2. Shall not be used to impose liability on a corporate director, officer, employee, or agent.
  4. An emergency exists for purposes of this section if a quorum of the corporation’s directors cannot readily be assembled because of some catastrophic event.

History. Enact. Acts 1988, ch. 23, § 21, effective January 1, 1989; 2007, ch. 137, § 55, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 55, effective July 15, 2010.

Research References and Practice Aids

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

Subtitle 3. Purposes and Powers

271B.3-010. Purposes.

  1. Every corporation incorporated under this chapter has the purpose of engaging in any lawful business unless a more limited purpose is set forth in the articles of incorporation.
  2. A corporation engaging in a business that is subject to regulation under another statute of this state may incorporate under this chapter only if permitted by, and subject to all limitations of, the other statute.

History. Enact. Acts 1988, ch. 23, § 22, effective January 1, 1989; 2007, ch. 137, § 56, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 56, effective July 15, 2010.

Research References and Practice Aids

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.3-020. General powers.

  1. Unless its articles of incorporation provide otherwise, every corporation shall have perpetual duration and succession in its corporate name and shall have the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including without limitation power to:
    1. Sue and be sued, complain and defend in its corporate name;
    2. Have a corporate seal, which may be altered at will, and to use it, or a facsimile of it, by impressing or affixing it or in any other manner reproducing it;
    3. Make and amend bylaws, not inconsistent with its articles of incorporation or with the laws of this state, for managing the business and regulating the affairs of the corporation;
    4. Purchase, receive, lease, or otherwise acquire, and own, hold, improve, use and otherwise deal with, real or personal property, or any legal or equitable interest in property, wherever located;
    5. Sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;
    6. Purchase, receive, subscribe for, or otherwise acquire; own, hold, vote, use, sell, mortgage, lend, pledge, or otherwise dispose of; and deal in and with shares or other interests in, or obligations of, any other entity;
    7. Make contracts and guarantees, incur liabilities, borrow money, issue its notes, bonds, and other obligations (which may be convertible into or include the option to purchase other securities of the corporation), and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;
    8. Lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment;
    9. Be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity;
    10. Conduct its business, locate offices, and exercise the powers granted by this chapter within or without this state;
    11. Elect directors and appoint officers, employees and agents of the corporation, define their duties, fix their compensation, and lend them money and credit;
    12. Pay pensions and establish pension plans, pension trusts, profit sharing plans, share bonus plans, share option plans, and benefit or incentive plans for any or all of its current or former directors, officers, employees, and agents;
    13. Make donations for the public welfare or for charitable, scientific, or educational purposes;
    14. Transact any lawful business that will aid governmental policy; and
    15. Make payments or donations, or do any other act, not inconsistent with law, that furthers the business and affairs of the corporation.
  2. Notwithstanding the provisions of subsection (1)(b) of this section, the presence or absence of a corporate seal on or from a writing shall neither add to nor detract from the legality thereof nor affect its validity in any manner or respect.

History. Enact. Acts 1988, ch. 23, § 23, effective January 1, 1989.

NOTES TO DECISIONS

Cited:

Telamarketing Communications, Inc. v. Liberty Partners, 798 S.W.2d 462, 1990 Ky. LEXIS 109 ( Ky. 1990 ).

Research References and Practice Aids

Kentucky Law Journal.

Campbell, Corporate Fiduciary Duties in Kentucky., 93 Ky. L.J. 551 (2004/2005).

ALR

Architecture, corporation practice of. 56 A.L.R.2d 726.

Partnership of or joint venture, corporation’s power to enter into. 60 A.L.R.2d 917.

Power of a business corporation to donate to a charitable or similar institution. 39 A.L.R.2d 1192.

Power of corporation to make political contribution or expenditure under state law. 79 A.L.R.3d 491.

271B.3-030. Emergency powers.

  1. In anticipation of or during an emergency defined in subsection (4) of this section, the board of directors of a corporation may:
    1. Modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent; and
    2. Relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so.
  2. During an emergency defined in subsection (4) of this section, unless emergency bylaws provide otherwise:
    1. Notice of a meeting of the board of directors need be given only to those directors whom it is practicable to reach and may be given in any practicable manner, including by publication and radio; and
    2. One (1) or more officers of the corporation present at a meeting of the board of directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.
  3. Corporate action taken in good faith during an emergency under this section to further the ordinary business affairs of the corporation:
    1. Shall bind the corporation; and
    2. Shall not be used to impose liability on a corporate director, officer, employee, or agent.
  4. An emergency shall exist for purposes of this section if a quorum of the corporation’s directors cannot readily be assembled because of some catastrophic event.

History. Enact. Acts 1988, ch. 23, § 24, effective January 1, 1989.

271B.3-040. Ultra vires.

  1. Except as provided in subsection (2) of this section, the validity of corporate action shall not be challenged on the ground that the corporation lacks or lacked power to act.
  2. A corporation’s power to act may be challenged in a proceeding by:
    1. A shareholder against the corporation to enjoin the act;
    2. The corporation, directly, derivatively, or through a receiver, trustee, or other legal representative, against an incumbent or former director, officer, employee, or agent of the corporation; or
    3. The Attorney General under KRS 271B.14-300 .
    4. In a shareholder’s proceeding under subsection (2)(a) of this section to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss (other than anticipated profits) suffered by the corporation or another party because of enjoining the unauthorized act.

History. Enact. Acts 1988, ch. 23, § 25, effective January 1, 1989.

NOTES TO DECISIONS

Cited:

Dingus v. Fada Serv. Co., 856 S.W.2d 45, 1993 Ky. App. LEXIS 79 (Ky. Ct. App. 1993).

Subtitle 4. Name

271B.4-010. Corporate name.

The name of each corporation shall satisfy the requirements of KRS 14A.3-010 .

History. Enact. Acts 2007, ch. 137, § 1, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 57, effective July 15, 2010; repealed and reenact., Acts 2010, ch. 151, § 53, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed and reenacted without change to the existing language by 2010 Ky. Acts ch. 51, effective 7/15/10, and repealed and reenacted with the new language by 2010 Ky. Acts ch. 151, effective 1/1/2011. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment by ch. 51 not serve to void amendments made by other bills, and these Acts do not appear to be in conflict, therefore, they have been codified together.

271B.4-020. Reserved name. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 58) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.3-020 .

271B.4-030. Registered name. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 59) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.3-030 .

Subtitle 5. Office and Agent

271B.5-010. Registered office and registered agent — Requirement for agent’s written acceptance of appointment.

Each corporation shall continuously maintain in this Commonwealth a registered office and a registered agent that comply with KRS 14A.4-010 .

History. Enact. Acts 1988, ch. 23, § 29, effective January 1, 1989; 1998, ch. 341, § 6, effective July 15, 1998; 2011, ch. 29, § 8, effective June 8, 2011.

NOTES TO DECISIONS

1.Agent.

It was not necessary that the agent reside at the place of business; nor that he be present at such place of business at all times. It was sufficient that he be at such place of business or in the county, at all reasonable times, and not be unnecessarily absent for unreasonable lengths of time. Paducah Cooperage Co. v. Commonwealth, 122 Ky. 755 , 93 S.W. 12, 29 Ky. L. Rptr. 304 , 1906 Ky. LEXIS 100 ( Ky. 1906 ) (decided under prior law).

A person designated by the statement as process agent remained such until a new statement was filed although he had ceased to be an agent in fact. American Patriots v. Kinkead, 144 Ky. 662 , 139 S.W. 834, 1911 Ky. LEXIS 690 ( Ky. 1911 ) (decided under prior law); S. B. Reese Lumber Co. v. Licking Coal & Lumber Co., 156 Ky. 723 , 161 S.W. 1124, 1914 Ky. LEXIS 186 ( Ky. 1914 ) (decided under prior law).

A process agent was not empowered to waive service of summons and enter his principal’s appearance, especially when antagonistic interests had developed between them. King Const. Co. v. Mary Helen Coal Corp., 194 Ky. 435 , 239 S.W. 799, 1922 Ky. LEXIS 184 ( Ky. 1922 ) (decided under prior law).

2.Venue.

A penal action to recover a fine for violation of former section requiring registered office and agent must be brought in the county where the corporation conducts its business. Kentucky Straight Creek Coal Co. v. Commonwealth, 304 Ky. 247 , 200 S.W.2d 470, 1947 Ky. LEXIS 622 ( Ky. 1947 ) (decided under prior law).

Where service was made on registered office and agent maintained as required by former similar section, the complaint could not be dismissed for lack of venue under KRS 452.450 since that section only refers to “an” office or place of business rather than the chief place of business. Kem Mfg. Corp. v. Kentucky Gem Coal Co., 610 S.W.2d 913, 1980 Ky. App. LEXIS 407 (Ky. Ct. App. 1980) (decided under prior law).

271B.5-020. Change of registered office or registered agent. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 30) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.4-020 .

271B.5-025. Statement of change of principal office.

A corporation that changes the mailing address of its principal office shall comply with KRS 14A.5-010 .

History. Enact. Acts 2007, ch. 137, § 1, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 1, effective July 15, 2010; repealed and reenact., ch. 151, § 54, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed and reenacted without change to the existing language by 2010 Ky. Acts ch. 51, effective 7/15/10, and repealed and reenacted with the new language by 2010 Ky. Acts ch. 151, effective 1/1/2011. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment by ch. 51 not serve to void amendments made by other bills, and these Acts do not appear to be in conflict, therefore, they have been codified together.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.5-030. Resignation of registered agent. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 31) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.4-030 .

271B.5-040. Service on corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 32) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.4-040 .

Subtitle 6. Shares and Distributions

271B.6-010. Authorized shares.

  1. The articles of incorporation shall prescribe the classes of shares and series of shares within a class and the number of shares of each class and series that the corporation is authorized to issue. If more than one (1) class or series of shares is authorized, the articles of incorporation shall prescribe a distinguishing designation for each class or series, and, prior to the issuance of shares of a class or series, the preferences, limitations, and relative rights of that class or series must be described in the articles of incorporation. All shares of a class shall have preferences, limitations, and relative rights identical with those of other shares of the same class except to the extent otherwise permitted by KRS 271B.6-020 .
  2. The articles of incorporation shall authorize:
    1. One (1) or more classes or series of shares that together have unlimited voting rights; and
    2. One (1) or more classes or series of shares which may be the same class or classes as those with voting rights, that together are entitled to receive the net assets of the corporation upon dissolution.
  3. The articles of incorporation may authorize one (1) or more classes or series of shares that:
    1. Have special, conditional, or limited voting rights, or no right to vote, except to the extent otherwise provided by this chapter;
    2. Are redeemable or convertible as specified in the articles of incorporation:
      1. At the option of the corporation, the shareholder, or another person or upon the occurrence of a designated event;
      2. For cash, indebtedness, securities, or other property; or
      3. In a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events;
    3. Entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative, or partially cumulative; or
    4. Have preference over any other class or series of shares with respect to distributions, including dividends and distributions upon the dissolution of the corporation.
  4. Terms of shares may be made dependent upon facts objectively ascertainable outside the articles of incorporation in accordance with KRS 271B.1-200 (2).
  5. The description of the designations, preferences, limitations, and relative rights of share classes in subsection (3) of this section shall not be considered exhaustive.

History. Enact. Acts 1988, ch. 23, § 33, effective January 1, 1989; Acts 2007, ch. 137, § 60, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 60, effective July 15, 2010; repealed and reenact., Acts 2010, ch. 151, § 121, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear in conflict, therefore, they have been codified together.

NOTES TO DECISIONS

1.No Par Stock.

Const., § 193 did not prohibit corporate stock having no par value. Lewis v. Oscar C. Wright Co., 234 Ky. 814 , 29 S.W.2d 566, 1930 Ky. LEXIS 282 ( Ky. 1930 ) (decided under prior law).

2.— Allocation of Proceeds.

The proceeds of stock having no par value may be allocated to either capital or surplus, as the directors may decide. Lewis v. Oscar C. Wright Co., 234 Ky. 814 , 29 S.W.2d 566, 1930 Ky. LEXIS 282 ( Ky. 1930 ) (decided under prior law).

3.Priority of Creditors over Stockholders.

As to withdrawal of capital or distribution of corporate assets the rights of creditors were paramount to the rights of stockholders, both common and preferred. Rider v. John G. Delker & Sons Co., 145 Ky. 634 , 140 S.W. 1011, 1911 Ky. LEXIS 899 ( Ky. 1911 ). See In re Phoenix Hotel Co., 83 F.2d 724, 1936 U.S. App. LEXIS 2624 (6th Cir. Ky.), cert. denied, 299 U.S. 568, 57 S. Ct. 31, 81 L. Ed. 418, 1936 U.S. LEXIS 257 (U.S. 1936); Fryer v. Wiedemann, 148 Ky. 379 , 146 S.W. 752, 1912 Ky. LEXIS 44 4 ( Ky. 1912 ); Smith v. Southern Foundry Co., 166 Ky. 208 , 179 S.W. 205, 1915 Ky. LEXIS 676 ( Ky. 1915 ); Westerfield-Bonte Co. v. Burnett, 176 Ky. 188 , 195 S.W. 477, 1917 Ky. LEXIS 44 ( Ky. 1917 ) (decided under prior law).

4.Priority of Preferred Stock over Common Stock.

It was only when the corporation was solvent and the rights of creditors would not be injuriously affected that stock preferences could be enforced. Rider v. John G. Delker & Sons Co., 145 Ky. 634 , 140 S.W. 1011, 1911 Ky. LEXIS 899 ( Ky. 1911 ) (decided under prior law).

5.Transfer of Shares.

A corporation was liable for paying dividends to the record owner of stock where the only other person who had ever claimed any right to the stock had relinquished such right by a formal assignment to the record owner, duly made and exhibited to the proper officers of the corporation. Greasy Brush Coal Co. v. Hays, 292 Ky. 517 , 166 S.W.2d 983, 1942 Ky. LEXIS 115 ( Ky. 1942 ) (decided under prior law).

A corporation owed a duty to its stockholders to exercise reasonable diligence, in every case where notice of any infirmity in the holder’s title had been brought to it, to ascertain whether or not a requested transfer of the stock was duly authorized to be made. Kentucky Utilities Co. v. Skaggs, 293 Ky. 622 , 169 S.W.2d 809, 1943 Ky. LEXIS 670 ( Ky. 1943 ) (decided under prior law).

A corporation was justified in refusing to transfer stock of one of its stockholders where it was put on notice of his mental condition and the facts were such as to raise a reasonable doubt of his mental capacity to transact business. Kentucky Utilities Co. v. Skaggs, 293 Ky. 622 , 169 S.W.2d 809, 1943 Ky. LEXIS 670 ( Ky. 1943 ) (decided under prior law).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

ALR

Validity of cancellation of accrued dividends on preferred corporate stock. 8 A.L.R.2d 893.

Rights of preferred stockholders as passed or accumulated dividends in going concern. 27 A.L.R.2d 1073.

Reduction of preferred stock of corporation. 35 A.L.R.2d 1149, 1175.

Validity, construction, and effect of articles of incorporation or stock certificates relating to call, redemption, or retirement of common stock. 48 A.L.R.2d 392.

Inadequate capitalization as factor in disregard of corporate entity. 63 A.L.R.2d 1051.

Power of corporation to change existing redemption rights of common stock shareholders. 70 A.L.R.2d 843.

Failure to issue stock as factor in disregard of corporate entity. 8 A.L.R.3d 1122.

Propriety of applying minority discount to value of shares purchased by corporation or its shareholders from minority shareholders, 13 A.L.R.5th 840.

271B.6-020. Terms of class or series determined by board of directors — Articles of amendment.

  1. If the articles of incorporation so provide, the board of directors may determine, in whole or in part, the preferences, limitations, and relative rights, within the limits set forth in KRS 271B.6-010 , of:
    1. Any class of shares before the issuance of any shares of that class; or
    2. One (1) or more series within a class before the issuance of any shares of that series.
  2. Each series of a class shall be given a distinguishing designation.
  3. All shares of a series shall have preferences, limitations, and relative rights identical with those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those of other series of the same class.
  4. Before issuing any shares of a class or series created under this section, the corporation shall deliver to the Secretary of State for filing articles of amendment, which are effective without shareholder action, that set forth:
    1. The name of the corporation;
    2. The text of the amendment determining the terms of the class or series of shares;
    3. The date it was adopted; and
    4. A statement that the amendment was duly adopted by the board of directors.
  5. The board of directors may adopt articles of amendment without shareholder action to make any of the following changes to a class or series created under this section:
    1. Increase the number of shares of a series but not above the total number of authorized and unissued shares of the class;
    2. Decrease the number of shares of a series but not below the number of shares of the series then issued and outstanding;
    3. Amend the designation, preferences, limitations, or relative rights of the shares of a class or series if no shares of the class or series are then issued or outstanding; or
    4. Eliminate the designation of, and all references to, a series from the articles of incorporation if no shares of the series are then issued and outstanding.
  6. If an amendment reduces the number of shares of a series, or eliminates a series, the shares previously subject to issuance in the series shall return to the status they had before the creation of the series.
  7. Articles of amendment adopted pursuant to subsection (5) of this section shall be delivered to the Secretary of State for filing and shall state:
    1. The name of the corporation;
    2. The designation of the class or series subject to the amendment;
    3. The text of the amendment changing the class or series;
    4. The date the amendment was adopted; and
    5. A statement that the amendment was duly adopted by the board of directors.

History. Enact. Acts 1988, ch. 23, § 34, effective January 1, 1989; 2002, ch. 102, § 8, effective July 15, 2002.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.6-030. Issued and outstanding shares.

  1. A corporation may issue the number of shares of each class or series authorized by the articles of incorporation. Shares that are issued shall be outstanding shares until they are reacquired, redeemed, converted, or canceled.
  2. The reacquisition, redemption, or conversion of outstanding shares shall be subject to the limitations of subsection (3) of this section and to KRS 271B.6-400 .
  3. At all times that shares of the corporation are outstanding, one (1) or more shares that together have unlimited voting rights and one (1) or more shares that together are entitled to receive the net assets of the corporation upon dissolution shall be outstanding.

History. Enact. Acts 1988, ch. 23, § 35, effective January 1, 1989.

271B.6-040. Fractional shares.

  1. A corporation may:
    1. Issue fractions of a share or pay in money the value of fractions of a share;
    2. Arrange for disposition of fractional shares by the shareholders; and
    3. Issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share.
  2. Each certificate representing scrip shall be conspicuously labeled “scrip” and shall contain the information required by subsection (2) of KRS 271B.6-250 .
  3. The holder of a fractional share shall be entitled to exercise the rights of a shareholder, including the right to vote, to receive dividends, and to participate in the assets of the corporation upon liquidation. The holder of scrip shall not be entitled to any of these rights unless the scrip provides for them.
  4. The board of directors may authorize the issuance of scrip subject to any condition considered desirable, including:
    1. That the scrip will become void if not exchanged for full shares before a specified date; and
    2. That the shares for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders.

History. Enact. Acts 1988, ch. 23, § 36, effective January 1, 1989.

Issuance of Shares

271B.6-200. Subscription of shares before incorporation.

  1. A subscription for shares entered into before incorporation shall be irrevocable for six (6) months, unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation.
  2. The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors shall be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise.
  3. Shares issued pursuant to subscriptions entered into before incorporation shall be fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement.
  4. If a subscriber defaults in payment of money or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the shares if the debt remains unpaid more than twenty (20) days after the corporation sends written demand for payment to the subscriber.
  5. A subscription agreement entered into after incorporation shall be a contract between the subscriber and the corporation subject to KRS 271B.6-210 .

History. Enact. Acts 1988, ch. 23, § 37, effective January 1, 1989.

NOTES TO DECISIONS

1.Formal Subscription.

A formal subscription was unnecessary if the stock had been bought and paid for. In re Kentucky Wagon Mfg. Co., 3 F. Supp. 958, 1932 U.S. Dist. LEXIS 1514 (D. Ky. 1932 ), aff’d, 71 F.2d 802, 1934 U.S. App. LEXIS 3216 (6th Cir. 1934), cert. denied, Laurent v. Stites, 293 U.S. 612, 55 S. Ct. 142, 79 L. Ed. 701, 1934 U.S. LEXIS 1050 (1934) (decided under prior law).

2.Release.

For a valuable consideration and in the absence of fraud a corporation could release part or all of a subscription when there were no creditors and when the present and incoming stockholders consented. In no event could a subsequent creditor complain. E. M. T. Coal Co. v. Rogers, 216 Ky. 440 , 288 S.W. 342, 1926 Ky. LEXIS 980 ( Ky. 1926 ) (decided under prior law).

Research References and Practice Aids

ALR

Enforcement of stock subscription after suit on note of subscriber is barred by statute. 11 A.L.R.2d 1380.

Conversion by promoter of money paid for a preincorporation subscription for stock shares as embezzlement. 84 A.L.R.2d 1100.

271B.6-210. Issuance of shares.

  1. The powers granted in this section to the board of directors may be reserved to the shareholders by the articles of incorporation.
  2. The board of directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation.
  3. Before the corporation issues shares, the board of directors shall determine that the consideration received or to be received for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid, and nonassessable.
  4. When the corporation receives the consideration for which the board of directors authorized the issuance of shares in accordance with this section, the shares issued therefor are fully paid and nonassessable. When, and to the extent, consideration for the issuance of shares consists of a promissory note or contract for services or other benefits, the shares shall be fully paid and nonassessable at the time the note is issued or the contract is entered into.
  5. The board of directors, or a committee of the board of directors, may authorize one (1) or more officers of the corporation to approve the issuance, sale, or contract for sale of shares or to determine the designation and relative rights, preferences, and limitations of a class or series of shares, all within limits specifically prescribed by the board of directors or the committee.

History. Enact. Acts 1988, ch. 23, § 38, effective January 1, 1989; 2002, ch. 102, § 9, effective July 15, 2002; 2002, ch. 102, § 10, effective November 15, 2002.

Legislative Research Commission Note.

(6/26/2007). 2007 Ky. Acts ch. 137, sec. 179, effective June 26, 2007 provided: The General Assembly finds and declares that the amendment of KRS 271B.6-210 , 271B.6-230 , 271B.7-040 , 271B.7-280 , and 271B.8-080 , as provided for in 2002 Ky. Acts ch. 102, secs. 10, 11, 15, 18, and 19, respectively, are and were effective as of November 15, 2002.

(11/15/02). 2002 Ky. Acts ch. 102, sec. 22, provides that this section “shall take effect November 15, 2002, if a constitutional amendment proposing to amend Sections 190, 191, 192, 193, 194, 195, 198, 200, 202, 203, 205, 207 and 208 of the Constitution of Kentucky relating to corporations is enacted by the General Assembly and approved by the voters in the November, 2002 general election.” Otherwise, this section shall be void.

A constitutional amendment proposing to amend 11 of those 13 sections of the Constitution was enacted by the General Assembly and approved by the voters. During the 2002 Regular Session, the General Assembly enacted 2002 Ky. Acts ch. 341, which proposed to amend Sections 190, 191, 192, 193, 194, 198, 200, 202, 203, 207, and 208 of the Constitution of Kentucky. The voters approved that amendment in the November, 2002 general elections.

Research References and Practice Aids

Kentucky Bench & Bar.

Young, Modernizing Kentucky’s Corporate Laws, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 12.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.6-220. Liability of shareholders.

  1. A purchaser from a corporation of its own shares shall not be liable to the corporation or its creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued or specified in the subscription agreement.
  2. Unless otherwise provided in the articles of incorporation, a shareholder of a corporation shall not be personally liable for the acts or debts of the corporation except that he or she may become personally liable by reason of his own acts or conduct.
  3. That a corporation has a single shareholder is not a basis for setting aside the rule recited in subsection (2) of this section.

History. Enact. Acts 1988, ch. 23, § 39, effective January 1, 1989; 2012, ch. 81, § 88, effective July 12, 2012.

NOTES TO DECISIONS

Analysis

1.Allegations That Misrepresentations Were Acts of Shareholders and Not Corporation.

Home owners’ fraudulent or negligent misrepresentation claims and a declaratory judgment claim against a construction company’s shareholders would not be dismissed under Fed. R. Civ. P. 12(b)(6) on the ground that the shareholders could not be personally liable under KRS 271B.6-220 (2) because the alleged misrepresentations were acts of the company, as the owners sufficiently alleged that the acts were the acts of the shareholders and not the company. Although the argument of the company and the shareholders might ultimately prevail, the court could only consider the facts as alleged in the complaint on a motion to dismiss. Schejbal v. Faulkner Eng'g & Constr., Inc., 2005 U.S. Dist. LEXIS 15323 (W.D. Ky. July 27, 2005).

2.Personal Liability.

Where the one owner continued to reach agreements with the construction company that was owed money by one owner’s administratively dissolved corporation, in the years after the money was owed, the one owner could not show that the one owner was not personally liable for the agreement the one owner made to guarantee the construction company payment in return for the construction company executing a lien waiver, which was an agreement the one owner did not fully perform. The one owner was not protected by KRS 271B.14-050 since the one owner’s conduct did not involve winding up the business and even though the one owner would normally be shielded from personal liability as a shareholder, the one owner was not so protected by KRS 271B.6-220 (2) because the administratively dissolved corporation had been dissolved by the time the one owner entered into the agreement. Martin v. Pack's Inc., 358 S.W.3d 481, 2011 Ky. App. LEXIS 187 (Ky. Ct. App. 2011).

Husband and wife who owned and operated a Kentucky oil and gas drilling company were ordered to pay investors $5,662,662 in compensatory damages plus prejudgment interest because they committed fraud, breach of contract, and conversion when they made misrepresentations that induced an elderly investor, members of his family, and family trusts to invest in nonexistent and worthless gas wells, and the debt was nondischargeable under 11 U.S.C.S. § 523. The court found that the husband and wife were personally liable for the fact that the company breached contracts with the investors because the company was the husband and wife’s alter ego and piercing the corporate veil was necessary to prevent the husband and wife from perpetuating a fraud and committing other illegal acts in the name of the company and then avoiding responsibility by hiding behind the corporate shield; the company did not maintain permanent corporate records, as required by KRS 271B.16-010 , and the husband and wife transferred significant amounts of money from the company to their personal bank accounts and used the money to pay personal expenses. Fontaine v. P&J Resources, Inc. (In re P&J Resources Inc.), 475 B.R. 838, 2012 Bankr. LEXIS 2167 (Bankr. E.D. Ky. 2012 ).

3.Subscriptions.

The subscriptions must be made in good faith and with the intention of paying therefor in cash or its equivalent. Smith v. Crawford, 228 Ky. 420 , 15 S.W.2d 249, 1929 Ky. LEXIS 556 ( Ky. 1929 ) (decided under prior law).

4.Tort Liability.

One’s position as an officer or shareholder in a corporation fails to immunize him from tort liability in circumstances where he would be otherwise liable if he were not a shareholder. Smith v. Isaacs, 777 S.W.2d 912, 1989 Ky. LEXIS 87 ( Ky. 1989 ) (decided under former KRS 271A.125 ).

Notes to Unpublished Decisions

1.Tort Liability.

Unpublished decision: District court erred when it found that a shareholder could not be personally liable for conversion where the proceeds of a sale of equipment that secured creditor’s loan were used to pay off another creditor because the proceeds were maintained in the corporation’s account. Under Kentucky law, if the shareholder was responsible for the transfer of funds to pay off the other creditor and was acting on behalf of the corporation, he could be personally liable for the tort of conversion. CNH Capital Am. LLC v. Hunt Tractor, Inc., 2014 FED App. 0477N, 2014 U.S. App. LEXIS 12722 (6th Cir. Ky. July 2, 2014).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge & Honabach, Kentucky Business Entity Laws: The 2010 Amendments, Vol. 74, No. 5, September 2010, Ky. Bench & Bar 6.

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Northern Kentucky Law Review.

Mellen, Myre and Lee, Limited Liability Companies and Registered Limited Liability Partnerships in Kentucky: A Practical Analysis, 22 N. Ky. L. Rev. 229 (1995).

ALR

Promise by stockholder to pay debt of corporation. 35 A.L.R.2d 906.

Enforceability in another jurisdiction of personal liability of stockholders for debts of corporation whose organization is incomplete or defective. 42 A.L.R.2d 659.

271B.6-230. Share dividends.

  1. Unless the articles of incorporation provide otherwise, shares may be issued pro rata and without consideration to the corporation’s shareholders or to the shareholders of one (1) or more classes or series. An issuance of shares under this subsection shall be considered a share dividend.
  2. Shares of one (1) class or series may not be issued as a share dividend in respect of shares of another class or series unless:
    1. The articles of incorporation so authorize;
    2. A majority of the votes entitled to be cast by the class or series to be issued approve the issue; or
    3. There are no outstanding shares of the class or series to be issued.
  3. If the board of directors does not fix the record date for determining shareholders entitled to a share dividend, it shall be the date the board of directors authorizes the share dividend.

History. Enact. Acts 1988, ch. 23, § 40, effective January 1, 1989; 2002, ch. 102, § 11, effective November 15, 2002.

Legislative Research Commission Note.

(6/26/2007). 2007 Ky. Acts ch. 137, sec. 179, effective June 26, 2007 provided: The General Assembly finds and declares that the amendment of KRS 271B.6-210 , 271B.6-230 , 271B.7-040 , 271B.7-280 , and 271B.8-080 , as provided for in 2002 Ky. Acts ch. 102, secs. 10, 11, 15, 18, and 19, respectively, are and were effective as of November 15, 2002.

(11/15/2002). 2002 Ky. Acts ch. 102, sec. 22, provides that this section “shall take effect November 15, 2002, if a constitutional amendment proposing to amend Sections 190, 191, 192, 193, 194, 195, 198, 200, 202, 203, 205, 207 and 208 of the Constitution of Kentucky relating to corporations is enacted by the General Assembly and approved by the voters in the November, 2002 general election.” Otherwise, [this section] shall be void.

A constitutional amendment proposing to amend 11 of those 13 sections of the Constitution was enacted by the General Assembly and approved by the voters. During the 2002 Regular Session, the General Assembly enacted 2002 Ky. Acts ch. 341, which proposed to amend Sections 190, 191, 192, 193, 194, 198, 200, 202, 203, 207, and 208 of the Constitution of Kentucky. The voters approved that amendment in the November, 2002 general elections.

Research References and Practice Aids

Kentucky Bench & Bar.

Young, Modernizing Kentucky’s Corporate Laws, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 12.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.6-240. Share options.

  1. A corporation may issue rights, options, or warrants for the purchase of shares of the corporation. The board of directors shall determine the terms upon which the rights, options, or warrants are issued, their form and content, and the terms and conditions upon which and the consideration for which the shares are to be issued.
    1. The board of directors may, by a resolution adopted by the board, authorize one (1) or more officers of the corporation to do one (1) or more of the following: (2) (a) The board of directors may, by a resolution adopted by the board, authorize one (1) or more officers of the corporation to do one (1) or more of the following:
      1. Designate officers and employees of the corporation or of any of its subsidiaries to receive rights, options, or warrants to be issued by the corporation;
      2. Determine the number of rights, options, or warrants to be issued to each recipient; and
      3. Determine the time or times at or during which rights, options, or warrants may be exercised.
    2. Any resolution adopted pursuant to paragraph (a) of this subsection shall specify the total number of rights, options, or warrants the officer or officers may award.
    3. The board of directors shall not authorize an officer to designate himself or herself as a recipient of any rights, options, or warrants.

History. Enact. Acts 1988, ch. 23, § 41, effective January 1, 1989; 2002, ch. 102, § 12, effective July 15, 2002.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.6-250. Form and content of certificate.

  1. Shares may but need not be represented by certificates. Unless this chapter or another statute expressly provides otherwise, the rights and obligations of shareholders shall be identical whether or not their shares are represented by certificates.
  2. At a minimum each share certificate shall state on its face:
    1. The name of the issuing corporation and that it is organized under the law of this state;
    2. The name of the person to whom issued; and
    3. The number and class of shares and the designation of the series, if any, the certificate represents.
  3. If the issuing corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the board of directors to determine variations for future series) shall be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge.
  4. Each share certificate:
    1. Must be signed (either manually or in facsimile) by two (2) officers designated in the bylaws or by the board of directors; and
    2. May bear the corporate seal or its facsimile.
  5. If the person who signed (either manually or in facsimile) a share certificate no longer holds office when the certificate is issued, the certificate shall nevertheless be valid.

History. Enact. Acts 1988, ch. 23, § 42, effective January 1, 1989.

Research References and Practice Aids

ALR

Sufficiency of evidence as to delivery of stock certificate to complete valid gift of stock. 23 A.L.R.2d 1171.

271B.6-260. Shares without certificates — Shares of a public benefit corporation.

  1. Unless the articles of incorporation or bylaws provide otherwise, the board of directors of a corporation may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. The authorization shall not affect shares already represented by certificates until they are surrendered to the corporation.
  2. Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates by subsections (2) and (3) of KRS 271B.6-250 and, if applicable, KRS 271B.6-270 .
  3. Any stock certificate issued by a public benefit corporation shall note conspicuously that the corporation is a public benefit corporation.

HISTORY: Enact. Acts 1988, ch. 23, § 43, effective January 1, 1989; 2017 ch. 28, § 5, effective June 29, 2017.

271B.6-270. Restrictions on transfer or registration of shares or other securities.

  1. The articles of incorporation, bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction shall not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction.
  2. A restriction on the transfer or registration of transfer of shares shall be valid and enforceable against the holder, or a transferee of the holder if the restriction is authorized by this section, and the holder or transferee has actual knowledge of the restriction or its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by KRS 271B.6-260 (2). Unless so noted or contained, a restriction is not enforceable against a person without knowledge of the restriction.
  3. A restriction on the transfer or registration of transfer of shares shall be authorized:
    1. To maintain the corporation’s status when it is dependent on the number or identity of its shareholders;
    2. To preserve exemptions under federal or state securities law;
    3. In connection with shares issued by the corporation to its officers, directors, employees, or independent contractors, including as equity-based compensation under the Internal Revenue Code; or
    4. For any other reasonable purpose.
  4. A restriction on the transfer or registration of transfer of shares may without limitation:
    1. Obligate the shareholder first to offer the corporation or other persons, separately, consecutively, or simultaneously, an opportunity to acquire the restricted shares;
    2. Obligate the corporation or other persons, separately, consecutively, or simultaneously, to acquire or transfer the restricted shares;
    3. Obligate a shareholder to transfer the restricted shares to the corporation or other persons for an agreed price or a price based on a valuation formula, including an obligation to transfer the shares for an amount equal to the original consideration paid for the shares;
    4. Require the corporation, the holders of any class of its shares, or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable; or
    5. Prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable.
  5. For purposes of this section, “shares” includes a security convertible into or carrying a right to subscribe for or acquire shares.

History. Enact. Acts 1988, ch. 23, § 44, effective January 1, 1989; 2002, ch. 102, § 13, effective July 15, 2002; 2007, ch. 137, § 61, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 61, effective July 15, 2010.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

ALR

Uniform Stock Transfer Act: construction and effect of § 15 prohibiting restriction on transfer of shares unless such restriction is stated on the certificate. 29 A.L.R.2d 901.

Right of corporation to refuse to transfer stock on presentation of properly indorsed certificate, because of conflicting rights or claims of one other than transferee. 75 A.L.R.2d 746.

Corporation’s delivery of stock certificate to stockholder as prerequisite of its issuance to him. 16 A.L.R.3d 1015.

271B.6-280. Expense of issue.

A corporation may pay or allow the expenses of selling or underwriting its shares or other securities, and of organizing or reorganizing the corporation, from the consideration received for shares without thereby rendering such shares or other securities not fully paid or assessable.

History. Enact. Acts 1988, ch. 23, § 45, effective January 1, 1989.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Subsequent Acquisition of Shares by Shareholders and Corporation

271B.6-300. Shareholders’ preemptive rights.

  1. The shareholders of a corporation shall not have a preemptive right to acquire the corporation’s unissued shares except:
    1. To the extent the articles of incorporation so provide; and
    2. To the extent provided in subsection (4) of this section.
  2. A statement included in the articles of incorporation that “the corporation elects to have preemptive rights” (or words of similar import) means that the following principles apply, except to the extent the articles of incorporation expressly provide otherwise:
    1. The shareholders of the corporation shall have a preemptive right granted on uniform terms and conditions prescribed by the board of directors, to provide a fair and reasonable opportunity to exercise the right to acquire proportional amounts of the corporation’s unissued shares upon the decision of the board of directors to issue them.
    2. A shareholder may waive his preemptive right. A waiver evidenced by a writing shall be irrevocable even though it is not supported by consideration.
    3. There shall be no preemptive right with respect to:
      1. Shares issued as compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates;
      2. Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates;
      3. Shares authorized in articles of incorporation that are issued within six (6) months from the effective date of incorporation; and
      4. Shares sold otherwise than for money.
    4. Holders of shares of any class without general voting rights but with preferential rights to distributions or assets shall have no preemptive rights with respect to shares of any class.
    5. Holders of shares of any class with general voting rights but without preferential rights to distributions or assets shall have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights.
    6. Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person for a period of one (1) year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one (1) year shall be subject to the shareholders’ preemptive rights.
  3. For purposes of this section, “shares” include a security convertible into or carrying a right to subscribe for or acquire shares.
  4. Except to the extent limited or denied by this subsection, shareholders of a corporation that existed on January 1, 1989, whose articles of incorporation did not on January 1, 1989, contain a provision specifically addressing preemptive rights shall have a preemptive right to acquire unissued shares or securities convertible into such shares or carrying a right to subscribe to or acquire shares.
    1. No preemptive right shall exist:
      1. To acquire any shares issued to directors, officers, or employees pursuant to approval by the affirmative vote of the holders of a majority of the shares entitled to vote thereon or when authorized by and consistent with a plan theretofore approved by such a vote of shareholders; or
      2. To acquire any shares sold otherwise than for cash.
    2. Holders of shares of any class that is preferred or limited as to dividends or assets shall not be entitled to any preemptive right.
    3. Holders of shares of any class with general voting rights but without preferential rights to distributions or assets shall not be entitled to any preemptive right to shares of any class that is preferred or limited as to dividends or assets or to any obligations, unless convertible into shares of any class with general voting rights but without preferential rights to distributions or assets, or carrying a right to subscribe to or acquire shares of any class with general voting rights but without preferential rights to distributions or assets.
    4. Holders of shares of any class without general voting rights shall have no preemptive rights to shares of a class which is identical as to rights except that the class has general voting rights.
    5. The preemptive right shall be only an opportunity to acquire shares or other securities under such terms and conditions as the board of directors may fix for the purpose of providing a fair and reasonable opportunity to exercise such right.
    6. This subsection shall not apply to any class of stock of any corporation after the corporation’s articles of incorporation are amended to limit or deny the preemptive rights of any class of its stock.

History. Enact. Acts 1988, ch. 23, § 46, effective January 1, 1989; 1990, ch. 441, § 1, effective July 13, 1990.

271B.6-310. Corporation’s acquisition of its own shares.

  1. A corporation may acquire its own shares and shares so acquired shall constitute authorized but unissued shares.
  2. If the articles of incorporation prohibit the reissue of acquired shares, the number of authorized shares shall be reduced by the number of shares acquired, effective upon amendment of the articles of incorporation.
  3. Articles of amendment may be adopted by the board of directors without shareholder action, and shall be delivered to the Secretary of State for filing, and shall set forth:
    1. The name of the corporation;
    2. The reduction in the number of authorized shares, itemized by class and series; and
    3. The total number of authorized shares, itemized by class and series, remaining after reduction of the shares.

History. Enact. Acts 1988, ch. 23, § 47, effective January 1, 1989.

Research References and Practice Aids

ALR

Stockholder converting or selling stock to corporation as creditor in bankruptcy. 4 A.L.R. Fed. 654.

Reduction of capital stock and distribution of capital assets upon reduction. 35 A.L.R.2d 1149, 1175.

Rights of creditors of corporation with respect to its purchase or acquisition of its own stock. 47 A.L.R.2d 758.

Validity, construction, and effect of provisions of articles of incorporation or stock certificates relating to call, redemption, or retirement of common stock. 48 A.L.R.2d 392.

Propriety of applying minority discount to value of shares purchased by corporation or its shareholders from minority shareholders. 13 A.L.R.5th 840.

Distributions

271B.6-400. Distributions to shareholders.

  1. A board of directors may authorize and the corporation may make distributions to its shareholders subject to restriction by the articles of incorporation and the limitation in subsection (3) of this section.
  2. If the board of directors does not fix the record date for determining shareholders entitled to a distribution (other than one involving a purchase, redemption or other acquisition of the corporation’s shares), it shall be the date the board of directors authorizes the distribution.
  3. No distribution shall be made if, after giving it effect:
    1. The corporation would not be able to pay its debts as they become due in the usual course of business; or
    2. The corporation’s total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
  4. The board of directors may base a determination that a distribution is not prohibited under subsection (3) of this section either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
  5. Except as provided in subsection (7) of this section, the effect of a distribution under subsection (3) of this section shall be measured:
    1. In the case of distribution by purchase, redemption, or other acquisition of the corporation’s shares, as of the earlier of:
      1. The date money or other property is transferred or debt incurred by the corporation; or
      2. The date the shareholder ceases to be a shareholder with respect to the acquired shares;
    2. In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
    3. In all other cases, as of:
      1. The date the distribution is authorized if the payment occurs within one hundred twenty (120) days after the date of authorization; or
      2. The date the payment is made if it occurs more than one hundred twenty (120) days after the date of authorization.
  6. A corporation’s indebtedness to a shareholder incurred by a reason of a distribution made in accordance with this section shall be at parity with the corporation’s indebtedness to its general creditors except to the extent subordinated by agreement.
  7. Indebtedness of a corporation, including indebtedness issued as a distribution, shall not be considered a liability for purposes of determinations under subsection (3) of this section if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest shall be treated as a distribution, the effect of which is measured on the date the payment is actually made.

History. Enact. Acts 1988, ch. 23, § 48, effective January 1, 1989.

NOTES TO DECISIONS

1.Fiduciary.

No technical trust was created between Chapter 7 debtor and bank which made loans to debtor’s electrical construction business, which would have allowed debtor to be considered as a fiduciary: under criteria set out in this section, no trust relationship existed notwithstanding any inferences that might be drawn from it concerning a corporate directors “fiduciary” duty to the corporation’s shareholders. Peoples Bank & Trust Co. v. Penick (In re Penick), 199 B.R. 16, 1996 Bankr. LEXIS 948 (Bankr. E.D. Ky. 1996 ).

2.Tolling.

Doctrine of adverse domination may operate to toll the statute of limitations under KRS 271B.8-330 (3) and 271B.6-400 while directors, who are guilty of alleged misconduct, exercise control over a corporation. Wilson v. Paine, 288 S.W.3d 284, 2009 Ky. LEXIS 154 ( Ky. 2009 ).

Research References and Practice Aids

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Northern Kentucky Law Review.

Miller, Notes, Piercing the Corporate Veil in Kentucky: An Analysis of United States v. WRW Corp., 22 N. Ky. L. Rev. 541 (1995).

ALR

Cancellation of accrued dividends. 8 A.L.R.2d 893.

Overpayments of dividends on preferred stock as deductible in payment of dividends for later years. 10 A.L.R.2d 241.

Parties defendant to stockholder’s suit to compel declaration of dividend. 15 A.L.R.2d 1124.

Rights of preferred stockholders as to passed or accumulated dividends in going concern. 27 A.L.R.2d 1073.

Dividend rights in surplus of new consolidated corporation resulting from reduction of capital stock of former constituent corporations. 28 A.L.R.2d 1177.

Consequences to shareholder of dividend in kind. 56 A.L.R.2d 474.

Subtitle 7. Shareholders

Meetings

271B.7-010. Annual meeting.

  1. A corporation shall hold a meeting of shareholders annually at a time stated in or fixed in accordance with the bylaws.
  2. Annual shareholders’ meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation’s principal office.
  3. The failure to hold an annual meeting at the time stated in or fixed in accordance with a corporation’s bylaws shall not affect the validity of any corporate action.

History. Enact. Acts 1988, ch. 23, § 49, effective January 1, 1989.

Research References and Practice Aids

ALR

Remedies to restrain or compel holding of stockholders’ meetings. 48 A.L.R.2d 615.

271B.7-020. Special meeting.

  1. A corporation shall hold a special meeting of shareholders:
    1. On call of its board of directors or the person or persons authorized to do so by the articles of incorporation or bylaws; or
    2. If the holders of at least thirty-three and one-third percent (331/3%) (or such higher or lower percentage as is contained in the articles of incorporation) of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date, and deliver to the corporation’s secretary one (1) or more written demands for the meeting describing the purpose or purposes for which it is to be held.
  2. If not otherwise fixed under KRS 271B.7-030 or 271B.7-070 , the record date for determining shareholders entitled to demand a special meeting shall be the date the first shareholder signs the demand.
  3. Special shareholders’ meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated or fixed in accordance with the bylaws, special meetings shall be held at the corporation’s principal office.
  4. Only business within the purpose or purposes described in the meeting notice required by subsection (3) of KRS 271B.7-050 may be conducted at a special shareholders’ meeting.

History. Enact. Acts 1988, ch. 23, § 50, effective January 1, 1989.

Research References and Practice Aids

ALR

Service of process, holding directors’, officers’, stockholders’, or sales meetings or conventions in a state by foreign corporation as doing business or otherwise subjecting it to service of process and suit. 84 A.L.R.2d 412.

271B.7-030. Court-ordered meeting.

  1. The Circuit Court for the county where a corporation’s principal office (or, if none in this state, its registered office) is located may summarily order a meeting to be held:
    1. On application of any shareholder of the corporation entitled to participate in an annual meeting if an annual meeting was not held within the earlier of six (6) months after the end of the corporation’s fiscal year or fifteen (15) months after its last annual meeting; or
    2. On application of a shareholder who signed a demand for a special meeting valid under KRS 271B.7-020 , if:
      1. Notice of the special meeting was not given within thirty (30) days after the date the demand was delivered to the corporation’s secretary; or
      2. The special meeting was not held in accordance with the notice.
  2. The court may fix the time and place of the meeting, determine the shares entitled to participate in the meeting, specify a record date for determining shareholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting (or direct that the votes represented at the meeting constitute a quorum for action on those matters), and enter other orders necessary to accomplish the purpose or purposes of the meeting.

History. Enact. Acts 1988, ch. 23, § 51, effective January 1, 1989.

271B.7-040. Action without meeting.

  1. Except as provided in the articles of incorporation, action required or permitted by this chapter to be taken at a shareholders’ meeting may be taken without a meeting and without prior notice, except as provided in subsection (8) of this section, if the action is taken by all the shareholders entitled to vote on the action.
  2. If the articles of incorporation so provide, any action except the election of directors by cumulative voting pursuant to KRS 271B.7-280 required or permitted by this chapter to be taken at a shareholders’ meeting may be taken without a meeting and without prior notice, except as provided in subsection (8) of this section, if the action is taken by shareholders entitled to vote on the action representing not less than eighty percent (80%), or such higher percentage required by this chapter or the articles of incorporation, of the votes entitled to be cast.
  3. The action taken under this section shall be evidenced by one (1) or more written consents describing the action taken, signed by the shareholders taking the action, and delivered to the corporation for inclusion in the minutes or filing with the corporate records.
  4. Action taken under this section shall be effective when consents representing the votes necessary to take the action under this section are delivered to the corporation, or upon delivery of the consents representing the necessary votes, as of a different date if specified in the consent.
  5. Any shareholder giving a consent may revoke the consent by a writing received by the corporation prior to the time that consents representing the votes required to take the action under this section have been delivered to the corporation but may not do so thereafter.
  6. A consent signed under this section shall have the effect of a meeting vote and may be described as such in any document.
  7. Prompt notice of the taking of any action by shareholders without a meeting under this section by less than unanimous written consent shall be given to those shareholders entitled to vote on the action who have not consented in writing.
  8. If this chapter requires that notice of proposed action be given to nonvoting shareholders and the action is to be taken by consent of the voting shareholders under this section, the corporation shall give its nonvoting shareholders and voting shareholders whose consent is not solicited, written notice of the proposed action at least ten (10) days before the action is taken. The notice shall contain or be accompanied by the same material that, under this chapter, would have been required to be sent to nonvoting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.

History. Enact. Acts 1988, ch. 23, § 52, effective January 1, 1989; 2002, ch. 102, § 14, effective July 15, 2002; 2002, ch. 102, § 15, effective November 15, 2002.

Legislative Research Commission Note.

(6/26/2007). 2007 Ky. Acts ch. 137, sec. 179, effective June 26, 2007 provided: The General Assembly finds and declares that the amendment of KRS 271B.6-210 , 271B.6-230 , 271B.7-040 , 271B.7-280 , and 271B.8-080 , as provided for in 2002 Ky. Acts ch. 102, secs. 10, 11, 15, 18, and 19, respectively, are and were effective as of November 15, 2002.

(11/15/02). 2002 Ky. Acts ch. 102, sec. 22, provides that this section “shall take effect November 15, 2002, if a constitutional amendment proposing to amend Sections 190, 191, 192, 193, 194, 195, 198, 200, 202, 203, 205, 207 and 208 of the Constitution of Kentucky relating to corporations is enacted by the General Assembly and approved by the voters in the November, 2002 general election.” Otherwise, [this section] shall be void.

A constitutional amendment proposing to amend 11 of those 13 sections of the Constitution was enacted by the General Assembly and approved by the voters. During the 2002 Regular Session, the General Assembly enacted 2002 Ky. Acts ch. 341, which proposed to amend Sections 190, 191, 192, 193, 194, 198, 200, 202, 203, 207, and 208 of the Constitution of Kentucky. The voters approved that amendment in the November, 2002 general elections.

Research References and Practice Aids

Kentucky Bench & Bar.

Young, Modernizing Kentucky’s Corporate Laws, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 12.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

271B.7-050. Notice of meeting.

  1. A corporation shall notify shareholders of the date, time, and place of each annual and special shareholders’ meeting no fewer than ten (10) nor more than sixty (60) days before the meeting date. Unless this chapter or the articles of incorporation require otherwise, the corporation shall be required to give notice only to shareholders entitled to vote at the meeting.
  2. Unless this chapter or the articles of incorporation require otherwise, notice of an annual meeting shall not be required to include a description of the purpose or purposes for which the meeting is called.
  3. Notice of a special meeting shall include a description of the purpose or purposes for which the meeting is called.
  4. If not otherwise fixed under KRS 271B.7-030 or 271B.7-070 , the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders’ meeting shall be the day before the first notice is delivered to shareholders.
  5. Unless the bylaws require otherwise, if an annual or special shareholders’ meeting is adjourned to a different date, time, or place, notice shall not be required to be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed under KRS 271B.7-070 , however, notice of the adjourned meeting shall be given under this section to persons who are shareholders as of the new record date.

History. Enact. Acts 1988, ch. 23, § 53, effective January 1, 1989.

NOTES TO DECISIONS

1.Notice.

Stockholders who consented to or ratified the action of a stockholder’s meeting which increased the capital stock waived their right to object to lack of notice. Stutz v. Handley, 41 F. 531, 1890 U.S. App. LEXIS 2042 (6th Cir. 1890), rev’d, 139 U.S. 417, 11 S. Ct. 530, 35 L. Ed. 227, 1891 U.S. LEXIS 2394 (1891), rev’d on other grounds, Handley v. Stutz, 139 U.S. 417, 11 S. Ct. 530, 35 L. Ed. 227, 1891 U.S. LEXIS 2394 (1891) (decided under prior law).

Where stockholders were given notice of a corporate reorganization meeting but were not specifically put on notice of a merger, failure to comply with requirement of filing written objections did not preclude them from qualifying as objecting shareholders. Acree v. E. I. F. C., Inc., 502 S.W.2d 43, 1973 Ky. LEXIS 59 ( Ky. 1973 ) (decided under prior law).

271B.7-060. Waiver of notice.

  1. A shareholder may waive any notice required by this chapter, the articles of incorporation, or bylaws before or after the date and time stated in the notice. The waiver shall be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records.
  2. A shareholder’s attendance at a meeting shall:
    1. Waive objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and
    2. Waive objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.

History. Enact. Acts 1988, ch. 23, § 54, effective January 1, 1989.

Research References and Practice Aids

ALR

Participation in meeting as waiver of compliance with notice requirement for shareholders’ meeting. 64 A.L.R.3d 358.

271B.7-070. Record date.

  1. The bylaws may fix or provide the manner of fixing the record date for one (1) or more voting groups in order to determine the shareholders entitled to notice of a shareholders’ meeting, to demand a special meeting, to vote, or to take any other action. If the bylaws do not fix or provide for fixing a record date, the board of directors of the corporation may fix a future date as the record date.
  2. A record date fixed under this section shall not be more than seventy (70) days before the meeting or action requiring a determination of shareholders.
  3. A determination of shareholders entitled to notice of or to vote at a shareholders’ meeting shall be effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting.
  4. If a court orders a meeting adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting, it may provide that the original record date continues in effect or it may fix a new record date.

History. Enact. Acts 1988, ch. 23, § 55, effective January 1, 1989.

Research References and Practice Aids

ALR

Who may exercise voting power of corporate stock pending settlement of estate of deceased owner. 7 A.L.R.3d 629.

271B.7-080. Remote communication.

  1. If the board of directors is authorized to determine the place of an annual or special meeting of shareholders, the board of directors, in its sole discretion, may determine that the meeting shall not be held at any place but shall instead be held solely by means of remote communication under subsection (2) of this section.
  2. If authorized by the board of directors in its sole discretion, and subject to such guidelines and procedures as the board of directors may adopt, shareholders and proxyholders not physically present at a meeting of shareholders may by means of remote communication:
    1. Participate in a meeting of shareholders; and
    2. Be deemed present in person and vote at a meeting of shareholders, whether such meeting is to be held at a designated place or solely by means of remote communication, if:
      1. The corporation implements reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a shareholder or proxyholder;
      2. The corporation implements reasonable measures to provide shareholders and proxyholders referred to in subparagraph 1. of this paragraph a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with the proceedings; and
      3. The corporation records any vote or other action taken at the meeting by a shareholder or proxyholder by means of remote communication. The corporation shall maintain as a record the recorded vote or other action taken.

History. Enact. Acts 2002, ch. 102, § 21, effective July 15, 2002.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Voting

271B.7-200. Shareholders’ list for meeting.

  1. After fixing a record date for a meeting, a corporation shall prepare a list of the names of all its shareholders who are entitled to notice of a shareholders’ meeting. The list shall be arranged by voting group (and within each voting group by class or series of shares) and show the address of and number of shares held by each shareholder.
  2. The shareholders’ list shall be available for inspection by any shareholder, beginning five (5) business days before the meeting for which the list was prepared and continuing through the meeting, at the corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder, his agent, or attorney shall be entitled on written demand to inspect and, subject to the requirements of subsection (3) of KRS 271B.16-020 , to copy the list, during regular business hours and at his expense, during the period it is available for inspection.
  3. The corporation shall make the shareholders’ list available at the meeting, and any shareholder, his agent, or attorney shall be entitled to inspect the list at any time during the meeting or any adjournment.
  4. Refusal or failure to prepare or make available the shareholders’ list shall not affect the validity of action taken at the meeting.

History. Enact. Acts 1988, ch. 23, § 56, effective January 1, 1989.

271B.7-210. Voting entitlement of shares.

  1. Except as provided in subsections (2) and (4) of this section or unless the articles of incorporation provide otherwise, each outstanding share, regardless of class, shall be entitled to one (1) vote on each matter voted on at a shareholders’ meeting. Only shares shall be entitled to vote.
  2. Absent special circumstances, the shares of a corporation shall not be entitled to vote if they are owned, directly or indirectly, by an entity, domestic or foreign, and the corporation controls, directly or indirectly, the entity’s determination to vote, and how to vote, the shares.
  3. Subsection (2) of this section shall not limit the power of a corporation to vote any shares, including its own shares, held by it in a fiduciary capacity.
  4. Redeemable shares shall not be entitled to vote after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares.

History. Enact. Acts 1988, ch. 23, § 57, effective January 1, 1989; 2007, ch. 137, § 62, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 62, effective July 15, 2010.

NOTES TO DECISIONS

1.Cumulative Voting.

It was optional with the stockholder whether or not he should cast his votes cumulatively. Schmidt v. Mitchell, 101 Ky. 570 , 41 S.W. 929, 19 Ky. L. Rptr. 763 , 1897 Ky. LEXIS 223 ( Ky. 1897 ) (decided under prior law).

An election was valid if stockholders were not required to vote cumulatively and if they were not denied such right. Schmidt v. Mitchell, 101 Ky. 570 , 41 S.W. 929, 19 Ky. L. Rptr. 763 , 1897 Ky. LEXIS 223 ( Ky. 1897 ) (decided under prior law).

The purpose of allowing cumulative voting was to protect the rights of minority stockholders. Haldeman v. Haldeman, 176 Ky. 635 , 197 S.W. 376, 1917 Ky. LEXIS 95 ( Ky. 1917 ) (decided under prior law).

2.Fiduciaries.

Fiduciaries could vote stock held by them, although not transferred to their name, until settlement and division of the estate. Schmidt v. Mitchell, 101 Ky. 570 , 41 S.W. 929, 19 Ky. L. Rptr. 763 , 1897 Ky. LEXIS 223 ( Ky. 1897 ) (decided under prior law).

3.Proxy.

A joint owner who was present at an election had, in the absence of his co-owners, the right to vote the stock, and such a vote revoked a proxy theretofore given by a co-owner. Schmidt v. Mitchell, 101 Ky. 570 , 41 S.W. 929, 19 Ky. L. Rptr. 763 , 1897 Ky. LEXIS 223 ( Ky. 1897 ) (decided under prior law).

4.Voters.

Persons who appeared as owners of stock on the corporate books as of the date of a stockholder’s meeting were prima facie entitled to vote said stock. Bernheim v. Louisville Property Co., 221 F. 273, 1914 U.S. Dist. LEXIS 1293 (D. Ky. 1914 ) (decided under prior law).

NOTES TO UNPUBLISHED DECISIONS

1.Voters.

Shareholders generally have no individual liability, they purchase shares for consideration, and in return, they have a right to vote those shares; if they do not own the majority of the shares, they should recognize that they may be outvoted. Conlon v. Haise, 2016 Ky. App. Unpub. LEXIS 884 (Ky. Ct. App. Sept. 30, 2016), review denied, ordered not published, 2017 Ky. LEXIS 55 (Ky. Feb. 9, 2017).

Tools of good corporate practice are designed to give a purchasing minority shareholder the opportunity to bargain for protection before parting with consideration; it would do violence to normal corporate practice and the corporation law to impose a duty on the majority to vote their shares in the minority's interests as opposed to their interests. Conlon v. Haise, 2016 Ky. App. Unpub. LEXIS 884 (Ky. Ct. App. Sept. 30, 2016), review denied, ordered not published, 2017 Ky. LEXIS 55 (Ky. Feb. 9, 2017).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

Article: Say on Pay’s Bundling Problems, 99 Ky. L.J. 119 (2010/2011).

ALR

Construction, application, and effect of constitutional provisions or statutes relating to cumulative voting of stock for corporate directors. 43 A.L.R.2d 1332.

Validity and effect of agreement controlling the vote of corporate stock. 45 A.L.R.2d 799.

Jointly held or fractional share in corporation, voting of. 98 A.L.R.2d 357.

Casting ballots after closing of polls. 41 A.L.R.3d 234.

Right, as between pledgor and pledgee, to vote pledged stock. 68 A.L.R.3d 680.

271B.7-220. Proxies.

  1. A shareholder may vote his or her shares in person or by proxy.
  2. A shareholder, or his or her agent or attorney-in-fact, may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form or by an electronic transmission. An electronic transmission shall contain, or be accompanied by, information from which one can determine that the shareholder, the shareholder’s agent, or the shareholder’s attorney-in-fact authorized the electronic transmission.
  3. An appointment of a proxy shall be effective when a signed appointment form or an electronic transmission of the appointment is received by the secretary or other officer or agent authorized to tabulate votes. An appointment shall be valid for eleven (11) months unless a longer period is expressly provided in the appointment form.
  4. An appointment of a proxy shall be revocable unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest. Appointments coupled with an interest include the appointment of:
    1. A pledgee;
    2. A person who purchased or agreed to purchase the shares;
    3. A creditor of the corporation who extended it credit under terms requiring the appointment;
    4. An employee of the corporation whose employment contract requires the appointment; or
    5. A party to a voting agreement created under KRS 271B.7-310 .
  5. The death or incapacity of the shareholder appointing a proxy shall not affect the right of the corporation to accept the proxy’s authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment.
  6. An appointment made irrevocable under subsection (4) of this section shall be revocable when the interest with which it is coupled is extinguished. The revocation of an appointment under this subsection shall not be effective until the secretary of the corporation has received written notice of the revocation.
  7. A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if he did not know of its existence when he acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares or on the information statement for shares without certificates.
  8. Subject to KRS 271B.7-240 and to any express limitation on the proxy’s authority stated in the appointment form or electronic transmission, a corporation shall be entitled to accept the proxy’s vote or other action as that of the shareholder making the appointment.

History. Enact. Acts 1988, ch. 23, § 58, effective January 1, 1989; 2002, ch. 102, § 16, effective July 15, 2002.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.7-230. Shares held by nominees.

  1. A corporation may establish a procedure by which the beneficial owner of shares that are registered in the name of a nominee is recognized by the corporation as the shareholder. The extent of this recognition may be determined in the procedure.
  2. The procedure may set forth:
    1. The types of nominees to which it applies;
    2. The rights or privileges that the corporation recognizes in a beneficial owner;
    3. The manner in which the procedure is selected by the nominee;
    4. The information that must be provided when the procedure is selected;
    5. The period for which selection of the procedure is effective; and
    6. Other aspects of the rights and duties created.

History. Enact. Acts 1988, ch. 23, § 59, effective January 1, 1989.

271B.7-240. Corporation’s acceptance of votes and persons authorized to vote shares.

  1. If the name signed on or submitted with a vote, consent, waiver, or proxy appointment corresponds to the name or electronic signature of a shareholder, the corporation if acting in good faith shall be entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder. For purposes of this section, a telegram or cablegram appearing to have been transmitted by the proper person, or a photographic, photostatic, or equivalent reproduction of a writing appointing a proxy may be accepted by the corporation, if acting in good faith, as a sufficient, signed appointment form.
  2. If the name signed on or submitted with a vote, consent, waiver, or proxy appointment does not correspond to the name or electronic signature of its shareholder, the corporation if, acting in good faith, shall nevertheless be entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:
    1. The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;
    2. The name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
    3. The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
    4. The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory’s authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or
    5. Two (2) or more persons are the shareholder as cotenants or fiduciaries and the name signed purports to be the name of at least one (1) of the co-owners and the person signing appears to be acting on behalf of all the co-owners.
  3. The corporation shall be entitled to reject a vote, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the shareholder or, in the case of an electronic record, to affix the shareholder’s electronic signature to the electronic record.
  4. The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section or KRS 271B.7-220 (2) shall not be liable in damages to the shareholder for the consequences of the acceptance or rejection.
  5. Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section or KRS 271B.7-220 (2) shall be valid, unless a court of competent jurisdiction determines otherwise.
  6. Shares standing in the name of another corporation, domestic or foreign, may be voted by either the president of such corporation or by proxy appointed by him, unless the board of directors of such other corporation authorizes another person to vote such shares.
  7. Shares held by an administrator, executor, guardian, or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name.
  8. Where shares are held jointly by three (3) or more fiduciaries acting under an instrument becoming effective after June 30, 1946, the will of the majority of such fiduciaries shall control the manner of voting or the giving of a proxy, unless the instrument or order appointing the fiduciaries otherwise directs. Where, in any case, fiduciaries are equally divided upon the manner of voting shares jointly held by them, any court of competent jurisdiction may, upon petition filed by any of the fiduciaries, or by any beneficiary, appoint an additional person to act with the fiduciaries in determining the manner in which the shares shall be voted upon the particular questions as to which the fiduciaries are divided.
  9. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed.
  10. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the share so transferred.

History. Enact. Acts 1988, ch. 23, § 60, effective January 1, 1989; 2002, ch. 102, § 17, effective July 15, 2002.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.7-250. Quorum and voting requirements for voting groups.

  1. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the articles of incorporation or this chapter provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group shall constitute a quorum of that voting group for action on that matter.
  2. Once a share is represented for any purpose at a meeting, it shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting, unless a new record date is or must be set for that adjourned meeting.
  3. If a quorum exists, action on a matter (other than the election of directors) by a voting group shall be approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or this chapter require a greater number of affirmative votes.
  4. An amendment of articles of incorporation adding, changing, or deleting a quorum or voting requirement for a voting group greater than specified in subsection (1) or (3) of this section shall be governed by KRS 271B.7-270 .
  5. The election of directors shall be governed by KRS 271B.7-280 .

History. Enact. Acts 1988, ch. 23, § 61, effective January 1, 1989.

271B.7-260. Action by single and multiple voting groups.

  1. If the articles of incorporation or this chapter provide for voting by a single voting group on a matter, action on that matter shall be taken when voted upon by that voting group as provided in KRS 271B.7-250 .
  2. If the articles of incorporation or this chapter provide for voting by two (2) or more voting groups on a matter, action on that matter shall be taken only when voted upon by each of those voting groups counted separately as provided in KRS 271B.7-250 . Action may be taken by one (1) voting group on a matter even though no action is taken by another voting group entitled to vote on the matter.

History. Enact. Acts 1988, ch. 23, § 62, effective January 1, 1989.

271B.7-270. Greater quorum or voting requirements.

  1. The articles of incorporation may provide for a greater quorum or voting requirement for shareholders (or voting groups of shareholders) than is provided for by this chapter.
  2. An amendment to the articles of incorporation that adds, changes, or deletes a greater quorum or voting requirement shall meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.

History. Enact. Acts 1988, ch. 23, § 63, effective January 1, 1989; 2007, ch. 137, § 63, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 63, effective July 15, 2010.

Research References and Practice Aids

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.7-280. Voting for directors — Cumulative voting.

  1. Unless otherwise provided in the articles of incorporation, directors are elected by a plurality of votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. A “plurality” means that the individuals with the largest number of votes are elected as directors up to the maximum number of directors to be chosen at the election.
  2. Shareholders do not have the right to cumulate their votes for directors unless the articles of incorporation so provide.
  3. A statement included in the articles of incorporation that “all, or a designated group of, shareholders are entitled to cumulate their votes for directors,” or words of similar import, means that the shareholders designated are entitled to multiply the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two (2) or more candidates.

History. Enact. Acts 1988, ch. 23, § 64, effective January 1, 1989; 2002, ch. 102, § 18, effective November 15, 2002.

Legislative Research Commission Note.

(6/26/2007). 2007 Ky. Acts ch. 137, sec. 179, effective June 26, 2007 provided: The General Assembly finds and declares that the amendment of KRS 271B.6-210 , 271B.6-230 , 271B.7-040 , 271B.7-280 , and 271B.8-080 , as provided for in 2002 Ky. Acts ch. 102, secs. 10, 11, 15, 18, and 19, respectively, are and were effective as of November 15, 2002.

(11/15/2002). 2002 Ky. Acts ch. 102, sec. 22, provides that this section “shall take effect November 15, 2002, if a constitutional amendment proposing to amend Sections 190, 191, 192, 193, 194, 195, 198, 200, 202, 203, 205, 207 and 208 of the Constitution of Kentucky relating to corporations is enacted by the General Assembly and approved by the voters in the November, 2002 general election.” Otherwise, [this section] shall be void.

A constitutional amendment proposing to amend 11 of those 13 sections of the Constitution was enacted by the General Assembly and approved by the voters. During the 2002 Regular Session, the General Assembly enacted 2002 Ky. Acts ch. 341, which proposed to amend Sections 190, 191, 192, 193, 194, 198, 200, 202, 203, 207, and 208 of the Constitution of Kentucky. The voters approved that amendment in the November, 2002 general elections.

Research References and Practice Aids

Kentucky Bench & Bar.

Young, Modernizing Kentucky’s Corporate Laws, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 12.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Voting Trusts and Agreements

271B.7-300. Voting trusts.

  1. One (1) or more shareholders may create a voting trust, conferring on a trustee the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust (which may include anything consistent with its purpose) and transferring their shares to the trustee. When a voting trust agreement is signed, the trustee shall prepare a list of the names and addresses of all owners of beneficial interests in the trust, together with the number and class of shares each transferred to the trust, and deliver copies of the list and agreement to the corporation’s principal office.
  2. A voting trust shall become effective on the date the first shares subject to the trust are registered in the trustee’s name. A voting trust shall be valid for not more than ten (10) years after its effective date unless extended under subsection (3) of this section.
  3. All or some of the parties to a voting trust may extend it for additional terms of not more than ten (10) years each by signing an extension. An extension shall be valid for ten (10) years from the date the first shareholder signs the extension agreement. The voting trustee shall deliver copies of the extension agreement and list of beneficial owners to the corporation’s principal office. An extension agreement shall bind only those parties signing it.

History. Enact. Acts 1988, ch. 23, § 65, effective January 1, 1989.

NOTES TO DECISIONS

1.In General.

A voting trust established for a lawful purpose was valid. Ecker v. Kentucky Refining Co., 144 Ky. 264 , 138 S.W. 264, 1911 Ky. LEXIS 614 ( Ky. 1911 ) (decided under prior law).

2.Consent of Stockholders.

Voting trusts and the pooling of stock for voting purposes were not valid when established without the consent of the stockholders involved. Lebus v. Stansifer, 154 Ky. 444 , 157 S.W. 727, 1913 Ky. LEXIS 91 ( Ky. 1913 ) (decided under prior law).

Research References and Practice Aids

ALR

Agreement controlling the vote of corporate stock. 45 A.L.R.2d 799.

Validity of voting trust or other similar agreement for control of voting power of corporate stock. 98 A.L.R.2d 376.

271B.7-310. Voting agreements.

  1. Two (2) or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose. A voting agreement created under this section shall not be subject to the provisions of KRS 271B.7-300 .
  2. A voting agreement created under this section shall be specifically enforceable.

History. Enact. Acts 1988, ch. 23, § 66, effective January 1, 1989.

NOTES TO DECISIONS

1.Public Policy.

Public policy forbids the bargaining away by a stockholder of his right to vote for directors according to his best judgment, and in the interest of the corporation. Haldeman v. Haldeman, 176 Ky. 635 , 197 S.W. 376, 1917 Ky. LEXIS 95 ( Ky. 1917 ) (decided under prior law).

Derivative Proceedings

271B.7-400. Procedure in derivative proceedings — Shareholders of a public benefit corporation.

  1. A person shall not commence a proceeding in the right of a domestic or foreign corporation unless he was a shareholder of the corporation when the transaction complained of occurred or unless he became a shareholder through transfer by operation of law from one who was a shareholder at that time. The derivative proceeding shall not be maintained if it appears that the person commencing the proceeding does not fairly and adequately represent the interests of the shareholders in enforcing the right of the corporation.
  2. A complaint in a proceeding brought in the right of a corporation shall be verified and allege with particularity the demand made, if any, to obtain action by the board of directors and either that the demand was refused or ignored or why he did not make the demand. Whether or not a demand for action was made, if the corporation commences an investigation of the charges made in the demand or complaint, the court may stay any proceeding until the investigation is completed.
  3. A proceeding commenced under this section may not be discontinued or settled without the court’s approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interest of the corporation’s shareholders or a class of shareholders, the court shall direct that notice be given the shareholders affected.
  4. On termination of the proceeding the court may require the plaintiff to pay any defendant’s reasonable expenses, including counsel fees, incurred in defending the proceeding if it finds that the proceeding was commenced without reasonable cause.
  5. For purposes of this section, “shareholder” includes a beneficial owner whose shares are held in a voting trust or held by a nominee on his behalf.
  6. In any derivative proceedings in the right of a foreign corporation, the matters covered by this section shall be governed by the laws of the jurisdiction of incorporation.
  7. The articles of incorporation of the corporation may provide that proper venue for a derivative action or an action to compel the production of books and records is in or only is in the appropriate court.
  8. Shareholders of a public benefit corporation owning individually or collectively, as of the date of instituting a derivative proceeding, at least two percent (2%) of the corporation’s outstanding shares or, in the case of a corporation with shares listed on a national securities exchange, the lesser of that percentage or shares of at least two million dollars ($2,000,000) in market value, may maintain a derivative proceeding to enforce the requirements set forth in KRS 271B.8-300 (8).

HISTORY: Enact. Acts 1988, ch. 23, § 67, effective January 1, 1989; 2007, ch. 137, § 64, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 64, effective July 15, 2010; 2015 ch. 34, § 7, effective June 24, 2015; 2017 ch. 28, § 6, effective June 29, 2017.

Compiler’s Notes.

The heading preceding this section which reads “Derivative Proceedings” was changed by the compiler from “Derivative Agreements” upon authorization of the Reviser of Statutes.

NOTES TO DECISIONS

1.Corporate Cause of Action.

A stockholder’s derivative suit must state a cause of action existing in favor of the corporate entity. Security Trust Co. v. Dabney, 372 S.W.2d 401, 1963 Ky. LEXIS 132 ( Ky. 1963 ).

2.Demand for Action.

Where it appears that a demand for action would be unavailing, or, if granted, litigation would be in unfriendly hands, such a demand is not a condition precedent to the right of stockholders to sue on behalf of a corporation. Maas v. Tyler, 316 S.W.2d 211, 1958 Ky. LEXIS 32 ( Ky. 1958 ).

Shareholder failed to make a sufficient demand for action as contemplated by KRS 271B.7-400 (2) because it simply requested production of certain information and demanded an investigation into her particular allegations, and the shareholder at no time demanded the commencement of legal action; however, under the present circumstances the demand requirement was excused for futility. Sahni v. Hock, 369 S.W.3d 39, 2010 Ky. App. LEXIS 79 (Ky. Ct. App. 2010), overruled in part, Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

3.Ownership of Shares at Time Actions Occurred.

In a stockholder derivative action where alleged wrongful acts involved in certain transactions were not claimed to have been committed subsequent to the earliest date on which any of the plaintiffs acquired stock in the corporation, the allegations relative to the wrongful acts were subject to a motion to strike. Levitan v. Stout, 97 F. Supp. 105, 1951 U.S. Dist. LEXIS 4261 (D. Ky. 1951 ).

4.President’s Debts to Corporation.

Where a minority stockholder wanted the debts of the president of the corporation to the corporation to be collected and wanted the arrangement set aside under which they were to be paid, the remedy by which it could be accomplished without a receiver was through a stockholder’s derivative suit in the name of the corporation. Cumberland Publishing Co. v. Adams Real Estate Corp., 432 S.W.2d 808, 1968 Ky. LEXIS 355 ( Ky. 1968 ).

5.Unpaid Stock.

If a corporation, being under the domination of stockholders who have not fully paid for their stock, fails or refuses to sue for sums unpaid on stock, and there are no creditors, a bona fide stockholder may sue in the corporate name and for its benefit either for a cancellation of unpaid stock or for amount of unpaid par value. People's State Bank v. Jacksonian Hotel Co., 261 Ky. 166 , 87 S.W.2d 111, 1935 Ky. LEXIS 603 ( Ky. 1935 ). See also Taylor v. Citizens' Oil Co., 182 Ky. 350 , 206 S.W. 644, 1918 Ky. LEXIS 386 ( Ky. 1918 ).

6.Investigation by Corporation.

The trial court’s findings of good faith, reasonableness and independence on the part of the corporation’s special litigation committees would be upheld where (1) directors did not serve on committees investigating entities in which they had a direct interest, (2) the board hired independent counsel to investigate and assist the committees, (3) counsel expended over 1,100 hours investigating the plaintiff’s charges at a cost exceeding $129,000, (4) the board also hired accountants who investigated the specific complaints and sampled transactions going back twelve (12) years. Allied Ready Mix Co. v. Allen, 994 S.W.2d 4, 1998 Ky. App. LEXIS 146 (Ky. Ct. App. 1998).

7.Fair and Adequate Representation of Shareholders.

The trial court properly found that the plaintiff was not a suitable representation to prosecute the action where he stated during his deposition that he would have the auditor review every financial record from the very beginning of the corporation that was available and that he would not place any cost controls or budgets on the investigation of the litigation. Allied Ready Mix Co. v. Allen, 994 S.W.2d 4, 1998 Ky. App. LEXIS 146 (Ky. Ct. App. 1998).

Shareholder’s appeal of the dismissal of his derivative action was dismissed because, during the pendency of the appeal, as the result of a merger, the shareholder’s stock in the corporation was cancelled; derivative actions required plaintiffs to fairly and adequately represent the interests of the stockholders, and continuous ownership of stock was required. Further, the right to continue any pending derivative lawsuits would have passed from the former stockholders to the surviving corporation. Bacigalupo v. Kohlhepp, 240 S.W.3d 155, 2007 Ky. App. LEXIS 454 (Ky. Ct. App. 2007).

Trial court did not abuse its discretion by concluding that the shareholder fairly and adequately represented the interests of the shareholders where she was the only shareholder available to pursue claims on behalf of the other shareholders. Sahni v. Hock, 369 S.W.3d 39, 2010 Ky. App. LEXIS 79 (Ky. Ct. App. 2010), overruled in part, Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

Trial court did not err by dismissing a derivative shareholder action, because appellant’s self-interest and lack of support from the other shareholders deprived him of standing to pursue a derivative claim under KRS 271B.7-400 (1). Appellant’s willingness to settle all claims if he was personally paid $2.2 million reflected that his self-interests were in conflict with those of the other shareholders. Watkins v. Stock Yards Bank & Trust Co., 2012 Ky. App. Unpub. LEXIS 1044 (Ky. Ct. App. June 29, 2012), review denied, ordered not published, 2013 Ky. LEXIS 503 (Ky. Aug. 21, 2013).

8.Costs and Attorney Fees.

Recovery of attorney fees from the shareholder was prohibited by KRS 271B.7-400 (4) because she prevailed on her derivative claim and direct action against the director; the shareholder’s proceeding was not wholly without merit. Sahni v. Hock, 369 S.W.3d 39, 2010 Ky. App. LEXIS 79 (Ky. Ct. App. 2010), overruled in part, Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

Upon the dismissal of a shareholder derivative action filed against appellees, the chairman of a corporation, its president, and majority shareholder, for selling a shopping mall for an allegedly inadequate price, the trial court did not err by refusing to award appellees attorney fees under KRS 271B.7-400 (4). Because the facts surrounding the sale and re-sale of the mall gave appellant a reasonable basis to question the sale, appellee did not commence the proceeding without reasonable cause. Watkins v. Stock Yards Bank & Trust Co., 2012 Ky. App. Unpub. LEXIS 1044 (Ky. Ct. App. June 29, 2012), review denied, ordered not published, 2013 Ky. LEXIS 503 (Ky. Aug. 21, 2013).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

ALR

Diversity of citizenship as ground of jurisdiction of federal courts in stockholders’ derivative action against directors where corporation is a citizen of same state as plaintiffs, under 28 USCS § 1401. 18 A.L.R.2d 1022.

Pending action or existing cause of action, statute regulating stockholders’ actions as applicable to. 32 A.L.R.2d 851.

Stockholder’s action as remedy to recover damages for violation of antitrust laws. 36 A.L.R.2d 1345.

Amount of compensation of attorney for services in stockholders’ action in absence of contract or statute fixing amount. 56 A.L.R.2d 176.

Diversity of citizenship for purposes of federal jurisdiction, in stockholders’ derivative action. 68 A.L.R.2d 824.

Intervention by other stockholders in stockholder’s derivative action. 69 A.L.R.2d 562.

Circumstances excusing demand upon other shareholders which is otherwise prerequisite to bringing of stockholder’s derivative suit on behalf of corporation. 48 A.L.R.3d 595.

Allowance of punitive damages in stockholder’s derivative action. 67 A.L.R.3d 350.

Negligence, nonfeasance, or ratification of wrongdoing as excusing demand on directors as prerequisite to bringing of stockholder’s derivative suit on behalf of corporation. 99 A.L.R.3d 1034.

Requirement of Rule 22.1 of Federal Rules of Civil Procedure that plaintiff in shareholder derivative action “fairly and adequately represent” shareholders’ interests in enforcing corporation’s right. 15 A.L.R. Fed. 954.

Notice to shareholders and court approval of dismissal or compromise of derivative actions, under Rule 23.1 of Federal Rules of Civil Procedure. 26 A.L.R. Fed. 465.

Circumstances Excusing Demand Upon Board of Directors that is Otherwise Prerequisite to Bringing of Stockholder’s Derivative Suit on Behalf of Corporation, 43 A.L.R.6th 1.

Subtitle 8. Directors and Officers

Board of Directors

271B.8-010. Requirement for and duties of board of directors.

  1. Except as provided in subsection (3) of this section, each corporation shall have a board of directors.
  2. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation.
  3. A corporation having fifty (50) or fewer shareholders may dispense with or limit the authority of a board of directors by describing in its articles of incorporation who will perform some or all of the duties of a board of directors.

History. Enact. Acts 1988, ch. 23, § 68, effective January 1, 1989.

NOTES TO DECISIONS

1.Acceptance of Office.

A duly elected director sufficiently accepts the office by the simple act of serving. Cumberland Publishing Co. v. Adams Real Estate Corp., 432 S.W.2d 808, 1968 Ky. LEXIS 355 ( Ky. 1968 ) (decided under prior law).

2.Powers.

The discretion and acts of the board of directors were conclusively deemed to be those of the corporation unless such acts were ultra vires, fraudulent or constitute a breach of trust. Pittsburg, C., C. & S. L. R. Co. v. Dodd, 115 Ky. 176 , 72 S.W. 822, 1903 Ky. LEXIS 88 ( Ky. 1903 ) (decided under prior law).

The management of a corporation’s affairs, involving exercise of judgment and policy, was by law committed to the board of directors. Pittsburg, C., C. & S. L. R. Co. v. Dodd, 115 Ky. 176 , 72 S.W. 822, 1903 Ky. LEXIS 88 ( Ky. 1903 ); Caddy Oil Co. v. Sommer, 186 Ky. 843 , 218 S.W. 288, 1920 Ky. LEXIS 41 ( Ky. 1920 ) (decided under prior law).

The action of directors when exercised in good faith and not in fraud of the rights of stockholders was not subject to their control and would not be interfered with by the courts. Taylor v. Axton-Fisher Tobacco Co., 295 Ky. 226 , 173 S.W.2d 377, 1943 Ky. LEXIS 189 ( Ky. 1943 ) (decided under prior law).

Directors could not vote by proxy. Haldeman v. Haldeman, 176 Ky. 635 , 197 S.W. 376, 1917 Ky. LEXIS 95 ( Ky. 1917 ).

An individual director had no authority as such. He could only act as agent by appointment, like other agents were appointed. Directors had to act together as a board; the separate assent of a majority was not binding on the corporation. Haldeman v. Haldeman, 176 Ky. 635 , 197 S.W. 376, 1917 Ky. LEXIS 95 ( Ky. 1917 ); Caddy Oil Co. v. Sommer, 186 Ky. 843 , 218 S.W. 288, 1920 Ky. LEXIS 41 ( Ky. 1920 ); Paducah Newspapers, Inc. v. Goodman, 251 Ky. 754 , 65 S.W.2d 990, 1933 Ky. LEXIS 944 ( Ky. 1933 ) (decided under prior law).

The directors could confer authority upon the corporate officers and ratify unauthorized acts of such officers. Caddy Oil Co. v. Sommer, 186 Ky. 843 , 218 S.W. 288, 1920 Ky. LEXIS 41 ( Ky. 1920 ) (decided under prior law). See also Paducah Newspapers, Inc. v. Goodman, 251 Ky. 754 , 65 S.W.2d 990, 1933 Ky. LEXIS 944 ( Ky. 1933 ) (decided under prior law).

3.Director as Trustee.

A director represented all the stockholders; he was a trustee for them, and could not use his office for his personal benefit at the expense of any stockholder. Haldeman v. Haldeman, 176 Ky. 635 , 197 S.W. 376, 1917 Ky. LEXIS 95 ( Ky. 1917 ) (decided under prior law).

A director or managing officer has a fiducial relation to the corporation and its stockholders. Urban J. Alexander Co. v. Trinkle, 311 Ky. 635 , 224 S.W.2d 923, 1949 Ky. LEXIS 1202 ( Ky. 1949 ) (decided under prior law).

4.Instigation of Litigation.

Executive director of a corporation, whose authority did not include the power to institute civil rights litigation on behalf of the corporation and whose action was specifically ordered terminated by the board of directors, was without standing to bring civil rights suit and the complaint was properly dismissed. Covington Housing Development Corp. v. Covington, 381 F. Supp. 427, 1974 U.S. Dist. LEXIS 6801 (E.D. Ky. 1974 ), aff’d, 513 F.2d 630 (6th Cir. Ky. 1975 ), cert. denied, Thompson v. Covington, 423 U.S. 869, 96 S. Ct. 133, 46 L. Ed. 2d 99, 1975 U.S. LEXIS 2794 (1975), rehearing denied, 423 U.S. 991, 96 S. Ct. 408, 46 L. Ed. 2d 312 (1975) (decided under prior law).

Cited:

United States v. WRW Corp., 778 F. Supp. 919, 1991 U.S. Dist. LEXIS 17028 (E.D. Ky. 1991 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.8-020. Qualifications of directors.

The articles of incorporation or bylaws may prescribe qualifications for directors. A director shall not be required to be a resident of this state or a shareholder of the corporation unless the articles of incorporation or bylaws so prescribe.

History. Enact. Acts 1988, ch. 23, § 69, effective January 1, 1989.

NOTES TO DECISIONS

1.Eligibility.

A fiduciary could have been a director. Schmidt v. Mitchell, 101 Ky. 570 , 41 S.W. 929, 19 Ky. L. Rptr. 763 , 1897 Ky. LEXIS 223 ( Ky. 1897 ) (decided under prior law).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.8-030. Number and election of directors.

  1. A board of directors shall consist of one (1) or more individuals, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.
  2. If a board of directors has power to fix or change the number of directors, the board may increase or decrease by thirty percent (30%) or less the number of directors last approved by the shareholders, but only the shareholders may increase or decrease by more than thirty percent (30%) the number of directors last approved by the shareholders.
  3. The articles of incorporation or bylaws may establish a variable range for the size of the board of directors by fixing a minimum and maximum number of directors. If a variable range is established, the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders or the board of directors. After shares are issued, only the shareholders may change the range for the size of the board or change from a fixed to a variable-range size board or vice versa.
  4. Directors shall be elected at the first annual shareholders’ meeting and at each annual meeting thereafter unless their terms are staggered under KRS 271B.8-060 .
  5. Every director of a corporation, by acceptance of election or appointment as a director, including by service, shall be deemed to have consented to the jurisdiction of the courts of the Commonwealth of Kentucky for any action by, in the name of, or on behalf of the corporation.

History. Enact. Acts 1988, ch. 23, § 70, effective January 1, 1989; 2012, ch. 81, § 89, effective July 12, 2012.

NOTES TO DECISIONS

1.Annual Elections.

An election for directors had to be held annually. Mutual Tel. Co. v. Jarrell, 220 Ky. 551 , 295 S.W. 865, 1927 Ky. LEXIS 570 ( Ky. 1927 ) (decided under prior law).

2.Calling of Election.

The directors or other proper officers were required by mandamus to call an election. O'Hara v. Williamstown Cemetery Co., 133 Ky. 828 , 119 S.W. 234, 1909 Ky. LEXIS 239 ( Ky. 1909 ) (decided under prior law).

Where there were no de jure directors, the court could require the corporation or stockholders to call a meeting for the purpose of electing directors. O'Hara v. Williamstown Cemetery Co., 133 Ky. 828 , 119 S.W. 234, 1909 Ky. LEXIS 239 ( Ky. 1909 ) (decided under prior law).

3.Failure to Elect.

Mere failure to elect a board of directors did not invalidate the organization of a corporation. Drake v. Herndon, 122 Ky. 206 , 91 S.W. 674, 28 Ky. L. Rptr. 1106 , 1906 Ky. LEXIS 39 ( Ky. 1906 ) (decided under prior law).

When new directors were not elected and qualified, subsequent acts of the old directors were valid. La Rue v. Bank of Columbus, 165 Ky. 669 , 178 S.W. 1033, 1915 Ky. LEXIS 585 ( Ky. 1915 ) (decided under prior law).

4.Incorporators.

The articles could not provide that the incorporators should act as the board of directors, even for a definitely named period, without any action on the part of the stockholders. Lebus v. Stansifer, 154 Ky. 444 , 157 S.W. 727, 1913 Ky. LEXIS 91 ( Ky. 1913 ) (decided under prior law).

5.Voting.

The court did not direct stockholders how to vote in an election for directors. Haldeman v. Haldeman, 176 Ky. 635 , 197 S.W. 376, 1917 Ky. LEXIS 95 ( Ky. 1917 ) (decided under prior law).

Research References and Practice Aids

ALR

Cumulative voting of stock for corporate directors. 43 A.L.R.2d 799.

Construction and effect of corporate bylaws or articles relating to change in number of directors. 3 A.L.R.2d 623.

Casting ballots after closing of polls. 41 A.L.R.3d 234.

271B.8-040. Election of directors by certain classes of shareholders.

If the articles of incorporation authorize dividing the shares into classes, the articles may also authorize the election of all or a specified number of directors by the holders of one (1) or more authorized classes of shares. A class (or classes) of shares entitled to elect one (1) or more directors is a separate voting group for purposes of the election of directors.

History. Enact. Acts 1988, ch. 23, § 71, effective January 1, 1989.

271B.8-050. Terms of directors generally.

  1. The terms of the initial directors of a corporation shall expire at the first shareholders’ meeting at which directors are elected.
  2. The terms of all other directors shall expire at the next annual shareholders’ meeting following their election unless their terms are staggered under KRS 271B.8-060 .
  3. A decrease in the number of directors shall not shorten an incumbent director’s term.
  4. For a corporation the directors of which are divided into groups under KRS 271B.8-060 , any director filling a vacancy under KRS 271B.8-100 shall hold office until the next election of the group in which the director is filling the vacancy, and until his or her successor shall be elected and qualified.
  5. Despite the expiration of a director’s term, he shall continue to serve until his successor is elected and qualifies or until there is a decrease in the number of directors.

History. Enact. Acts 1988, ch. 23, § 72, effective January 1, 1989; 2001, ch. 130, § 1, effective June 21, 2001.

271B.8-060. Staggered terms for directors.

The articles of incorporation may provide for staggering the terms of directors by dividing the total number of directors in two (2) or three (3) groups, with each group containing one-half (1/2) or one-third (1/3) of the total, as near as may be. In that event, the terms of directors in the first group shall expire at the first annual shareholders’ meeting after their election, the terms of the second group shall expire at the second annual shareholders’ meeting after their election, and the terms of the third group, if any, shall expire at the third annual shareholders’ meeting after their election. At each annual shareholders’ meeting held thereafter, directors shall be chosen for a term of two (2) years or three (3) years, as the case may be, to succeed those whose terms expire.

History. Enact. Acts 1988, ch. 23, § 73, effective January 1, 1989; 1996, ch. 21, § 1, effective July 15, 1996.

271B.8-070. Resignation of directors.

  1. A director may resign at any time by delivering written notice to the board of directors, its chairman, or to the corporation.
  2. A resignation shall be effective when the notice is delivered unless the notice specifies a later effective date.

History. Enact. Acts 1988, ch. 23, § 74, effective January 1, 1989.

1.Resignation.

Directors who resigned, effective upon acceptance, remained such, when the resignations were not accepted. Lincoln Court Realty Co. v. Kentucky Title Sav. Bank & Trust Co., 169 Ky. 840 , 185 S.W. 156, 1916 Ky. LEXIS 777 ( Ky. 1916 ) (decided under prior law).

271B.8-080. Removal of directors by shareholders.

  1. The shareholders may remove one (1) or more directors with or without cause, unless the articles of incorporation provide that directors may be removed only for cause.
  2. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him or her.
  3. If cumulative voting is authorized, a director shall not be removed if the number of votes sufficient to elect him or her under cumulative voting is voted against his or her removal. If cumulative voting is not authorized, a director shall be removed only if the number of votes cast to remove him or her exceeds the number of votes cast not to remove him or her.
  4. A director shall be removed by the shareholders only at a meeting called for the purpose of removing him or her, and the meeting notice shall state that the purpose, or one (1) of the purposes, of the meeting is removal of the director.

History. Enact. Acts 1988, ch. 23, § 75, effective January 1, 1989; 2002, ch. 102, § 19, effective November 15, 2002.

Legislative Research Commission Note.

(6/26/2007). 2007 Ky. Acts ch. 137, sec. 179, effective June 26, 2007 provided: The General Assembly finds and declares that the amendment of KRS 271B.6-210 , 271B.6-230 , 271B.7-040 , 271B.7-280 , and 271B.8-080 , as provided for in 2002 Ky. Acts ch. 102, secs. 10, 11, 15, 18, and 19, respectively, are and were effective as of November 15, 2002.

(11/15/2002). 2002 Ky. Acts ch. 102, sec. 22, provides that this section “shall take effect November 15, 2002, if a constitutional amendment proposing to amend Sections 190, 191, 192, 193, 194, 195, 198, 200, 202, 203, 205, 207 and 208 of the Constitution of Kentucky relating to corporations is enacted by the General Assembly and approved by the voters in the November, 2002 general election.” Otherwise, [this section] shall be void.

A constitutional amendment proposing to amend 11 of those 13 sections of the Constitution was enacted by the General Assembly and approved by the voters. During the 2002 Regular Session, the General Assembly enacted 2002 Ky. Acts ch. 341, which proposed to amend Sections 190, 191, 192, 193, 194, 198, 200, 202, 203, 207, and 208 of the Constitution of Kentucky. The voters approved that amendment in the November, 2002 general elections.

Research References and Practice Aids

Kentucky Bench & Bar.

Young, Modernizing Kentucky’s Corporate Laws, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 12.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

271B.8-100. Vacancy on board.

  1. Unless the articles of incorporation provide otherwise, if a vacancy occurs on a board of directors, including a vacancy resulting from an increase in the number of directors:
    1. The shareholders may fill the vacancy;
    2. The board of directors may fill the vacancy; or
    3. If the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.
  2. If the vacant office was held by a director elected by a voting group of shareholders, only the holders of shares of that voting group shall be entitled to vote to fill the vacancy if it is filled by the shareholders.
  3. A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date under subsection (2) of KRS 271B.8-070 or otherwise) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.

History. Enact. Acts 1988, ch. 23, § 76, effective January 1, 1989.

NOTES TO DECISIONS

1.Filling of Vacancy.

The only vacancies authorized to be filled by the directors were those arising after the stockholders, either at the annual meeting or a called meeting held for that purpose, had first filled all places due to be filled at the annual meeting. Harris v. Brown, 6 F.2d 922, 1925 U.S. Dist. LEXIS 1184 (D. Ky. 1925 ) (decided under prior law).

Research References and Practice Aids

ALR

Provision authorizing directors to fill vacancies as applicable to newly created directorships. 6 A.L.R.2d 174.

271B.8-110. Compensation of directors.

Unless the articles of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.

History. Enact. Acts 1988, ch. 23, § 77, effective January 1, 1989.

NOTES TO DECISIONS

1.Entitlement to Compensation.

Directors were entitled to compensation for work done not in line of duty, where the conduct of the corporation justified an expectation of payment. Louisville Bldg. Ass'n v. Hegan, 49 S.W. 796, 20 Ky. L. Rptr. 1629 , 1899 Ky. LEXIS 478 (Ky. Ct. App. 1899) (decided under prior law).

A director or officer of a corporation could recover the reasonable value of services rendered entirely outside the scope of his official duties when they were rendered under such circumstances as to indicate that the parties intended or understood they were to be paid for or ought to have so intended and understood. Johnson v. Tri-Union Oil & Gas Co., 278 Ky. 633 , 129 S.W.2d 111, 1939 Ky. LEXIS 463 ( Ky. 1939 ) (decided under prior law).

Meetings and Action of Board of Directors

271B.8-200. Meetings.

  1. The board of directors may hold regular or special meetings in or out of this state.
  2. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during this meeting. A director participating in a meeting by this means shall be deemed to be present in person at the meeting.

History. Enact. Acts 1988, ch. 23, § 78, effective January 1, 1989.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.8-205. Court-ordered meeting.

The Circuit Court for the county where a corporation’s principal office or, if there is none in this state, its registered office is located may order a special meeting of the board of directors on the application of one-third (1/3) or more of the incumbent number of directors. The court may fix the time and place of the meeting, prescribe the form and content of the meeting notice, and enter such other orders as are necessary to accomplish the purpose of the meeting.

History. Enact. Acts 2010, ch. 133, § 2, effective July 15, 2010.

Research References and Practice Aids

Northern Kentucky Law Review.

Kentucky Survey Issue: Article: The 2010 Amendments to Kentucky’s Business Entity Laws, 38 N. Ky. L. Rev. 383 (2011).

271B.8-210. Action without meeting.

  1. Unless the articles of incorporation or bylaws provide otherwise, action required or permitted by this chapter to be taken at a board of director’s meeting may be taken without a meeting if the action is taken by all members of the board. The action shall be evidenced by one (1) or more written consents describing the action taken, signed by each director, and included in the minutes or filed with the corporate records reflecting the action taken.
  2. Action taken under this section shall be effective when the last director signs the consent, unless the consent specifies a different effective date.
  3. A consent signed under this section shall have the effect of a meeting vote and may be described as such in any document.

History. Enact. Acts 1988, ch. 23, § 79, effective January 1, 1989.

271B.8-220. Notice of meeting.

  1. Unless the articles of incorporation or bylaws provide otherwise, regular meetings of the board of directors may be held without notice of the date, time, place, or purpose of the meeting.
  2. Unless the articles of incorporation or bylaws provide for a longer or shorter period, special meetings of the board of directors shall be preceded by at least two (2) days’ notice of the date, time, and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or bylaws.

History. Enact. Acts 1988, ch. 23, § 80, effective January 1, 1989; 2007, ch. 137, § 65, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 65, effective July 15, 2010.

Research References and Practice Aids

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.8-230. Waiver of notice.

  1. A director may waive any notice required by this Act, the articles of incorporation, or bylaws before or after the date and time stated in the notice. Except as provided by subsection (2) of this section, the waiver shall be in writing, signed by the director entitled to the notice, and filed with the minutes or corporate records.
  2. A director’s attendance at or participation in a meeting shall waive any required notice to him of the meeting, unless the director at the beginning of the meeting (or promptly upon his arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

History. Enact. Acts 1988, ch. 23, § 81, effective January 1, 1989.

271B.8-240. Quorum and voting.

  1. Unless the articles of incorporation or bylaws require a greater number, a quorum of a board of directors shall consist of:
    1. A majority of the fixed number of directors if the corporation has a fixed board size; or
    2. A majority of the number of directors prescribed, or if no number is prescribed the number in office immediately before the meeting begins, if the corporation has a variable-range size board.
  2. The articles of incorporation or bylaws may authorize a quorum of a board of directors to consist of no fewer than one-third (1/3) of the fixed or prescribed number of directors determined under subsection (1) of this section.
  3. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present shall be the act of the board of directors, unless the articles of incorporation or bylaws require the vote of a greater number of directors.
  4. A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken shall be deemed to have assented to the action taken unless:
    1. He objects at the beginning of the meeting (or promptly upon his arrival) to holding it or transacting business at the meeting;
    2. His dissent or abstention from the action taken is entered in the minutes of the meeting; or
    3. He delivers written notice of his dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting. The right of dissent or abstention shall not be available to a director who votes in favor of the action taken.

History. Enact. Acts 1988, ch. 23, § 82, effective January 1, 1989.

NOTES TO DECISIONS

1.Lack of Quorum.

Less than a quorum of the board could not bind the corporation. Paducah Newspapers, Inc. v. Goodman, 251 Ky. 754 , 65 S.W.2d 990, 1933 Ky. LEXIS 944 ( Ky. 1933 ) (decided under prior law).

2.Majority.

A majority of the directors constituted a quorum for the transaction of business. Caddy Oil Co. v. Sommer, 186 Ky. 843 , 218 S.W. 288, 1920 Ky. LEXIS 41 ( Ky. 1920 ) (decided under prior law).

271B.8-250. Committees — Powers — Limitations — Alternate members.

  1. Unless this chapter, the articles of incorporation, or the bylaws provide otherwise, a board of directors may create one (1) or more committees and appoint one (1) or more members of the board of directors to serve on any such committee.
  2. Unless this chapter provides otherwise, the creation of a committee and appointment of members to it shall be approved by the greater of:
    1. A majority of all the directors in office when the action is taken; or
    2. The number of directors required by the articles of incorporation or bylaws to take action under KRS 271B.8-240 .
  3. KRS 271B.8-200 to 271B.8-240 shall apply both to committees of the board and to their members as well.
  4. To the extent specified by the board of directors or in the articles of incorporation or bylaws, each committee may exercise the powers of the board of directors under KRS 271B.8-010 .
  5. A committee shall not, however:
    1. Authorize or approve distributions, except according to a formula or method, or within limits, prescribed by the board of directors;
    2. Approve or propose to shareholders action that this chapter requires be approved by shareholders;
    3. Fill vacancies on the board of directors or, subject to the provisions of subsection (7) of this section, on any of its committees; or
    4. Adopt, amend, or repeal bylaws.
  6. The creation of, delegation of authority to, or action by a committee shall not alone constitute compliance by a director with the standards of conduct described in KRS 271B.8-300 .
  7. The board of directors may appoint one (1) or more directors as alternate members of any committee to replace any absent or disqualified member during the member’s absence or disqualification. Unless the articles of incorporation, the bylaws, or the resolution creating the committee provide otherwise, in the event of the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting may unanimously appoint another director to act in place of the absent or disqualified member.

History. Enact. Acts 1988, ch. 23, § 83, effective January 1, 1989; 2002, ch. 102, § 20, effective July 15, 2002.

NOTES TO DECISIONS

1.Delegation of Power.

Directors could delegate part of their power to an executive committee. Haldeman v. Haldeman, 176 Ky. 635 , 197 S.W. 376, 1917 Ky. LEXIS 95 ( Ky. 1917 ) (decided under prior law).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

Standards of Conduct

271B.8-300. General standards for directors — Directors of a public benefit corporation.

  1. A director shall discharge his duties as a director, including his duties as a member of a committee:
    1. In good faith;
    2. On an informed basis; and
    3. In a manner he honestly believes to be in the best interests of the corporation.
  2. A director shall be considered to discharge his duties on an informed basis if he makes, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, inquiry into the business and affairs of the corporation, or into a particular action to be taken or decision to be made.
  3. In discharging his duties a director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
    1. One (1) or more officers or employees of the corporation whom the director honestly believes to be reliable and competent in the matters presented;
    2. Legal counsel, public accountants, or other persons as to matters the director honestly believes are within the person’s professional or expert competence; or
    3. A committee of the board of directors of which he is not a member, if the director honestly believes the committee merits confidence.
  4. A director shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (3) of this section unwarranted.
  5. In addition to any other limitation on a director’s liability for monetary damages contained in any provision of the corporation’s articles of incorporation adopted in accordance with subsection (2)(d) of KRS 271B.2-020 , any action taken as a director, or any failure to take any action as a director, shall not be the basis for monetary damages or injunctive relief unless:
    1. The director has breached or failed to perform the duties of the director’s office in compliance with this section; and
    2. In the case of an action for monetary damages, the breach or failure to perform constitutes willful misconduct or wanton or reckless disregard for the best interests of the corporation and its shareholders.
  6. A person bringing an action for monetary damages under this section shall have the burden of proving by clear and convincing evidence the provisions of subsection (5)(a) and (b) of this section, and the burden of proving that the breach or failure to perform was the legal cause of damages suffered by the corporation.
  7. Nothing in this section shall eliminate or limit the liability of any director for any act or omission occurring prior to July 15, 1988.
  8. In a public benefit corporation:
    1. The board of directors shall manage or direct the business and affairs of the public benefit corporation in a manner that balances the pecuniary interests of the stockholders, the best interests of those materially affected by the corporation’s conduct, and the specific public benefit or public benefits identified in its articles of incorporation;
    2. A director of the public benefit corporation shall not, by virtue of the public benefit provisions set forth in the corporation’s articles of incorporation, have any duty to any person on account of any interest of the person in the public benefit or public benefits identified in the articles of incorporation or on account of any interest materially affected by the corporation’s conduct;
    3. With respect to a decision implicating the balance requirement inparagraph (a) of this subsection, a director shall act in conformity with subsection (1) of this section; and
    4. The articles of incorporation of a public benefit corporation may include a provision that any disinterested failure to satisfy this subsection shall not constitute an act or omission not in good faith or a breach of the duty of loyalty.

HISTORY: Enact. Acts 1988, ch. 23, § 85, effective January 1, 1989; 1988, ch. 224, § 8, effective July 15, 1988; 2017 ch. 28, § 7, effective June 29, 2017.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.202 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

NOTES TO DECISIONS

1.Applicability.

Although KRS 271B.8-300 (3), regarding director liability, was relevant to determine the standard of care which the bank’s directors were obligated to exercise, the bank was not entitled to use that statute offensively to support a separate cause of action against its auditors. Indeed, even the bank cited no authority for the proposition that it could do so. Peoples Bank of N. Ky., Inc. v. Crowe Chizek & Co. LLC, 277 S.W.3d 255, 2008 Ky. App. LEXIS 176 (Ky. Ct. App. 2008).

KRS 271B.8-300 and 271B.8-420 were applicable to a breach of fiduciary responsibility lawsuit brought against corporate directors who allegedly solicited the revocation of proxies to prevent a quorum at the corporation’s annual meeting and voting in order to remove the CEO as an officer. The directors allegedly acted to preserve their employment in the corporation; actions that could be classified as having been taken as a director or officer. Gundaker/Jordan Am. Holdings, Inc. v. Clark, 2008 U.S. Dist. LEXIS 80907 (E.D. Ky. Oct. 9, 2008).

Shareholder failed to demonstrate a specific injury to herself outside the diminution in value of company stock and she did not sufficiently allege a cause of action under KRS 271B.8-300 ; therefore, the judgment in favor of the shareholder individually was reversed and remanded to the trial court with instructions to dismiss the shareholder’s direct action claim. Sahni v. Hock, 369 S.W.3d 39, 2010 Ky. App. LEXIS 79 (Ky. Ct. App. 2010), overruled in part, Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

2.Construction.

Because there was no mandatory or persuasive authority from Kentucky courts classifying a breach of fiduciary duty as a personal injury, the court declined to construe it as such. Therefore, KRS 271B.8-300 and 271B.8-420 did not fall under the protection of the “jural rights” doctrine and had to be enforced. Gundaker/Jordan Am. Holdings, Inc. v. Clark, 2008 U.S. Dist. LEXIS 80907 (E.D. Ky. Oct. 9, 2008).

To the extent Sahni v. Hock, 369 S.W.3d 39, 47, 2010 Ky. App. LEXIS 79 (Ky. App. 2011) suggests that refinement and correction of the legal theory during the pleading stage is not allowed pursuant to KRS 271B.8-300 , it is incorrect. Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

Lower courts erred in concluding that KRS 271B.8-300 abrogated a corporation’s common law fiduciary duty claims against corporate directors where the statute applied to any action taken as a director and any failure to take any action as a director, and preparing for and participating in a competing venture did not constitute the type of internal corporate governance conduct addressed in § 271B.8-300 . Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

KRS 271B.8-300 does not abrogate common law fiduciary duty claims against directors in Kentucky but essentially codifies a standard of conduct and standard of liability for directors that is derived from business judgment rule principles. Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

If a director is acting on his own accord in anticipation of competing with the corporation which he still serves, that conduct implicates the director’s common law fiduciary duties, not KRS 271B.8-300 . Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

KRS 271B.8-300 simply does not speak to all actions an individual takes while serving as a corporate director but only to those which he or she takes or fails to take while acting in a directorial role, i.e., actions or inactions regarding corporate governance and the affairs of the corporation. For claims alleging breach of a director’s fiduciary duties, especially the duty of loyalty, in the context of preparation for and participation in a competing enterprise, the common law principles elucidated in case law continue to apply. Baptist Physicians Lexington, Inc. v. New Lexington Clinic, P.S.C., 436 S.W.3d 189, 2013 Ky. LEXIS 642 ( Ky. 2013 ).

3.Common law.

Clinic properly asserted a breach of fiduciary claim because KRS 271B.8-300 did not supplant the common law breach of fiduciary duty. Notice was given of a general claim of breach of fiduciary duty, the facts giving rise to the claim, and the nature of the damages sought; moreover, a reference to KRS ch. 271B was not required due to the liberal policy relating to notice pleadings. New Lexington Clinic, P.S.C. v. Cooper, 2011 Ky. App. LEXIS 245 (Ky. Ct. App. Dec. 16, 2011).

Kentucky General Assembly intends for KRS 271B.8-300 to apply in all circumstances where money damages are sought in a claim of breach of fiduciary duty against a corporate director; aside from this heightened burden of proof, KRS 271B.8-300 (5) tracks the common law very closely. The Kentucky Legislature has merely meticulously set forth the claims and remedies available under common law, and the change in the burden of proof does not indicate an intent to abrogate the common-law claim entirely; rather, it merely increases the burden of proof. New Lexington Clinic, P.S.C. v. Cooper, 2011 Ky. App. LEXIS 245 (Ky. Ct. App. Dec. 16, 2011).

4.Expert Testimony.

In a bank auditor malpractice case, a trial court did not err by admitting expert testimony under KRE. 702 because the nature and scope of a bank director’s duties under KRS 271B.8-300 was beyond the ken of the average juror or the court. Peoples Bank of N. Ky., Inc. v. Horwath, 390 S.W.3d 830, 2012 Ky. App. LEXIS 113 (Ky. Ct. App. 2012).

5.Standing.

Circuit court properly dismissed a shareholder's causes of action for against a corporate officer for lack of standing because the claims were derivative, not direct, where the officer owed the shareholder a fiduciary duty to inform him personally if she had reason to know that assets would be (or were being) misappropriated, the common-law fiduciary and statutory duties ran directly to the corporation or limited liability company. Griffin v. Jones, 2015 Ky. App. LEXIS 115 (Ky. Ct. App. Aug. 14, 2015), review denied, ordered not published, 2016 Ky. LEXIS 360 (Ky. Aug. 17, 2016).

Research References and Practice Aids

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Campbell, Corporate Fiduciary Duties in Kentucky., 93 Ky. L.J. 551 (2004/2005).

Article: Normative Justifications for Lax (or No) Corporate Fiduciary Duties: A Tale of Problematic Principles, Imagined Facts and Inefficient Outcomes, 99 Ky. L.J. 231 (2010/2011).

Note: Corporate Gatekeepers: An Examination of the Transactional Lawyer’s Role, 99 Ky. L.J. 555 (2010/2011).

Northern Kentucky Law Review.

Comment, A Survey of Kentucky Tort Reform, 17 N. Ky. L. Rev. 473 (1990).

271B.8-310. Director conflict of interest.

  1. A conflict of interest transaction shall be a transaction with the corporation in which a director of the corporation has a direct or indirect interest. A conflict of interest transaction shall not be voidable by the corporation solely because of the director’s interest in the transaction if any one (1) of the following is true:
    1. The material facts of the transaction and the director’s interest were disclosed or known to the board of directors or a committee of the board of directors and the board of directors or committee authorized, approved, or ratified the transaction;
    2. The material facts of the transaction and the director’s interest were disclosed or known to the shareholders entitled to vote and they authorized, approved, or ratified the transaction; or
    3. The transaction was fair to the corporation.
  2. For purposes of this section, a director of the corporation shall have an indirect interest in a transaction if:
    1. Another entity in which he has a material financial interest or in which he is a general partner is a party to the transaction; or
    2. Another entity of which he is a director, officer, or trustee is a party to the transaction and the transaction is or should be considered by the board of directors of the corporation.
  3. For purposes of subsection (1)(a) of this section, a conflict of interest transaction shall be considered authorized, approved, or ratified if it receives the affirmative vote of a majority of the directors on the board of directors (or on the committee) who have no direct or indirect interest in the transaction, but a transaction shall not be authorized, approved, or ratified under this section by a single director. If a majority of the directors who have no direct or indirect interest in the transaction vote to authorize, approve, or ratify the transaction, a quorum shall be present for the purpose of taking action under this section. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction shall not affect the validity of any action taken under subsection (1)(a) of this section if the transaction is otherwise authorized, approved, or ratified as provided in that subsection.
  4. For purposes of subsection (1)(b) of this section, a conflict of interest transaction shall be considered authorized, approved, or ratified if it receives the vote of a majority of the shares entitled to be counted under this subsection. Shares owned by or voted under the control of a director who has a direct or indirect interest in the transaction, and shares owned by or voted under the control of an entity described in subsection (2)(a) of this section, may not be counted in a vote of shareholders to determine whether to authorize, approve, or ratify a conflict of interest transaction under subsection (1)(b) of this section. The vote of those shares, however, shall be counted in determining whether the transaction is approved under other sections of this chapter. A majority of the shares that are entitled to be counted in a vote on the transaction under this subsection shall constitute a quorum for the purpose of taking action under this section.

History. Enact. Acts 1988, ch. 23, § 86, effective January 1, 1989; 1988, ch. 224, § 9, effective July 15, 1988.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.206 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

NOTES TO DECISIONS

Analysis

1.Overcoming Conflict.

The three basic requirements to overcome director conflict at the time of merger include disclosure, shareholder approval of the merger, and a fair and reasonable transaction to the corporation. Nelson v. Gammon, 478 F. Supp. 630, 1979 U.S. Dist. LEXIS 10010 (W.D. Ky. 1979 ), aff’d, 647 F.2d 710, 1981 U.S. App. LEXIS 13523 (6th Cir. 1981) (decided under prior law).

2.— Shareholder Validation.

Kentucky has adopted the principle that informed shareholders could validate transactions which might otherwise be subject to attack due to director self-interest; this section did add, however, the requirement that the transaction must not be “manifestly unfair” to the corporation. Nelson v. Gammon, 478 F. Supp. 630, 1979 U.S. Dist. LEXIS 10010 (W.D. Ky. 1979 ), aff’d, 647 F.2d 710, 1981 U.S. App. LEXIS 13523 (6th Cir. 1981) (decided under prior law).

3.Merger Plan.

Nothing in the Kentucky merger statutes requires disqualification of shareholders from voting on a merger plan. Nelson v. Gammon, 478 F. Supp. 630, 1979 U.S. Dist. LEXIS 10010 (W.D. Ky. 1979 ), aff’d, 647 F.2d 710, 1981 U.S. App. LEXIS 13523 (6th Cir. 1981) (decided under prior law).

4.Business Opportunity Doctrine.

Judgment which did not award damages based on a managing member’s breach of fiduciary duty to a limited liability company (LLC) was error because, regardless of the LLC’s ability to complete projects diverted to another company formed by the managing member, the managing member could have and should have informed the other LLC members, and this conduct violated KRS 275.170 ; KRS 271B.8-310 (1) was illustrative of Kentucky law regarding the primacy of fiduciary duty over misappropriation of corporate opportunity. Patmon v. Hobbs, 280 S.W.3d 589, 2009 Ky. App. LEXIS 48 (Ky. Ct. App. 2009).

5.Construction.

Statute, which concerned director conflicts of interest, provided no support for the corporation's argument that it was capable of filing suit on its own behalf; the statute merely delineates transactions that are voidable by the corporation, and nothing in the statute requires a corporation to directly exercise that right, or alters the manner in which a corporation decides to exercise and vindicate such a right, and nothing in the statute disqualifies any director, self-interested or otherwise, from voting against the corporation exercising such a right. Gross v. Adcomm, Inc., 478 S.W.3d 396, 2015 Ky. App. LEXIS 170 (Ky. Ct. App. 2015).

Claim alleging a violation of this statute was subject to dismissal because the statute did not provide an individual cause of action for the debtor as a shareholder or director and thus the debtor lacked standing to assert a direct claim against plaintiff creditor under the statute. Feldman v. Pearl (In re Pearl), 2017 Bankr. LEXIS 616 (Bankr. E.D. Ky. Mar. 8, 2017).

Notes to Unpublished Decisions

1.Application.

Unpublished decision: KRS 271B.8-310 (a), which governed corporate directors’ conflicts of interest, did not apply to the case because defendant, a former corporate officer and controller, was not a director of plaintiff, his former company. In the absence of Kentucky statutory authority governing a corporate officer’s conflicts of interest, Kentucky common law—in the instant case, Aero Drapery of Ky. Inc. v. Engdahl, 507 S.W.2d 166, 1974 Ky. LEXIS 671 ( Ky. 1974 ), and its progeny—governed; therefore, defendant’s argument that, pursuant to KRS 271B.8-310 (1), the transactions between companies in which he had a secret interest and plaintiff needed only to be “fair” to waive his conflicts of interest was not well taken. Mazak Corp. v. King, 496 Fed. Appx. 507, 2012 FED App. 0935N, 2012 U.S. App. LEXIS 17945 (6th Cir. Ky. 2012 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Campbell, Corporate Fiduciary Duties in Kentucky., 93 Ky. L.J. 551 (2004/2005).

Article: Normative Justifications for Lax (or No) Corporate Fiduciary Duties: A Tale of Problematic Principles, Imagined Facts and Inefficient Outcomes, 99 Ky. L.J. 231 (2010/2011).

Northern Kentucky Law Review.

Comment, A Survey of Kentucky Tort Reform, 17 N. Ky. L. Rev. 473 (1990).

ALR

Purchase of claims against corporation by officer or director thereof. 13 A.L.R.2d 1172.

Right of corporate officer to purchase corporate assets from corporation. 24 A.L.R.2d 71.

Validity of contract between corporations as affected by directors or officers in common. 33 A.L.R.2d 1060.

271B.8-320. Loans to directors.

  1. Except as provided by subsection (3) of this section, a corporation may not lend money to or guarantee the obligation of a director of the corporation unless:
    1. The particular loan or guarantee is approved by a majority of the votes represented by the outstanding voting shares of all classes, voting as a single voting group, except the votes of shares owned by or voted under the control of the benefited director; or
    2. The corporation’s board of directors determines that the loan or guarantee benefits the corporation and either approves the specific loan or guarantee or a general plan authorizing loans and guarantees.
  2. The fact that a loan or guarantee is made in violation of this section shall not affect the borrower’s liability on the loan or the corporation’s liability on the guarantee.
  3. This section shall not apply to loans and guarantees authorized by statute regulating any special class of corporations.

History. Enact. Acts 1988, ch. 23, § 87, effective January 1, 1989.

271B.8-330. Liability for unlawful distributions.

  1. A director who votes for or who assents to a distribution made in violation of KRS 271B.6-400 or the articles of incorporation shall be personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating KRS 271B.6-400 or the articles of incorporation if it is established that he did not perform his duties in compliance with KRS 271B.8-300 . In any proceeding commenced under this section, a director shall have all of the defenses ordinarily available to a director.
  2. A director held liable under subsection (1) of this section for an unlawful distribution shall be entitled to contribution:
    1. From every other director who could be held liable under subsection (1) of this section for the unlawful distribution; and
    2. From each shareholder for the amount the shareholder accepted knowing the distribution was made in violation of KRS 271B.6-400 or the articles of incorporation.
  3. A proceeding under this section shall be barred unless it is commenced within two (2) years after the date on which the effect of the distribution was measured under subsection (5) or (7) of KRS 271B.6-400 .

History. Enact. Acts 1988, ch. 23, § 88, effective January 1, 1989.

NOTES TO DECISIONS

1.Tolling.

Doctrine of adverse domination may operate to toll the statute of limitations under KRS 271B.8-330 (3) and 271B.6-400 while directors, who are guilty of alleged misconduct, exercise control over a corporation. Wilson v. Paine, 288 S.W.3d 284, 2009 Ky. LEXIS 154 ( Ky. 2009 ).

2.Applicability.

In a bank's action seeking repayment of loans guaranteed by a realty company, its breach of fiduciary duty claims against two officers of the company were not limited by this statute; precedents indicated that officers owe fiduciary duties to a corporation's creditors in some circumstances, and that duty was triggered when the officers improperly transferred property away from the company when it was moving toward insolvency and owed money to the bank. Bank of Am., N.A. v. Corporex Cos., LLC, 99 F. Supp. 3d 708, 2015 U.S. Dist. LEXIS 49254 (E.D. Ky. 2015 ).

Research References and Practice Aids

Northern Kentucky Law Review.

Miller, Notes, Piercing the Corporate Veil in Kentucky: An Analysis of United States v. WRW Corp., 22 N. Ky. L. Rev. 541 (1995).

Officers

271B.8-400. Required officers.

  1. A corporation shall have the officers described in its bylaws or appointed by the board of directors in accordance with the bylaws.
  2. A duly appointed officer may appoint one (1) or more officers or assistant officers if authorized by the bylaws or the board of directors.
  3. The bylaws or the board of directors shall delegate to one (1) of the officers responsibility for preparing minutes of the directors’ and shareholders’ meetings and for authenticating records of the corporation.
  4. The same individual may simultaneously hold more than one (1) office in a corporation.
  5. Every officer of a corporation, by acceptance of election or appointment as an officer, including by service, shall be deemed to have consented to the jurisdiction of the courts of the Commonwealth of Kentucky for any action by, in the name of, or on behalf of the corporation.

History. Enact. Acts 1988, ch. 23, § 89, effective January 1, 1989; 2012, ch. 81, § 90, effective July 12, 2012.

271B.8-410. Duties of officers.

Each officer shall have the authority and shall perform the duties set forth in the bylaws or, to the extent consistent with the bylaws, the duties prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of other officers.

History. Enact. Acts 1988, ch. 23, § 90, effective January 1, 1989.

NOTES TO DECISIONS

1.President’s Powers.

While presidents of corporations customarily exercised wide powers without approval of the board of directors, such powers were limited to doing acts customarily done in the business. Bancokentucky Co.'s Receiver v. National Bank of Kentucky's Receiver, 281 Ky. 784 , 137 S.W.2d 357, 1939 Ky. LEXIS 41 ( Ky. 1939 ) (decided under prior law).

Fact that corporation was engaged in business of acquiring securities did not confer power on president to purchase securities known to him to be worthless. Bancokentucky Co.'s Receiver v. National Bank of Kentucky's Receiver, 281 Ky. 784 , 137 S.W.2d 357, 1939 Ky. LEXIS 41 ( Ky. 1939 ) (decided under prior law).

2.Executive Director.

The executive director of a corporation, whose authority did not include the power to institute civil rights litigation on behalf of the corporation and whose action was specifically ordered terminated by the board of directors, was without standing to bring civil rights suit and the complaint was properly dismissed. Covington Housing Development Corp. v. Covington, 381 F. Supp. 427, 1974 U.S. Dist. LEXIS 6801 (E.D. Ky. 1974 ), aff’d, 513 F.2d 630 (6th Cir. Ky. 1975 ), cert. denied, Thompson v. Covington, 423 U.S. 869, 96 S. Ct. 133, 46 L. Ed. 2d 99, 1975 U.S. LEXIS 2794 (1975), rehearing denied, 423 U.S. 991, 96 S. Ct. 408, 46 L. Ed. 2d 312 (1975) (decided under prior law).

271B.8-420. Standards of conduct for officers.

  1. An officer with discretionary authority shall discharge his duties under that authority:
    1. In good faith;
    2. On an informed basis; and
    3. In a manner he honestly believes to be in the best interests of the corporation.
  2. An officer shall be considered to discharge his duties on an informed basis if he makes, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, inquiry into the business and affairs of the corporation, or into a particular action to be taken or decision to be made.
  3. In discharging his duties an officer shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
    1. One (1) or more officers or employees of the corporation whom the officer honestly believes to be reliable and competent in the matters presented; or
    2. Legal counsel, public accountants, or other persons as to matters the officer honestly believes are within the person’s professional or expert competence.
  4. An officer shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (3) of this section unwarranted.
  5. Any action taken as an officer, or any failure to take any action as an officer, shall not be the basis for monetary damages or injunctive relief unless:
    1. The officer has breached or failed to perform his duties in compliance with this section; and
    2. In the case of an action for monetary damages, the breach or failure to perform constitutes willful misconduct or wanton or reckless disregard for the best interests of the corporation or its shareholders.
  6. A person bringing an action or monetary damages under this section shall have the burden of proving by clear and convincing evidence the provisions of subsection (5)(a) and (b) of this section, and the burden of proving that the breach or failure to perform was the legal cause of damages suffered by the corporation.
  7. Nothing in this section shall eliminate or limit the liability of any officer for any act or omission occurring prior to January 1, 1989.

History. Enact. Acts 1988, ch. 23, § 91, effective January 1, 1989; 1988, ch. 224, § 10, effective July 15, 1988.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.257 (Acts 1988, ch. 224, § 10, effective July 15, 1988) which was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989, and KRS 271B.420 (Acts 1988 ch. 23, § 91, effective January 1, 1989).

NOTES TO DECISIONS

1.Applicability.

KRS 271B.8-300 and 271B.8-420 were applicable to a breach of fiduciary responsibility lawsuit brought against corporate directors who allegedly solicited the revocation of proxies to prevent a quorum at the corporation’s annual meeting and voting in order to remove the CEO as an officer. The directors allegedly acted to preserve their employment in the corporation; actions that could be classified as having been taken as a director or officer. Gundaker/Jordan Am. Holdings, Inc. v. Clark, 2008 U.S. Dist. LEXIS 80907 (E.D. Ky. Oct. 9, 2008).

Even if this statute could have supported an action for wrongful termination, it did not apply in a case where an employee was just managerial in nature; his title of “president” was honorary only. Brown Jordan Int'l, Inc. v. Carmicle, 846 F.3d 1167, 2017 U.S. App. LEXIS 1310 (11th Cir. Fla. 2017).

2.Construction.

Because there was no mandatory or persuasive authority from Kentucky courts classifying a breach of fiduciary duty as a personal injury, the court declined to construe it as such. Therefore, KRS 271B.8-300 and 271B.8-420 did not fall under the protection of the “jural rights” doctrine and had to be enforced. Gundaker/Jordan Am. Holdings, Inc. v. Clark, 2008 U.S. Dist. LEXIS 80907 (E.D. Ky. Oct. 9, 2008).

3.Tort Liability.

One’s position as an officer or shareholder in a corporation fails to immunize him from tort liability in circumstances where he would be otherwise liable if he were not a shareholder. Smith v. Isaacs, 777 S.W.2d 912, 1989 Ky. LEXIS 87 ( Ky. 1989 ) (decided under former KRS 271A.125 ).

4.Standing.

Circuit court properly dismissed a shareholder's causes of action for against a corporate officer for lack of standing because the claims were derivative, not direct, where the officer owed the shareholder a fiduciary duty to inform him personally if she had reason to know that assets would be (or were being) misappropriated, the common-law fiduciary and statutory duties ran directly to the corporation or limited liability company. Griffin v. Jones, 2015 Ky. App. LEXIS 115 (Ky. Ct. App. Aug. 14, 2015), review denied, ordered not published, 2016 Ky. LEXIS 360 (Ky. Aug. 17, 2016).

Research References and Practice Aids

Kentucky Law Journal.

Campbell, Corporate Fiduciary Duties in Kentucky., 93 Ky. L.J. 551 (2004/2005).

Article: Normative Justifications for Lax (or No) Corporate Fiduciary Duties: A Tale of Problematic Principles, Imagined Facts and Inefficient Outcomes, 99 Ky. L.J. 231 (2010/2011).

Northern Kentucky Law Review.

Comment, A Survey of Kentucky Tort Reform, 17 N. Ky. L. Rev. 473 (1990).

271B.8-430. Resignation and removal of officers.

  1. An officer may resign at any time by delivering notice to the corporation. A resignation shall be effective when the notice is delivered, unless the notice specifies a later effective date. If a resignation is made effective at a later date and the corporation accepts the future effective date, its board of directors may fill the pending vacancy before the effective date if the board of directors provides that the successor shall not take office until the effective date.
  2. A board of directors may remove any officer at any time with or without cause.

History. Enact. Acts 1988, ch. 23, § 92, effective January 1, 1989.

NOTES TO DECISIONS

1.Right of Removal.

Legal directors had the right to remove an officer. Harris v. Brown, 6 F.2d 922, 1925 U.S. Dist. LEXIS 1184 (D. Ky. 1925 ) (decided under prior law).

In the absence of contract the directors could discharge a corporate officer at any time without cause. O'Neal v. F. A. Neider Co., 118 Ky. 62 , 80 S.W. 451, 25 Ky. L. Rptr. 2279 , 1904 Ky. LEXIS 8 ( Ky. 1904 ) (decided under prior law).

271B.8-440. Contract rights of officers.

  1. The appointment of an officer shall not itself create contract rights.
  2. An officer’s removal shall not affect the officer’s contract rights, if any, with the corporation. An officer’s resignation shall not affect the corporation’s contract rights, if any, with the officer.

History. Enact. Acts 1988, ch. 23, § 93, effective January 1, 1989.

Indemnification

271B.8-500. Definitions for KRS 271B.8-510 to 271B.8-580.

As used in KRS 271B.8-510 to 271B.8-580 :

  1. “Corporation” includes any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.
  2. “Director” means an individual who is or was a director of a corporation or an individual, while a director of a corporation, is or was serving at the corporation’s request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. A director shall be considered to be serving an employee benefit plan at the corporation’s request if his duties to the corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. “Director” includes, unless the context requires otherwise, the estate or personal representative of a director.
  3. “Expenses” include counsel fees.
  4. “Liability” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding.
  5. “Official capacity” means:
    1. When used with respect to a director, the office of director in a corporation; and
    2. When used with respect to an individual other than a director, as contemplated in KRS 271B.8-560 , the office in a corporation held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the corporation. “Official capacity” shall not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan, or other enterprise.
  6. “Party” includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding.
  7. “Proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal.

History. Enact. Acts 1988, ch. 23, § 94, effective January 1, 1989.

Research References and Practice Aids

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

271B.8-510. Authority to indemnify.

  1. Except as provided in subsection (4) of this section, a corporation may indemnify an individual made a party to a proceeding because he is or was a director against liability incurred in the proceeding if:
    1. He conducted himself in good faith; and
    2. He honestly believed:
      1. In the case of conduct in his official capacity with the corporation, that his conduct was in its best interests; and
      2. In all other cases, that his conduct was at least not opposed to its best interests; and
    3. In the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful.
  2. A director’s conduct with respect to an employee benefit plan for a purpose he reasonably believed to be in the interests of the participants in and beneficiaries of the plan shall be conduct that satisfies the requirement of subsection (1)(b)2. of this section.
  3. The termination of a proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not be, of itself, determinative that the director did not meet the standard of conduct described in this section.
  4. A corporation may not indemnify a director under this section:
    1. In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or
    2. In connection with any other proceeding charging improper personal benefit to him, whether or not involving action in his official capacity, in which he was adjudged liable on the basis that personal benefit was improperly received by him.
  5. Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation shall be limited to reasonable expenses incurred in connection with the proceeding.

HISTORY: Enact. Acts 1988, ch. 23, § 95, effective January 1, 1989; 2015 ch. 34, § 8, effective June 24, 2015.

271B.8-520. Mandatory indemnification.

Unless limited by its articles of incorporation, a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party because he is or was a director of the corporation against reasonable expenses incurred by him in connection with the proceeding.

History. Enact. Acts 1988, ch. 23, § 96, effective January 1, 1989.

271B.8-530. Advance for expenses.

  1. A corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if:
    1. The director furnishes the corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet the standard of conduct; and
    2. A determination is made that the facts then known to those making the determination would not preclude indemnification under KRS 271B.8-500 to 271B.8-580 .
  2. The undertaking required by subsection (1)(a) of this section shall be an unlimited general obligation of the director but shall not be required to be secured and may be accepted without reference to financial ability to make repayment.
  3. Determinations and authorizations of payments under this section shall be made in the manner specified in KRS 271B.8-550 .

HISTORY: Enact. Acts 1988, ch. 23, § 97, effective January 1, 1989; 2017 ch. 193, § 6, effective June 29, 2017.

271B.8-540. Court-ordered indemnification.

Unless a corporation’s articles of incorporation provide otherwise, a director of the corporation who is a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of an application, the court after giving any notice the court considers necessary may order indemnification if it determines:

  1. The director is entitled to mandatory indemnification under KRS 271B.8-520 , in which case the court shall also order the corporation to pay the director’s reasonable expenses incurred to obtain court-ordered indemnification; or
  2. The director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he met the standard of conduct set forth in KRS 271B.8-510 or was adjudged liable as described in subsection (4) of KRS 271B.8-510 , but if he was adjudged so liable his indemnification shall be limited to reasonable expenses incurred.

History. Enact. Acts 1988, ch. 23, § 98, effective January 1, 1989.

271B.8-550. Determination and authorization of indemnification.

  1. A corporation shall not indemnify a director under KRS 271B.8-510 unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because he has met the standard of conduct set forth in KRS 271B.8-510 .
  2. The determination shall be made:
    1. By the board of directors by majority vote of a quorum consisting of directors not at the time parties to the proceeding;
    2. If a quorum cannot be obtained under subsection (2)(a) of this section, by majority vote of a committee duly designated by the board of directors (in which designation directors who are parties may participate), consisting solely of two (2) or more directors not at the time parties to the proceeding;
    3. By special legal counsel:
      1. Selected by the board of directors or its committee in the manner prescribed in subsection (2)(a) and (b) of this section; or
      2. If a quorum of the board of directors cannot be obtained under subsection (2)(a) of this section and a committee cannot be designated under subsection (2)(b) of this section, selected by majority vote of the full board of directors (in which selection directors who are parties may participate); or
    4. By the shareholders, but shares owned by or voted under the control of directors or shareholders who are at the time parties to the proceeding shall not be voted on the determination.
  3. Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subsection (2)(c) of this section to select counsel.

HISTORY: Enact. Acts 1988, ch. 23, § 99, effective January 1, 1989; 2017 ch. 193, § 7, effective June 29, 2017.

271B.8-560. Indemnification of officers, employees, and agents.

Unless a corporation’s articles of incorporation provide otherwise:

  1. An officer of the corporation who is not a director shall be entitled to mandatory indemnification under KRS 271B.8-520 , and is entitled to apply for court-ordered indemnification under KRS 271B.8-540 , in each case to the same extent as a director;
  2. The corporation may indemnify and advance expenses under KRS 271B.8-500 to 271B.8-580 to an officer, employee, or agent of the corporation who is not a director to the same extent as to a director; and
  3. A corporation may also indemnify and advance expenses to an officer, employee, or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract.

History. Enact. Acts 1988, ch. 23, § 100, effective January 1, 1989.

271B.8-570. Insurance.

A corporation may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee, or agent of the corporation, or who, while a director, officer, employee or agent of the corporation, is or was serving at the request of the corporation as a director, officer, manager, partner, trustee, employee, or agent of another entity, or of an employee benefit plan or other enterprise, against liability asserted against or incurred in that capacity or arising from the status as a director, officer, manager, employee, or agent, whether or not the corporation would have power to indemnify against the same liability under KRS 271B.8-510 or 271B.8-520 .

History. Enact. Acts 1988, ch. 23, § 101, effective January 1, 1989; 2007, ch. 137, § 66, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 66, effective July 15, 2010.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

271B.8-580. Application of KRS 271B.8-500 to 271B.8-580.

  1. The indemnification and advancement of expenses provided by, or granted pursuant to, KRS 271B.8-500 to 271B.8-580 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
  2. KRS 271B.8-500 to 271B.8-580 shall not limit a corporation’s power to pay or reimburse expenses incurred by a director in connection with his appearance as a witness at a proceeding at a time when he has not been made a named defendant or responded to the proceeding.

History. Enact. Acts 1988, ch. 23, § 102, effective January 1, 1989.

Subtitle 9. [Reserved]

Subtitle 10. Amendment of Articles of Incorporation and Bylaws

Amendment of Articles of Incorporation

271B.10-010. Authority to amend — Conversion to nonstock, nonprofit corporation.

  1. A corporation may amend its articles of incorporation at any time to add or change a provision that is required or permitted in the articles of incorporation or to delete a provision not required in the articles of incorporation. Whether a provision is required or permitted in the articles of incorporation shall be determined as of the effective date of the amendment.
  2. A shareholder of the corporation shall not have a vested property right resulting from any provision in the articles of incorporation, including provisions relating to management, control, capital structure, dividend entitlement, or purpose or duration of the corporation.
  3. A corporation existing under this chapter or its predecessors may amend its articles of incorporation to convert into a nonstock, nonprofit corporation under KRS 273.161 to 273.387 , but a corporation existing under KRS 273.161 to 273.387 may not convert to a corporation existing under this chapter.

History. Enact. Acts 1988, ch. 23, § 103, effective January 1, 1989; 2005, ch. 182, § 8, effective June 20, 2005.

NOTES TO DECISIONS

1.Creditors.

The right to amend the articles was not conditioned upon the consent of creditors. In re Benedict Tea & Coffee Co., 192 F. 1011, 1912 U.S. Dist. LEXIS 1845 (D. Ky. 1912 ) (decided under prior law).

2.New Corporation.

An amendment changing the name of the corporation, the number and qualifications of its directors, and authorizing an executive committee created a new corporation. Senn v. Levy, 111 Ky. 318 , 63 S.W. 776, 23 Ky. L. Rptr. 1331 , 23 Ky. L. Rptr. 662 , 1901 Ky. LEXIS 209 ( Ky. 1901 ) (decided under prior law).

271B.10-020. Amendment by board of directors.

Unless the articles of incorporation provide otherwise, a corporation’s board of directors may adopt one (1) or more amendments to the corporation’s articles of incorporation without shareholder action:

  1. To extend the duration of the corporation if it was incorporated at a time when limited duration was required by law;
  2. To delete the names and addresses of the initial directors;
  3. To delete the name and address of the initial registered agent or registered office, if a statement of change is on file with the Secretary of State;
  4. To delete the mailing address of the corporation’s initial principal office if the statement containing the mailing address of new principal office is on file with the Secretary of State;
  5. To change each issued and unissued authorized share of an outstanding class into a greater number of whole shares if the corporation has only shares of that class outstanding;
  6. To change the corporate name by substituting the word “corporation,” “incorporated,” “company,” “limited,” or the abbreviation “corp.,” “inc.,” “co.,” or “ltd.,” for a similar word or abbreviation in the name, or by adding, deleting, or changing a geographical attribution for the name; or
  7. To make any other change expressly permitted by this chapter to be made without shareholder action.

History. Enact. Acts 1988, ch. 23, § 104, effective January 1, 1989; 1998, ch. 341, § 7, effective July 15, 1998.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, The 2002 Amendments to the Kentucky Business Corporation Act, Vol. 67, No. 3, May 2003, Ky. Bench & Bar 13.

271B.10-030. Amendment by board of directors and shareholders.

  1. A corporation’s board of directors may propose one (1) or more amendments to the articles of incorporation for submission to the shareholders.
  2. For the amendment to be adopted:
    1. The board of directors shall recommend the amendment to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the amendment; and
    2. The shareholders entitled to vote on the amendment shall approve the amendment as provided in subsection (5) of this section.
  3. The board of directors may condition its submission of the proposed amendment on any basis.
  4. The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholder’s meeting in accordance with KRS 271B.7-050 . The notice of meeting shall also state that the purpose, or one (1) of the purposes, of the meeting is to consider the proposed amendment and contain or be accompanied by a copy or summary of the amendment.
  5. Unless this chapter, the articles of incorporation, or the board of directors (acting pursuant to subsection (3) of this section) requires a greater vote or a vote by voting groups, the amendment to be adopted shall be approved by:
    1. A majority of the votes entitled to be cast on the amendment by any voting group with respect to which the amendment would create dissenters’ rights; and
    2. The votes required by KRS 271B.7-250 and 271B.7-260 by every other voting group entitled to vote on the amendment.

History. Enact. Acts 1988, ch. 23, § 105, effective January 1, 1989.

271B.10-040. Voting on amendments by voting groups.

  1. The holders of the outstanding shares of a class shall be entitled to vote as a separate voting group (if shareholder voting is otherwise required by this chapter) on a proposed amendment if the amendment would:
    1. Increase or decrease the aggregate number of authorized shares of the class;
    2. Effect an exchange or reclassification of all or part of the shares of the class into shares of another class;
    3. Effect an exchange or reclassification, or create the right of exchange, of all or part of the shares of another class into shares of the class;
    4. Change the designation, rights, preferences, or limitations of all or part of the shares of the class;
    5. Change the shares of all or part of the class into a different number of shares of the same class;
    6. Create a new class of shares having rights or preferences with respect to distributions or to dissolution that are prior, superior, or substantially equal to the shares of the class;
    7. Increase the rights, preferences, or number of authorized shares of any class that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolution that are prior, superior, or substantially equal to the shares of the class;
    8. Limit or deny an existing preemptive right of all or part of the shares of the class; or
    9. Cancel or otherwise affect rights to distributions or dividends that have accumulated but not yet been declared on all or part of the shares of the class.
  2. If a proposed amendment would affect a series of a class of shares in one (1) or more of the ways described in subsection (1) of this section, the shares of that series shall be entitled to vote as a separate voting group on the proposed amendment.
  3. If a proposed amendment that entitles two (2) or more series of shares to vote as separate voting groups under this section would affect those two (2) or more series in the same or a substantially similar way, the shares of all the series so affected shall vote together as a single voting group on the proposed amendment.
  4. A class or series of shares is entitled to the voting rights granted by this section although the articles of incorporation provide that the shares are nonvoting shares.

History. Enact. Acts 1988, ch. 23, § 106, effective January 1, 1989.

271B.10-050. Amendment before issuance of shares.

If a corporation has not yet issued shares, its incorporators or board of directors may adopt one (1) or more amendments to the corporation’s articles of incorporation.

History. Enact. Acts 1988, ch. 23, § 107, effective January 1, 1989.

271B.10-060. Articles of amendment.

A corporation amending its articles of incorporation shall deliver to the Secretary of State for filing articles of amendment setting forth:

  1. The name of the corporation;
  2. The text of each amendment adopted;
  3. If an amendment provides for an exchange, reclassification, or cancellation of issued shares, provisions for implementing the amendment if not contained in the amendment itself;
  4. The date of each amendment’s adoption;
  5. If an amendment was adopted by the incorporators or board of directors without shareholder action, a statement to that effect and that shareholder action was not required; and
  6. If an amendment was approved by the shareholders:
    1. The designation, number of outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately on the amendment, and number of votes of each voting group indisputably represented at the meeting; and
    2. Either the total number of votes cast for and against the amendment by each voting group entitled to vote separately on the amendment or the total number of undisputed votes cast for the amendment by each voting group and a statement that the number cast for the amendment by each voting group was sufficient for approval by that voting group.
  7. If the amendment includes language converting the corporation into a nonprofit, nonstock corporation under KRS 273.161 to 273.387 , the conversion shall be effective upon the filing of the amendment with the Secretary of State, and, upon filing, the Secretary of State shall immediately forward a copy of the amendment to the commissioner of revenue.

History. Enact. Acts 1988, ch. 23, § 108, effective January 1, 1989; 2005, ch. 182, § 9, effective June 20, 2005.

Legislative Research Commission Note.

(6/20/2005). 2005 Ky. Acts chs. 11, 85, 95, 97, 98, 99, 123, and 181 instruct the Reviser of Statutes to correct statutory references to agencies and officers whose names have been changed in the 2005 legislation confirming the reorganization of the executive branch. Such a correction has been made in this section.

271B.10-070. Restated articles of incorporation.

  1. A corporation’s board of directors may restate its articles of incorporation at any time with or without shareholder action.
  2. The restatement may include one (1) or more amendments to the articles. If the restatement includes an amendment requiring shareholder approval, it shall be adopted as provided in KRS 271B.10-030 .
  3. If the board of directors submits a restatement for shareholder action, the corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with KRS 271B.7-050 . The notice shall also state that the purpose, or one (1) of the purposes, of the meeting is to consider the proposed restatement and contain or be accompanied by a copy of the restatement that identifies any amendment or other change it would make in the articles.
  4. A corporation restating its articles of incorporation shall deliver to the secretary of state for filing articles of restatement setting forth the name of the corporation and the text of the restated articles of incorporation together with a certificate setting forth:
    1. Whether the restatement contains an amendment to the articles requiring shareholder approval and, if it does not, that the board of directors adopted the restatement; or
    2. If the restatement contains an amendment to the articles requiring shareholder approval, the information required by KRS 271B.10-060 .
  5. Restated articles of incorporation supersede the original articles of incorporation and all amendments to them when the restated articles of incorporation become effective pursuant to KRS 14A.2-070 .
  6. The secretary of state may certify restated articles of incorporation as the articles of incorporation currently in effect, without including the certificate information required by subsection (4) of this section.

History. Enact. Acts 1988, ch. 23, § 109, effective January 1, 1989; 2010, ch. 151, § 132, effective January 1, 2011.

271B.10-080. Amendment pursuant to reorganization.

  1. A corporation’s articles of incorporation may be amended without action by the board of directors or shareholders to carry out a plan of reorganization ordered or decreed by a court of competent jurisdiction under federal statute if the articles of incorporation after amendment contain only provisions required or permitted by KRS 271B.2-020 .
  2. The individual or individuals designated by the court shall deliver to the Secretary of State for filing articles of amendment setting forth:
    1. The name of the corporation;
    2. The text of each amendment approved by the court;
    3. The date of the court’s order or decree approving the articles of amendment;
    4. The title of the reorganization proceeding in which the order or decree was entered; and
    5. A statement that the court had jurisdiction of the proceeding under federal statute.
  3. Shareholders of a corporation undergoing reorganization shall not have dissenters’ rights except as and to the extent provided in the reorganization plan.
  4. This section shall not apply after entry of a final decree in the reorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan.

History. Enact. Acts 1988, ch. 23, § 110, effective January 1, 1989.

271B.10-090. Effect of amendment.

An amendment to articles of incorporation shall not affect a cause of action existing against or in favor of the corporation, a proceeding to which the corporation is a party, or the existing rights of persons other than shareholders of the corporation. An amendment changing a corporation’s name shall not abate a proceeding brought by or against the corporation in its former name.

History. Enact. Acts 1988, ch. 23, § 111, effective January 1, 1989.

Amendment of Bylaws

271B.10-200. Amendment by board of directors or shareholders.

  1. A corporation’s board of directors may amend or repeal the corporation’s bylaws unless:
    1. The articles of incorporation or this chapter reserve this power exclusively to the shareholders in whole or part; or
    2. The shareholders in amending or repealing a particular bylaw provide expressly that the board of directors may not amend or repeal that bylaw.
  2. A corporation’s shareholders may amend or repeal the corporation’s bylaws even though the bylaws may also be amended or repealed by its board of directors.
  3. A shareholder of the corporation shall not have a vested property right resulting from any provision in the bylaws.

HISTORY: Enact. Acts 1988, ch. 23, § 112, effective January 1, 1989; 2017 ch. 193, § 8, effective June 29, 2017.

271B.10-220. Bylaw increasing quorum or voting requirements for directors.

  1. A bylaw that fixes a greater quorum or voting requirement for the board of directors may be amended or repealed:
    1. If originally adopted by the shareholders, only by the shareholders; or
    2. If originally adopted by the board of directors, either by the shareholders or by the board of directors.
  2. A bylaw adopted or amended by the shareholders that fixes a greater quorum or voting requirement for the board of directors may provide that it may be amended or repealed only by a specified vote of either the shareholders or the board of directors.
  3. Action by the board of directors under subsection (1)(b) of this section to adopt or amend a bylaw that changes the quorum or voting requirement for the board of directors shall meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.

History. Enact. Acts 1988, ch. 23, § 113, effective January 1, 1989.

Subtitle 11. Merger and Share Exchange

271B.11-010. Merger.

  1. One (1) or more corporations may merge into another corporation if the board of directors of each corporation adopts and its shareholders (if required by KRS 271B.11-030 ) approve a plan of merger.
  2. The plan of merger shall set forth:
    1. The name of each corporation planning to merge and the name of the surviving corporation into which each other corporation plans to merge;
    2. The terms and conditions of the merger; and
    3. The manner and basis of converting the shares of each corporation into shares, obligations, or other securities of the surviving or any other corporation or into cash or other property in whole or part.
  3. The plan of merger may set forth:
    1. Amendments to the articles of incorporation of the surviving corporation; and
    2. Other provisions relating to the merger.

History. Enact. Acts 1988, ch. 23, § 114, effective January 1, 1989.

NOTES TO DECISIONS

1.In General.

Consolidation describes the combination of two (2) corporations into a new one. Central University of Kentucky v. Walters' Ex'rs, 122 Ky. 65 , 90 S.W. 1066, 28 Ky. L. Rptr. 1041 , 1906 Ky. LEXIS 23 ( Ky. 1906 ).

2.Retention of Board Members and Employees.

The retention of board members and continued employment with the surviving corporation do not offend principles of Kentucky merger law. Nelson v. Gammon, 478 F. Supp. 630, 1979 U.S. Dist. LEXIS 10010 (W.D. Ky. 1979 ), aff'd, 647 F.2d 710, 1981 U.S. App. LEXIS 13523 (6th Cir. Ky. 1981 ).

Research References and Practice Aids

ALR

Merger or consolidation of corporation as terminating charitable trust of which corporation is beneficiary. 34 A.L.R.3d 749.

Sufficiency, under § 14 of Securities Exchange Act of 1934 (15 USCS § 78n), and implementing regulations, of proxy or information statement incident to merger of corporation. 4 A.L.R. Fed. 1021.

271B.11-020. Share exchange.

  1. A corporation may acquire all of the outstanding shares of one (1) or more classes or series of another corporation if the board of directors of each corporation adopts and its shareholders (if required by KRS 271B.11-030 ) approve the exchange.
  2. The plan of exchange shall set forth:
    1. The name of the corporation whose shares will be acquired and the name of the acquiring corporation;
    2. The terms and conditions of the exchange; and
    3. The manner and basis of exchanging the shares to be acquired for shares, obligations, or other securities of the acquiring or any other corporation or for cash or other property in whole or part.
  3. The plan of exchange may set forth other provisions relating to the exchange.
  4. This section shall not limit the power of a corporation to acquire all or part of the shares of one (1) or more classes or series of another corporation through a voluntary exchange or otherwise.

History. Enact. Acts 1988, ch. 23, § 115, effective January 1, 1989.

NOTES TO DECISIONS

1.Transfer of Assets.

A transfer of assets by one corporation to another corporation in the nature of an assignment for creditors was not a consolidation. La Rue v. Bank of Columbus, 165 Ky. 669 , 178 S.W. 1033, 1915 Ky. LEXIS 585 ( Ky. 1915 ) (decided under prior law).

Research References and Practice Aids

ALR

Merger or consolidation of corporation as terminating charitable trust of which corporation is beneficiary. 34 A.L.R.3d 749.

271B.11-025. Change of status from or to a public benefit corporation — Conditions for.

  1. Notwithstanding any other provisions of this chapter, a corporation that is not a public benefit corporation shall not, without the approval of ninety percent (90%) of the outstanding shares of each class of the stock of the corporation of which there are outstanding shares, whether voting or nonvoting:
    1. Amend its articles of incorporation to elect to be a public benefit corporation; or
    2. Merge with or into another entity if, as a result of the merger, the shares in the corporation would become, or be converted into or exchanged for the right to receive, shares or other equity interests in a domestic or foreign public benefit corporation or similar entity. The restrictions of this section shall not apply prior to the time that the corporation has received payment for any of its capital stock.
  2. Any stockholder of a corporation that is not a public benefit corporation who:
    1. Holds shares of stock of the corporation immediately prior to the effective time of:
      1. An amendment to the corporation’s articles of incorporation to become a public benefit corporation; or
      2. A merger that would result in the conversion of the corporation’s stock into, or exchange of the corporation’s stock for the right to receive, shares or other equity interests in a domestic or foreign public benefit corporation or similar entity; and
    2. Has not voted in favor of the amendment, merger, or consolidation or consented thereto in writing; shall be entitled to exercise dissenters’ rights under Subtitle 13 of this chapter.
  3. Notwithstanding any other provisions of this chapter, a corporation that is a public benefit corporation shall not, without the approval of two-thirds (2/3) of the outstanding shares of each class of the stock of the corporation of which there are outstanding shares, whether voting or nonvoting:
    1. Amend its articles of incorporation to delete the election to be a public benefit corporation; or
    2. Merge with or into another entity if, as a result of the merger, the shares in the corporation would become, or be converted into or exchanged for the right to receive, shares or other equity interests in a domestic or foreign corporation that is not a public benefit corporation or similar entity and the articles of incorporation of which does not contain the identical public benefit or public benefits as the public benefit corporation identified in its articles of incorporation.

HISTORY: 2017 ch. 28, § 3, effective June 29, 2017.

271B.11-030. Action on plan.

  1. After adopting a plan of merger or share exchange, the board of directors of each corporation party to the merger, and the board of directors of the corporation whose shares will be acquired in the share exchange, shall submit the plan of merger (except as provided in subsection (7) of this section) or share exchange for approval by its shareholders.
  2. For a plan of merger or share exchange to be approved:
    1. The board of directors shall recommend the plan of merger or share exchange to the shareholders, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the plan; and
    2. The shareholders entitled to vote shall approve the plan.
  3. The board of directors may condition its submission of the proposed merger or share exchange on any basis.
  4. The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with KRS 271B.7-050 . The notice shall also state that the purpose, or one (1) of the purposes, of the meeting is to consider the plan of merger or share exchange and contain or be accompanied by a copy or summary of the plan.
  5. Unless this chapter, the articles of incorporation, or the board of directors (acting pursuant to subsection (3) of this section) require a greater vote or vote by voting groups, the plan of merger or share exchange to be authorized shall be approved by each voting group entitled to vote separately on the plan by a majority of all the votes entitled to be cast on the plan by that voting group.
  6. Separate voting by voting groups shall be required:
    1. On a plan of merger if the plan contains a provision that, if contained in a proposed amendment to articles of incorporation, would require action by one (1) or more separate voting groups on the proposed amendment under KRS 271B.10-040 ; and
    2. On a plan of share exchange by each class or series of shares included in the exchange, with each class or series constituting a separate voting group.
  7. Action by the shareholders of the surviving corporation on a plan of merger shall not be required if:
    1. The articles of incorporation of the surviving corporation will not differ (except for amendments enumerated in KRS 271B.10-020 ) from its articles before the merger;
    2. Each shareholder of the surviving corporation whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations, and relative rights, immediately after;
    3. The number of voting shares outstanding immediately after the merger, plus the number of voting shares issuable as a result of the merger (either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger) will not exceed by more than twenty percent (20%) the total number of voting shares of the surviving corporation outstanding immediately before the merger; and
    4. The number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger (either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger), will not exceed by more than twenty percent (20%) the total number of participating shares outstanding immediately before the merger.
  8. As used in subsection (7) of this section:
    1. “Participating shares” means shares that entitle their holders to participate without limitation in distributions.
    2. “Voting shares” means shares that entitle their holders to vote unconditionally in elections of directors.
  9. After a merger or share exchange is authorized, and at any time before articles of merger or share exchange are filed, the planned merger or share exchange may be abandoned (subject to any contractual rights), without further shareholder action, in accordance with the procedure set forth in the plan of merger or share exchange or, if none is set forth, in the manner determined by the board of directors.

History. Enact. Acts 1988, ch. 23, § 116, effective January 1, 1989.

NOTES TO DECISIONS

1.Preferred Shareholders.

Former section governing merger and consolidation did not impair the obligation of preferred stockholders simply because it authorized some sort of consolidation. Donohue v. Heuser, 239 S.W.2d 238, 1951 Ky. LEXIS 866 ( Ky. 1951 ) (decided under prior law).

2.Rights of Stockholders.

A consolidation necessarily involves a change in the rights of shareholders and the shareholder is on notice that changes may be effected; moreover a reasonable alteration of preferred stockholders’ rights would include the elimination of dividend arrearages and other changes made provided they are necessary, proper, and fair in view of the corporate condition shown in the particular case. Donohue v. Heuser, 239 S.W.2d 238, 1951 Ky. LEXIS 866 ( Ky. 1951 ) (decided under prior law).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

271B.11-040. Merger of subsidiary.

  1. A parent corporation owning at least ninety percent (90%) of the outstanding shares of each class of a subsidiary corporation may merge the subsidiary into itself without approval of the shareholders of the parent or subsidiary.
  2. The board of directors of the parent shall adopt a plan of merger that sets forth:
    1. The names of the parent and subsidiary; and
    2. The manner and basis of converting the shares of the subsidiary into shares, obligations, or other securities of the parent or any other corporation or into cash or other property in whole or part.
  3. The parent shall mail a copy or summary of the plan of merger to each shareholder of the subsidiary who does not waive the mailing requirement in writing.
  4. The parent shall not deliver articles of merger to the Secretary of State for filing until at least thirty (30) days after the date it mailed a copy of the plan of merger to each shareholder of the subsidiary who did not waive the mailing requirement.
  5. Articles of merger under this section shall not contain amendments to the articles of incorporation of the parent corporation (except for amendments enumerated in KRS 271B.10-020 ).

History. Enact. Acts 1988, ch. 23, § 117, effective January 1, 1989.

271B.11-050. Articles of merger or share exchange.

  1. After a plan of merger or share exchange is approved by the shareholders, or adopted by the board of directors if shareholder approval is not required, the surviving or acquiring corporation shall deliver to the Secretary of State for filing articles of merger or share exchange setting forth:
    1. The names of the parties to the merger or share exchange;
    2. The name of the surviving corporation, if a merger, or the name of the acquiring corporation, if a share exchange;
    3. If a merger, the information required by KRS 271B.11-010 (2)(c);
    4. If a merger, any amendment to the articles of incorporation of the surviving corporation;
    5. If a share exchange, the information required by KRS 271B.11-020 (2)(c);
    6. If shareholder approval was not required, a statement to that effect; and
    7. If approval of the shareholders of one (1) or more corporations party to the merger or share exchange was required:
      1. The designation, number of outstanding shares, and number of votes entitled to be cast by each voting group entitled to vote separately on the plan as to each corporation; and
      2. Either the total number of votes cast for and against the plan by each voting group entitled to vote separately on the plan or the total number of undisputed votes cast for the plan separately by each voting group and a statement that the number cast for the plan by each voting group was sufficient for approval by that voting group.
  2. A merger or share exchange shall take effect upon the effective date of the articles of merger or share exchange.

HISTORY: Enact. Acts 1988, ch. 23, § 118, effective January 1, 1989; 2015 ch. 34, § 9, effective June 24, 2015.

Legislative Research Commission Notes.

(6/24/2015). During codification, the Reviser of Statutes has corrected a manifest clerical or typographical error in subsection (1)(e) of this statute from the way it appeared in 2015 Ky. Acts ch. 34, sec. 9 by changing a citation to “KRS 271B.11-020 (c)” to read “KRS 271B.11-020 (2)(c).” None of the text of the subsection was changed.

Research References and Practice Aids

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

271B.11-060. Effect of merger or share exchange.

  1. When a merger takes effect:
    1. Every other corporation party to the merger shall merge into the surviving corporation and the separate existence of every corporation, except the surviving corporation, shall cease;
    2. The title to all property, whether real, personal, or intangible, owned by each corporation party to the merger shall be vested in the surviving corporation without reversion or impairment;
    3. The surviving corporation shall have all liabilities of each corporation party to the merger;
    4. A proceeding pending against any corporation party to the merger may be continued as if the merger did not occur or the surviving corporation may be substituted in the proceeding for the corporation whose existence ceased;
    5. The articles of incorporation of the surviving corporation shall be amended to the extent provided in the articles of merger; and
    6. The shares of each corporation party to the merger that are to be converted into shares, obligations, or other securities of the surviving or any other corporation or into cash or other property shall be converted, and the former holders of the shares shall be entitled only to the rights provided in the articles of merger or to their rights under Subtitle 13.
  2. When a share exchange takes effect, the shares of each acquired corporation shall be exchanged as provided in the articles of share exchange, and the former holders of the shares shall be entitled only to the exchange rights provided in the articles of share exchange or to their rights under Subtitle 13.

HISTORY: Enact. Acts 1988, ch. 23, § 119, effective January 1, 1989; 2012, ch. 81, § 91, effective July 12, 2012; 2015 ch. 34, § 10, effective June 24, 2015.

NOTES TO DECISIONS

1.Consolidated Company.

The constituent corporations ceased to exist as such and the consolidated corporation became a single new corporation, subject to all laws of the state relating to such corporations. Kentucky Power & Light Co. v. Maysville, 36 F.2d 816, 1929 U.S. Dist. LEXIS 1741 (D. Ky. 1929 ) (decided under prior law).

2.— Assets.

All assets of the constituent corporations passed to the new concern. Taylor v. Citizens' Oil Co., 182 Ky. 350 , 206 S.W. 644, 1918 Ky. LEXIS 386 ( Ky. 1918 ) (decided under prior law). And see Farmers-Exchange Bank v. McDaniel, 266 Ky. 743 , 99 S.W.2d 827, 1936 Ky. LEXIS 743 ( Ky. 1936 ).

3.— Debts.

Corporation purchasing assets of another corporation was liable for debts of selling corporation, whether contract or tort, liquidated or unliquidated, though it did not expressly assume payment, where there was no consideration for the sale, or sale was not in good faith but for purpose of defeating creditors, or where there had been a merger or consolidation, or where purchasing corporation took over from stockholders all stock of selling corporation, or where transaction amounted to mere reincorporation. Payne-Baber Coal Co. v. Butler, 276 Ky. 211 , 123 S.W.2d 273, 1938 Ky. LEXIS 542 ( Ky. 1938 ) (decided under prior law).

Liability of purchasing corporation was for full amount of debt owed by selling corporation, without regard to amount paid for purchase. Payne-Baber Coal Co. v. Butler, 276 Ky. 211 , 123 S.W.2d 273, 1938 Ky. LEXIS 542 ( Ky. 1938 ) (decided under prior law).

4.— Franchises and Property Rights.

Street franchises pass to the consolidated corporation. Louisville v. Cumberland Tel. & Tel. Co., 224 U.S. 649, 32 S. Ct. 572, 56 L. Ed. 934, 1912 U.S. LEXIS 2333 (U.S. 1912); Owensboro v. Cumberland Tel. & Tel. Co., 230 U.S. 58, 33 S. Ct. 988, 57 L. Ed. 1389, 1913 U.S. LEXIS 2678 (U.S. 1913) (decided under prior law).

Consolidation continued in the new corporation all the franchises, and vested in it all the property rights, subject to the terms upon which it was acquired, of the two constituent corporations. Central University of Kentucky v. Walters' Ex'rs, 122 Ky. 65 , 90 S.W. 1066, 28 Ky. L. Rptr. 1041 , 1906 Ky. LEXIS 23 ( Ky. 1906 ) (decided under prior law).

5.— Liabilities.

The consolidated company succeeded to all the liabilities of the constituent companies. Mercer-Lincoln Pine Knob Oil Co. v. Payne, 206 Ky. 848 , 268 S.W. 584, 1925 Ky. LEXIS 1056 ( Ky. 1925 ) (decided under prior law).

6.— Negotiable Paper.

Where two corporations were consolidated and new corporation took over assets, new corporation acquired no new rights as to negotiable paper held by old corporations, and was not a holder in due course as to such paper. National Bank of Lima v. Deaton, 279 Ky. 606 , 131 S.W.2d 495, 1939 Ky. LEXIS 318 ( Ky. 1939 ) (decided under prior law).

7.— Powers.

The consolidated company had no power that was not enjoyed by at least one of its constituent members. Covington Gaslight Co. v. Covington, 58 S.W. 805, 22 Ky. L. Rptr. 796 , 1900 Ky. LEXIS 250 ( Ky. 1900 ) (decided under prior law).

8.— Separate Identity.

Consolidation destroyed nothing except the separate identity of the consolidating corporations. Central University of Kentucky v. Walters' Ex'rs, 122 Ky. 65 , 90 S.W. 1066, 28 Ky. L. Rptr. 1041 , 1906 Ky. LEXIS 23 ( Ky. 1906 ) (decided under prior law).

9.Merged Corporation — Trade Name.

Where plaintiff who owned two unincorporated drug stores and the right to a certain trade name or a derivative thereof incorporated the two stores and used the trade name in both corporations, the trade name and corporate name being the same merged into one, with the trade name becoming the property of the corporation, so that when the two corporations were later merged into the defendants’ two corporations the trade name became the property of the defendants’ surviving corporation under KRS 271.285 (now repealed) and plaintiff could not enjoin the use of the name or recover damages for use of the name. Gregory v. Grantz, 609 S.W.2d 702, 1980 Ky. App. LEXIS 397 (Ky. Ct. App. 1980) (decided under prior law).

10.Pending Derivative Lawsuits.

Shareholder’s appeal of the dismissal of his derivative action was dismissed because, during the pendency of the appeal, as the result of a merger, the shareholder’s stock in the corporation was cancelled; derivative actions required plaintiffs to fairly and adequately represent the interests of the stockholders, and continuous ownership of stock was required. Further, the right to continue any pending derivative lawsuits would have passed from the former stockholders to the surviving corporation. Bacigalupo v. Kohlhepp, 240 S.W.3d 155, 2007 Ky. App. LEXIS 454 (Ky. Ct. App. 2007).

Research References and Practice Aids

ALR

Similarity of ownership or control as basis for charging corporation acquiring assets of another with liability for former owner’s debts. 49 A.L.R.3d 881.

Validity and construction of state statute making successor corporation liable for taxes of predecessor. 65 A.L.R.3d 1181.

Liability of successor corporation for injury or damage caused by product issued by predecessor. 66 A.L.R.3d 824.

Doctrine of potential competition as basis for finding violation of § 7 of Clayton Act (15 USCS § 18). 44 A.L.R. Fed. 412.

Liability of Successor Corporation for Injury or Damage Caused by Product Issued by Predecessor, Based on Successor’s Independent Duty to Warn Third Party of Danger or Defect, 92 A.L.R.5th 227.

Liability of Successor Corporation for Injury or Damage Caused by Product Issued by Predecessor, Based on Merger or Consolidation of Transferor and Transferee, 109 A.L.R.5th 301.

Liability of Successor Corporation for Injury or Damage Caused by Product Issued by Predecessor, Based on Successor’s Express or Implied Agreement to Assume Liability or Where Transfer Was Fraudulent, in Bad Faith, or Without Adequate Consideration, 112 A.L.R.5th 113.

Liability of Successor Corporation for Injury or Damage Caused by Product Issued by Predecessor, Based on “Product Line” Successor Liability, 18 A.L.R.6th 629.

Liability of Successor Corporation for Injury or Damage Caused by Product Issued by Predecessor, Based on Mere Continuation or Continuity of Enterprise Exceptions to Nonliability, 13 A.L.R.6th 355.

271B.11-070. Merger or share exchange with foreign corporation.

  1. One (1) or more foreign corporations may merge or enter into a share exchange with one (1) or more domestic corporations if:
    1. In a merger, the merger is permitted by the law of the state or country under whose law each foreign corporation is incorporated and each foreign corporation complies with that law in effecting the merger;
    2. In a share exchange, the corporation whose shares will be acquired is a domestic corporation, whether or not a share exchange is permitted by the law of the state or country under whose law the acquiring corporation is incorporated;
    3. The foreign corporation complies with KRS 271B.11-050 if it is the surviving corporation of the merger or acquiring corporation of the share exchange; and
    4. Each domestic corporation complies with the applicable provisions of KRS 271B.11-010 to 271B.11-040 and, if it is the surviving corporation of the merger or acquiring corporation of the share exchange, with KRS 271B.11-050 .
  2. Upon the merger or share exchange taking effect, the surviving foreign corporation of a merger and the acquiring foreign corporation of a share exchange shall be deemed:
    1. To appoint the Secretary of State as its agent for service of process in a proceeding to enforce any obligation or the rights of dissenting shareholders of each domestic corporation party to the merger or share exchange;
    2. To agree that it will promptly pay to the dissenting shareholders of each domestic corporation party to the merger or share exchange the amount, if any, to which they are entitled under Subtitle 13; and
    3. To have agreed, to the extent required by Section 200 of the Kentucky Constitution, that the courts of this Commonwealth shall retain jurisdiction over that part of the corporate property within the limits of this Commonwealth in all matters which may arise, as if the transaction had not taken place.
  3. This section shall not limit the power of a foreign corporation to acquire all or part of the shares of one (1) or more classes or series of a domestic corporation through a voluntary exchange or otherwise.

History. Enact. Acts 1988, ch. 23, § 120, effective January 1, 1989.

271B.11-080. Merger of domestic or foreign limited liability companies or limited partnerships with domestic corporations — Shareholder’s liability following merger.

  1. One (1) or more domestic or foreign limited liability companies or limited partnerships may merge with one (1) or more domestic corporations if:
    1. The merger is permitted by the laws of the state or country under whose law each foreign limited liability company or limited partnership is incorporated, organized, or formed, and each foreign limited liability company or limited partnership complies with those laws in effecting the merger;
    2. Each domestic limited liability company party to the merger complies with the applicable provisions of the Kentucky Revised Statutes;
    3. Each domestic limited partnership party to the merger complies with the applicable provisions of KRS Chapter 362;
    4. Each domestic corporation complies with the applicable provisions of KRS 271B.11-010 to 271B.11-040 .
  2. The plan of merger shall set forth:
    1. The name of each constituent business entity that is a party to the merger and the name of the surviving business entity into which each constituent business entity proposes to merge;
    2. The terms and conditions of the proposed merger, including but not limited to, a statement which sets forth whether limited liability is retained by the surviving business entity;
    3. The manner and basis of converting the shares in each corporation and the interests in each business entity that is a party to the merger into interests, shares, or other securities or obligations, as the case may be, of the surviving entity, or of any other business entity, or, in whole or in part, into cash or other property;
    4. The amendments to the articles of organization of a limited liability company, or articles of incorporation of a corporation or certificate of limited partnership, as the case may be, of the surviving business entity as are desired to be effected by the merger, or that no changes are desired;
    5. Other provisions relating to the proposed merger that are deemed necessary or desirable.
  3. The business entity surviving from the merger shall deliver to the Secretary of State for filing articles of merger duly executed by each constituent business entity setting forth:
    1. The name and jurisdiction of formation or organization of each constituent business entity which is to merge;
    2. The plan of merger;
    3. The name of the surviving business entity;
    4. A statement that the plan of merger was duly authorized and approved by each constituent business entity in accordance with the laws applicable to such business entity; and
    5. If the surviving entity is not a business entity organized under the laws of this Commonwealth, a statement that the surviving business entity:
      1. Agrees that it may be served with process in this Commonwealth in any proceeding for enforcement of any obligation of any constituent business entity party to the merger that was organized under the laws of this Commonwealth, as well as for enforcement of any obligation of the surviving business entity arising from the merger; and
      2. Appoints the Secretary of State as its agent for service of process in any such proceeding. The surviving entity shall specify the address to which a copy of the process shall be mailed to it by the Secretary of State.
  4. The articles of merger filed by the surviving entity in accordance with this section shall also be deemed to have been filed for any domestic limited liability company party to the merger in accordance with the applicable sections of the Kentucky Revised Statutes and for any domestic limited partnership party to the merger in accordance with KRS Chapter 362.
  5. Upon merger taking effect, if the surviving entity in the merger is a foreign limited partnership, limited liability company, or corporation, the surviving entity shall be deemed:
    1. To appoint the Secretary of State as its agent for service of process in a proceeding to enforce any obligation or the rights of dissenting shareholders of each domestic corporation party to the merger;
    2. To agree that it will promptly pay to the dissenting shareholders of each domestic corporation party to the merger the amount, if any, to which they are entitled under Subtitle 13 of KRS Chapter 271B; and
    3. To agree, to the extent required by Section 200 of the Constitution, that the courts of this Commonwealth shall retain jurisdiction over that part of the corporate property within the limits of this Commonwealth in all matters which may arise, as if the transaction has not taken place.
  6. If a domestic or foreign limited liability company or limited partnership is the surviving entity of a merger, the surviving domestic or foreign limited liability company or limited partnership shall be considered a surviving corporation for purposes of KRS 271B.11-060 (1).
  7. A partner or, in the case of a limited partnership, a general partner who becomes a shareholder of a corporation as a result of a merger shall remain liable as a partner or general partner, as the case may be, for an obligation incurred by the partnership or limited partnership before the merger takes effect. The partner’s or general partner’s liability for all obligations of the corporation incurred before the merger takes effect shall be that of a shareholder as provided in this chapter. A limited partner who becomes a shareholder as a result of a merger shall remain liable only as a limited partner for an obligation incurred by the limited partnership before the merger takes effect.

History. Enact. Acts 1994, ch. 389, § 111, effective July 15, 1994; 1998, ch. 341, § 8, effective July 15, 1998.

Legislative Research Commission Note.

(3/24/95) Under KRS 7.136(1)(h), the word “or” has been added to subsection (1) of this statute before the phrase “more domestic corporations.” The use of the plural in this phrase and the use of the adjective “each” in paragraph (d) of subsection (1) make it clear from context that the omission of the word “or” constitutes a manifest clerical or typographical error.

Research References and Practice Aids

Northern Kentucky Law Review.

Mellen, Myre and Lee, Limited Liability Companies and Registered Limited Liability Partnerships in Kentucky: A Practical Analysis, 22 N. Ky. L. Rev. 229 (1995).

Subtitle 12. Sale of Assets; Business Combinations

271B.12-010. Sale of assets in regular course of business and mortgage of assets.

  1. A corporation may, on the terms and conditions and for the consideration determined by the board of directors:
    1. Sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property in the usual and regular course of business;
    2. Mortgage, pledge, dedicate to the repayment of indebtedness (whether with or without recourse), or otherwise encumber any or all of its property whether or not in the usual and regular course of business; or
    3. Transfer any or all of its property to an entity of which all the shares or all of the limited liability company interests or other equity interests are owned by the corporation.
  2. Unless the articles of incorporation require it, approval by the shareholders of a transaction described in subsection (1) of this section shall not be required.

History. Enact. Acts 1988, ch. 23, § 121, effective January 1, 1989; 2011, ch. 29, § 9, effective June 8, 2011.

Research References and Practice Aids

ALR

Valuation of stock of dissenting stockholders in case of consolidation or merger of corporation, sale of its assets, or the like. 48 A.L.R.3d 430.

271B.12-020. Sale of assets other than in regular course of business.

  1. A corporation may sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property (with or without the good will), otherwise than in the usual and regular course of business, on the terms and conditions and for the consideration determined by the corporation’s board of directors, if the board of directors proposes and its shareholders approve the proposed transaction.
  2. For a transaction to be authorized:
    1. The board of directors shall recommend the proposed transaction to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the submission of the proposed transaction; and
    2. The shareholders entitled to vote shall approve the transaction.
  3. The board of directors may condition its submission of the proposed transaction on any basis.
  4. The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with KRS 271B.7-050 . The notice shall also state that the purpose, or one (1) of the purposes, of the meeting is to consider the sale, lease, exchange, or other disposition of all, or substantially all, the property of the corporation and contain or be accompanied by a description of the transaction.
  5. Unless the articles of incorporation or the board of directors (acting pursuant to subsection (3) of this section) require a greater vote or a vote by voting groups, the transaction to be authorized shall be approved by a majority of all the votes entitled to be cast on the transaction.
  6. After a sale, lease, exchange, or other disposition of property is authorized, the transaction may be abandoned (subject to any contractual rights) without further shareholder action.
  7. A transaction that constitutes a distribution is governed by KRS 271B.6-400 and not by this section.

History. Enact. Acts 1988, ch. 23, § 122, effective January 1, 1989.

271B.12-030. Conversion of corporation to limited liability company.

  1. A corporation may be converted to a limited liability company as provided in KRS 275.376 .
  2. A corporation may be converted to a statutory trust as provided in KRS 386A.7-060 .

History. Enact. Acts 2007, ch. 137, § 2, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 2, effective July 15, 2010; 2012, ch. 81, § 92, effective July 12, 2012.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Business Combinations

271B.12-200. Definitions for KRS 271B.12-210 to 271B.12-230.

As used in KRS 271B.12-210 to 271B.12-230 :

  1. “Affiliate,” including the term “affiliated person,” means a person who directly, or indirectly through one (1) or more intermediaries, controls, or is controlled by, or is under common control with, a specified person.
  2. “Associate,” when used to indicate a relationship with any person, means:
    1. Any corporation or organization (other than the corporation or a subsidiary of the corporation) of which such person is an officer, director or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities;
    2. Any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and
    3. Any relative or spouse of such person, or any relative of such spouse, any one (1) of whom has the same home as such person or is a director or officer of the corporation or any of its affiliates.
  3. “Beneficial owner,” when used with respect to any voting stock, means a person:
    1. Who, individually or with any of its affiliates or associates, beneficially owns voting stock, directly or indirectly; or
    2. Who, individually or with any of its affiliates or associates, has:
      1. The right to acquire voting stock, whether such right is exercisable immediately or only after the passage of time and whether or not such right is exercisable only after specified conditions are met, pursuant to any agreement, arrangement, or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise;
      2. The right to vote voting stock pursuant to any agreement, arrangement, or understanding; or
      3. Any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting or disposing of voting stock with any other person who beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such shares of voting stock; however, for the purposes of this section and KRS 271B.12-230 the beneficial owner of any voting stock held by, or owned through participation in, any purchase, savings, option, bonus, appreciation, profit sharing, thrift, incentive, pension, stock ownership or similar plan for employees or officers of the corporation or any of its subsidiaries shall be deemed to be the shareholder of record of such voting stock as shown on the stock transfer books of the corporation.
  4. “Business combination” means:
    1. Unless the merger or consolidation does not alter the contract rights of the stock as expressly set forth in the articles of incorporation or change or convert in whole or in part the outstanding shares of stock of the corporation, any merger or consolidation of the corporation or any subsidiary with any interested shareholder or any other corporation, whether or not itself an interested shareholder, which is, or after the merger or consolidation would be, an affiliate or associate of an interested shareholder who was an interested shareholder prior to the transaction;
    2. Any sale, lease, transfer, or other disposition, other than in the ordinary course of business, in one (1) transaction or a series of transactions in any twelve-month period, to any interested shareholder or any affiliate or associate of any interested shareholder, other than the corporation or any subsidiaries, of any assets of the corporation or any subsidiary having, measured at the time the transaction or transactions are approved by the board of directors of the corporation, an aggregate book value as of the end of the corporation’s most recently ended fiscal quarter of five percent (5%) or more of the total market value of the outstanding stock of the corporation or of its net worth as of the end of its most recently ended fiscal quarter;
    3. The issuance or transfer by the corporation, or any subsidiary, in one transaction or a series of transactions in any twelve-month period, of any equity securities of the corporation or any subsidiary which have an aggregate market value of five percent (5%) or more of the total market value of the outstanding stock of the corporation, determined as of the end of the corporation’s most recently ended fiscal quarter prior to the first such issuance or transfer, to any interested shareholder or any affiliate or associate of any interested shareholder, other than the corporation or any of its subsidiaries, except pursuant to the exercise of warrants or rights to purchase securities offered pro rata to all holders of the corporation’s voting stock or any other method affording substantially proportionate treatment to the holders of voting stock;
    4. The adoption of any plan or proposal for the liquidation or dissolution of the corporation in which anything other than cash will be received by an interested shareholder or any affiliate or associate of any interested shareholder; or
    5. Any reclassification of securities, including any reverse stock split; or recapitalization of the corporation; or any merger or consolidation of the corporation with any of its subsidiaries; or any other transaction which has the effect, directly or indirectly, in one transaction or a series of transactions, of increasing by five percent (5%) or more the proportionate amount of the outstanding shares of any class of equity securities of the corporation or any subsidiary which is directly or indirectly beneficially owned by any interested shareholder or any affiliate or associate of any interested shareholder; or
    6. Any receipt by an interested shareholder or any affiliate or associate of such interested shareholder of the benefit directly or indirectly, except proportionately as a shareholder of such corporation, of any loans, advances, guaranties, pledges or other financial assistance, or any tax credits or other tax advantages provided by or through such corporation.
  5. “Common stock” means any stock other than preferred or preference stock.
  6. “Continuing director” means any member of the board of directors who is not an affiliate or associate of an interested shareholder or any of its affiliates, other than the corporation or any of its subsidiaries, and who was a director of the corporation prior to the time the interested shareholder became an interested shareholder, and any successor to such continuing director who is not an affiliate or associate of an interested shareholder or any of its affiliates, other than the corporation or any of its subsidiaries, and was recommended or elected by a majority of the continuing directors at a meeting at which a quorum consisting of a majority of the continuing directors is present.
  7. “Control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise, and the beneficial ownership of ten percent (10%) or more of the votes entitled to be cast by a corporation’s voting stock creates a presumption of control.
  8. “Equity security” means:
    1. Any stock or similar security, certificate of interest, or participation in any profit-sharing agreement, voting trust certificate, or certificate of deposit for the foregoing;
    2. Any security convertible, with or without consideration, into an equity security, or any warrant or other security carrying any right to subscribe to or purchase an equity security; or
    3. Any put, call, straddle, or other option, right or privilege of acquiring an equity security from or selling an equity security to another without being bound to do so.
  9. “Independent member” of the board of directors means any director who is not an officer or full-time employee of the corporation or an affiliate or associate of an interested shareholder or any of its affiliates.
  10. “Interested shareholder” means any person, other than the corporation or any of its subsidiaries, who:
    1. Is the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the outstanding voting stock of the corporation; or is an affiliate of the corporation and at any time within the five (5) year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the then outstanding voting stock of the corporation. The term interested shareholder shall not mean any entity or person holding or owning voting stock for, or through participation in, any purchase, savings, option, bonus, appreciation, profit sharing, thrift, incentive, pension, stock ownership or similar plan for employees or officers of the corporation or any of its subsidiaries.
    2. For the purpose of determining whether a person is an interested shareholder, the number of shares of voting stock deemed to be outstanding shall include shares deemed owned by the person through application of subsection (3) of this section, but shall not include any other shares of voting stock which may be issuable pursuant to any agreement, arrangement, or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
  11. “Market value” means:
    1. In the case of stock, the highest closing sale price during the thirty-day period immediately preceding the date in question of a share of such stock on the composite tape for New York stock exchange listed stocks, or, if such stock is not quoted on the composite tape on the New York stock exchange, or if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the thirty-day period preceding the date in question on the National Association of Securities Dealers, Inc., Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the continuing directors at a meeting of the board of directors at which a quorum consisting of at least a majority of the continuing directors is present; and
    2. In the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the continuing directors at a meeting of the board of directors at which a quorum consisting of at least a majority of the continuing directors is present.
  12. “Subsidiary” means any corporation of which voting stock having a majority of the votes entitled to be cast is owned, directly or indirectly, by the corporation.
  13. “Voting stock” means shares of capital stock of a corporation entitled to vote generally in the election of directors.

History. Enact. Acts 1984, ch. 355, § 1, effective July 13, 1984; 1988, ch. 22, § 1, effective July 15, 1988.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.396 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

271B.12-210. Minimum share vote requirements for approval of business combinations — Limitations on business corporation.

  1. In addition to any vote otherwise required by law or the articles of incorporation of the corporation, a business combination shall either be approved by a majority of the independent members of the board of directors who are also continuing directors, provided that the independent members of the board of directors shall not, for the purposes of this subsection, be required to either approve or disapprove of any proposed business combination, or approved by the affirmative vote of at least:
    1. Eighty percent (80%) of the votes entitled to be cast by outstanding shares of voting stock of the corporation, voting together as a single voting group; and
    2. Two-thirds of the votes entitled to be cast by holders of voting stock other than voting stock beneficially owned by the interested shareholder who is, or whose affiliate is, a party to the business combination or by an affiliate or associate of such interested shareholder, voting together as a single voting group.
  2. Unless a business combination is exempted from the operation of KRS 271B.12-200 to 271B.12-230 in accordance with the terms hereof, the failure to comply with the voting requirements of subsection (1) of this section shall render such business combination void.
  3. Notwithstanding anything to the contrary contained in this chapter (except the provisions of KRS 271B.12-220 (5)(a)), no corporation shall engage in any business combination with any entity or person who is at the time of such business combination an interested shareholder of such corporation, unless such person became an interested shareholder before March 28, 1986, for a period of five (5) years following the date on which such interested shareholder became an interested shareholder unless such business combination is approved by a majority of the independent members of the board of directors of such corporation prior to such date on which the interested shareholder became an interested shareholder. If a good faith proposal is made in writing to the board of directors of such corporation regarding a business combination, the board of directors shall respond, in writing, within thirty (30) days or such shorter period, if any, as may be required by the Securities Exchange Act of 1934, setting forth its reasons for its decision regarding such proposal. If the board of directors does not respond affirmatively in writing within thirty (30) days or such shorter period, if any, as may be required by the Securities Exchange Act of 1934, the independent members of the board of directors shall be deemed to have disapproved the business combination.
  4. In discharging its duties under this section, or otherwise, the board of directors, in considering the best interests of the corporation, may consider in addition to the interests of the corporation’s shareholders, any of the following:
    1. The interests of the corporation’s employees, suppliers, creditors and customers;
    2. The economy of the state and nation;
    3. Community and societal considerations; and
    4. The long-term as well as short-term interests of the corporation and its shareholders, including the possibility that these interests may be best served by the continued independence of the corporation.
  5. Notwithstanding KRS 271B.6-020 and any other provision of this chapter, and unless otherwise provided in the articles of incorporation before the creation or issuance of any rights or options as set forth herein, in considering the interests of the corporation’s shareholders, the board of directors of a corporation may, before, on or after July 15, 1988, create and issue rights or options pursuant to KRS 271B.6-240 which may contain provisions which adjust the option price or number of shares issuable under such rights or options in the event of an acquisition of shares or a reorganization, merger, consolidation, sale of assets or other occurrence involving such corporation. Such rights or options may also include conditions that prevent the holder or holders of at least a specified number or percentage of the outstanding shares of the corporation, including subsequent transferees of the holder, from exercising those rights or options.

History. Enact. Acts 1984, ch. 355, § 2, effective July 13, 1984; 1986, ch. 202, § 10, effective March 28, 1986; 1988, ch. 22, § 2, effective July 15, 1988.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.397 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

The Securities and Exchange Act of 1934 referenced in this section is compiled at 15 USCS §§ 78a, et seq.

Research References and Practice Aids

Kentucky Law Journal.

Note, CTS Corp. v. Dynamics Corp. of America: Of State Regulation, Tender Offers, and Necromancy, 77 Ky. L.J. 149 (1988-89).

271B.12-220. Exemptions from minimum share vote requirements.

  1. For purposes of subsection (2) of this section:
    1. “Announcement date” means the first general public announcement of the proposal or intention to make a proposal of the business combination or its first communication generally to shareholders of the corporation, whichever is earlier;
    2. “Determination date” means the date on which an interested shareholder first became an interested shareholder; and
    3. “Valuation date” means:
      1. For a business combination voted upon by shareholders, the latter of the day prior to the date of the shareholders vote or the date twenty (20) days prior to the consummation of the business combination; and
      2. For a business combination not voted upon by shareholders, the date of the consummation of the business combination.
  2. The vote required by KRS 271B.12-210 does not apply to a business combination if each of the following conditions is met:
    1. The aggregate amount of the cash and the market value as of the valuation date of consideration, other than cash to be received per share by holders of common stock in such business combination, is at least equal to the highest of the following:
      1. The highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the interested shareholder for any shares of common stock of the same class or series acquired by it:
        1. Within the five (5) year period immediately prior to the announcement date of the proposal of the business combination;
        2. In the transaction in which it became an interested shareholder, whichever is higher; or
      2. The market value per share of common stock of the same class or series on the announcement date or on the determination date, whichever is higher; or
      3. The price per share equal to the market value per share of common stock of the same class or series determined pursuant to subparagraph 2. of this paragraph, multiplied by the fraction of:
        1. The highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers’ fees, paid by the interested shareholder for any shares of common stock of the same class or series acquired by it within the five (5) year period immediately prior to the announcement date, over
        2. The market value per share of common stock of the same class or series on the first day in such five (5) year period on which the interested shareholder acquired any shares of common stock;
    2. The aggregate amount of the cash and the market value as of the valuation date of consideration other than cash to be received per share by holders of shares of any class or series of outstanding stock other than common stock is at least equal to the highest of the following, whether or not the interested shareholder has previously acquired any shares of a particular class or series of stock:
      1. The highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers’ fees, paid by the interested shareholder for any shares of such class of stock acquired by it:
        1. Within the five (5) year period immediately prior to the announcement date of the proposal of the business combination;
        2. In the transaction in which it became an interested shareholder, whichever is higher; or
      2. The highest preferential amount per share to which the holders of shares of such class of stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation;
      3. The market value per share of such class of stock on the announcement date or on the determination date, whichever is higher; or
      4. The price per share equal to the market value per share of such class of stock determined pursuant to subparagraph 3. of this paragraph, multiplied by the fraction of:
        1. The highest per share price, including any brokerage commissions, transfer taxes and soliciting dealers’ fees, paid by the interested shareholder for any shares of any class of voting stock acquired by it within the five (5) year period immediately prior to the announcement date, over
        2. The market value per share of the same class of voting stock on the first day in such five (5) year period on which the interested shareholder acquired any shares of the same class of voting stock.
    3. In making any price calculation under this section, appropriate adjustments shall be made to reflect any reclassification, including any reverse stock split; recapitalization; reorganization; or any similar transaction which has the effect of reducing the number of outstanding shares of the stock. The consideration to be received by holders of any class or series of outstanding stock is to be in cash or in the same form as the interested shareholder has previously paid for shares of the same class or series of stock. If the interested shareholder has paid for shares of any class of stock with varying forms of consideration, the form of consideration for such class of stock shall be either cash or the form used to acquire the largest number of shares of such class or series of stock previously acquired by it;
      1. After the interested shareholder has become an interested shareholder and prior to the consummation of such business combination: (d) 1. After the interested shareholder has become an interested shareholder and prior to the consummation of such business combination:
        1. There shall have been no failure to declare and pay, at the regular date therefor, any full periodic dividends, whether or not cumulative, on any outstanding preferred stock of the corporation;
        2. There shall have been no reduction in the annual rate of dividends paid on any class or series of stock of the corporation that is not preferred stock, except as necessary to reflect any subdivision of the stock; and an increase in such annual rate of dividends as necessary to reflect any reclassification, including any reverse stock split; recapitalization; reorganization; or any similar transaction which has the effect of reducing the number of outstanding shares of the stock; and
        3. The interested shareholder did not become the beneficial owner of any additional shares of stock of the corporation, except as part of the transaction which resulted in such interested shareholder becoming an interested shareholder or by virtue of proportionate stock splits or stock dividends.
      2. The provisions of sub-subparagraphs a. and b. of subparagraph 1. of this paragraph do not apply if no interested shareholder or an affiliate or associate of the interested shareholder voted as a director of the corporation in a manner inconsistent with such sub-subparagraphs and the interested shareholder, within ten (10) days after any act or failure to act inconsistent with such sub-subparagraphs, notifies the board of directors of the corporation in writing that the interested shareholder disapproves thereof and requests in good faith that the board of directors rectify such act or failure to act.
    1. Whether or not such business combinations are authorized or consummated in whole or in part after July 13, 1984, or after the interested shareholder became an interested shareholder, the requirements of KRS 271B.12-210 do not apply to business combinations that specifically, generally, or generally by types, as to specifically identified or unidentified existing or future interested shareholders or their affiliates or associates, have been approved or exempted therefrom by resolution of the board of directors of the corporation prior to two (2) months after July 13, 1984, or such earlier date as may be irrevocably established by resolution of the board of directors; and (3) (a) Whether or not such business combinations are authorized or consummated in whole or in part after July 13, 1984, or after the interested shareholder became an interested shareholder, the requirements of KRS 271B.12-210 do not apply to business combinations that specifically, generally, or generally by types, as to specifically identified or unidentified existing or future interested shareholders or their affiliates or associates, have been approved or exempted therefrom by resolution of the board of directors of the corporation prior to two (2) months after July 13, 1984, or such earlier date as may be irrevocably established by resolution of the board of directors; and
    2. Unless by its terms a resolution adopted under this subsection is made irrevocable, it may be altered or repealed by the board of directors, but this shall not affect any business combinations that have been consummated, or are the subject of an existing agreement entered into, prior to the alteration or repeal.
    1. Unless the articles of incorporation or bylaws of the corporation specifically provide otherwise, the requirements of KRS 271B.12-210 do not apply to business combinations of a corporation that, on July 13, 1984, had an existing interested shareholder, whether a business combination is with the existing shareholder or with any other person who becomes an interested shareholder, after July 13, 1984, or their present or future affiliates, unless, at any time after July 13, 1984, the board of directors of the corporation elects by resolution, adopted by a majority of the continuing directors at a meeting of the board of directors at which a quorum consisting of at least a majority of the continuing directors is present, to be subject, in whole or in part, specifically, generally, or generally by types, as to specifically identified or unidentified interested shareholders, to the requirements of KRS 271B.12-210 ; (4) (a) Unless the articles of incorporation or bylaws of the corporation specifically provide otherwise, the requirements of KRS 271B.12-210 do not apply to business combinations of a corporation that, on July 13, 1984, had an existing interested shareholder, whether a business combination is with the existing shareholder or with any other person who becomes an interested shareholder, after July 13, 1984, or their present or future affiliates, unless, at any time after July 13, 1984, the board of directors of the corporation elects by resolution, adopted by a majority of the continuing directors at a meeting of the board of directors at which a quorum consisting of at least a majority of the continuing directors is present, to be subject, in whole or in part, specifically, generally, or generally by types, as to specifically identified or unidentified interested shareholders, to the requirements of KRS 271B.12-210;
    2. The articles of incorporation or bylaws of the corporation may provide that if the board of directors adopts a resolution under paragraph (a) of this subsection, the resolution shall be subject to approval of the shareholders in the manner and by the vote specified in the articles of incorporation or the bylaws;
    3. An election under this subsection may be added to but may not be altered or repealed except by an amendment to the articles of incorporation adopted by a vote of shareholders meeting the requirements of subsection (5)(a)2. of this section; and
    4. If a corporation elects under this subsection to be included within the provisions of KRS 271B.12-210 generally, without qualification or limitation, it shall file with the secretary of state articles of amendment, including a copy of the resolution making the election and a statement describing the manner in which the resolution was adopted. The articles of amendment shall be executed in the manner required by KRS 271B.10-060 .
    1. Unless the articles of incorporation of the corporation provide otherwise, the requirements of a shareholder vote and board approval in KRS 271B.12-210 do not apply to any business combination of: (5) (a) Unless the articles of incorporation of the corporation provide otherwise, the requirements of a shareholder vote and board approval in KRS 271B.12-210 do not apply to any business combination of:
      1. A corporation which does not have on the date any interested shareholder became an interested shareholder:
        1. Five hundred (500) or more beneficial owners of its stock;
        2. Its principal executive office located in this state; and
        3. One (1) or more of the following: (i) More than two hundred (200) beneficial owners of its stock residing in this state; (iii) More than ten percent (10%) of its outstanding stock owned by residents of this state; (v) Assets located in this state and owned by, or owned by a person or entity controlled by, the corporation with a value of at least one million dollars ($1,000,000); 2. A corporation whose original articles of incorporation have a provision, or whose shareholders adopt an amendment to the articles of incorporation after July 13, 1984, by a vote of at least eighty percent (80%) of the votes entitled to be cast by outstanding shares of voting stock of the corporation, voting together as a single voting group and two-thirds (2/3) of the votes entitled to be cast by persons, if any, who are not interested shareholders of the corporation, voting together as a single voting group, expressly electing not to be governed by KRS 271B.12-210; or 3. An investment company registered under the federal Investment Company Act of 1940, as amended; a bank or a bank holding company as defined in the federal Bank Holding Company Act of 1956, as amended; a savings and loan holding company as defined in the federal Savings and Loan Holding Company Amendments of 1967, as amended; and a domestic insurer as defined under KRS 304.1-070 ; and
    2. More than ten percent (10%) of the beneficial owners of its stock residing in this state;
    3. More than one hundred (100) employees of the corporation and its subsidiaries working within this state; or
    4. For purposes of subparagraph 1. of paragraph (a) of this subsection, all shareholders of a corporation who have executed an agreement to which the corporation is an executing party governing the purchase and sale of stock of the corporation or a voting trust agreement governing stock of the corporation shall be considered a single beneficial owner of the stock covered by the agreement.

History. Enact. Acts 1984, ch. 355, § 3, effective July 13, 1984; 1988 ch. 22, § 3, effective July 15, 1988; 1988, ch. 23, § 176, effective January 1, 1989.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.398 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

271B.12-230. KRS 271B.12-200 to 271B.12-220 prevail over other provisions of KRS Chapter 271B — Severability of provisions.

  1. The provisions of KRS 271B.12-200 to 271B.12-220 are in addition to and do not repeal any other provisions of KRS Chapter 271B that govern any corporate actions described in KRS 271B.12-200 to 271B.12-220 ; provided, that in the event of a direct conflict between any provision of KRS 271B.12-200 to 271B.12-220 and any other provision of KRS Chapter 271B, the provision of KRS 271B.12-200 to 271B.12-220 shall prevail.
  2. It shall be considered that, for the purposes of KRS 446.090 , it is the intent of the general assembly in enacting KRS 271B.12-200 to 271B.12-220 that any clause, sentence, subparagraph, paragraph, subsection, section, or other part of the above-stated sections or the application thereof to any person or circumstances held to be invalid shall not affect, impair or invalidate the remainder of the stated sections or the application of that part held invalid to any other person or circumstances, but shall be confined in its operation to the clause, sentence, subparagraph, paragraph, subsection, section, or other part thereof directly involved in that holding or to the person or circumstances therein involved.

History. Enact. Acts 1984, ch. 355, § 4, effective July 13, 1984; 1988, ch. 22, § 4, effective July 1, 1988.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.399 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

Subtitle 13. Dissenters’ Rights

Right to Dissent and Obtain Payment for Shares

271B.13-010. Definitions for subtitle.

As used in this subtitle:

  1. “Corporation” means the issuer of the shares held by a dissenter, except that in the case of a merger where the issuing corporation is not the surviving corporation, then, after consummation of the merger, “corporation” shall mean the surviving corporation.
  2. “Dissenter” means a shareholder who is entitled to dissent from corporate action under KRS 271B.13-020 and who exercises that right when and in the manner required by KRS 271B.13-200 to 271B.13-280 .
  3. “Fair value,” with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. In any transaction subject to the requirements of KRS 271B.12-210 or exempted by KRS 271B.12-220 (2), “fair value” shall be at least an amount required to be paid under KRS 271B.12-220 (2) in order to be exempt from the requirements of KRS 271B.12-210 .
  4. “Interest” means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances.
  5. “Record shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
  6. “Beneficial shareholder” means the person who is a beneficial owner of shares held in a voting trust or by a nominee as the record shareholder.
  7. “Shareholder” means the record shareholder or the beneficial shareholder.

History. Enact. Acts 1988, ch. 23, § 123, effective January 1, 1989; 1998, ch. 341, § 9, effective July 15, 1998.

NOTES TO DECISIONS

1.“Fair value.”

In setting “fair value” pursuant to KRS 271B.13-010 , the trial court erred in applying a 20 percent marketability discount, absent exceptional circumstances, which made it possible for majority shareholders to squeeze-out a minority shareholder at a price considerably less than the minority shareholder’s proportionate interest in the closely-held family corporation as a whole. Brooks v. Brooks Furniture Mfgrs, Inc., 325 S.W.3d 904, 2010 Ky. App. LEXIS 207 (Ky. Ct. App. 2010), overruled in part, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ).

In appraising a dissenter’s shares pursuant to KRS 271B.13-300 following a cash-out merger, a marketability discount was inappropriate at the shareholder level in determining fair value as defined in KRS 271B.13-010 (3), and and use of the Delaware block appraisal method was not necessary. Net asset value could be considered on remand, and an entity-level discount would be permissible. Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 )(Overruling to the extent inconsistent: Ford v. Courier-Journal Job Printing Co., 639 S.W.2d 553, 1982 Ky. App. LEXIS 251 (Ky. Ct. App. 1982), overruled in part, Brooks v. Brooks Furniture Mfgrs, Inc., 325 S.W.3d 904, 2010 Ky. App. LEXIS 207 (Ky. Ct. App. 2010), overruled in part, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ).

Because a hypothetical market price for the dissenter’s particular shares as a commodity is not the value being sought in an appraisal proceeding under KRS 271B.13-300 , market adjustments to arrive at such a price, such as discounts for lack of control or lack of marketability, are inappropriate in determining fair value as defined in KRS 271B.13-010 (3). The dissenting shareholder is entitled to the fair value of his or her shares as measured by the proportionate interest those shares represent in the value of the company as a going concern, a value determined in accord with generally accepted valuation concepts and techniques, as to which the Delaware block approach is not required. Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 )(Overruling to the extent inconsistent: Ford v. Courier-Journal Job Printing Co., 639 S.W.2d 553, 1982 Ky. App. LEXIS 251 (Ky. Ct. App. 1982), overruled in part, Brooks v. Brooks Furniture Mfgrs, Inc., 325 S.W.3d 904, 2010 Ky. App. LEXIS 207 (Ky. Ct. App. 2010), overruled in part, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Dolson, Contractual Dissenters’ Rights for Kentucky LLCs, Volume 75, No. 1, January 2011, Ky. Bench & Bar 18.

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

271B.13-020. Right to dissent.

  1. A shareholder shall be entitled to dissent from, and obtain payment of the fair value of his shares in the event of, any of the following corporate actions:
    1. Consummation of a plan of merger to which the corporation is a party:
      1. If shareholder approval is required for the merger by KRS 271B.11-030 or the articles of incorporation and the shareholder is entitled to vote on the merger; or
      2. If the corporation is a subsidiary that is merged with its parent under KRS 271B.11-040 ;
    2. Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan;
    3. Consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one (1) year after the date of sale;
    4. Consummation of a plan of conversion of the corporation into a limited liability company or statutory trust;
    5. An amendment of the articles of incorporation that materially and adversely affects rights in respect of a dissenter’s shares because it:
      1. Alters or abolishes a preferential right of the shares to a distribution or in dissolution;
      2. Creates, alters, or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase of the shares;
      3. Excludes or limits the right of the shares to vote on any matter other than a limitation by dilution through issuance of shares or other securities with similar voting rights;
      4. Reduces the number of shares owned by the shareholder to a fraction of a share, if the fractional share so created is to be acquired for cash under KRS 271B.6-040 ; or
      5. In a public benefit corporation, changes the public benefit provisions;
    6. Any transaction subject to the requirements of KRS 271B.12-210 or exempted by KRS 271B.12-220 (2);
    7. Any election by a corporation to become a public benefit corporation or pursuant to the merger of a corporation with and into a public benefit corporation; or
    8. Any corporate action taken pursuant to a shareholder vote to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares.
  2. A shareholder entitled to dissent and obtain payment for his shares under this chapter shall not challenge the corporate action creating his entitlement except by an application for injunctive relief prior to the consummation of the corporate action.

HISTORY: Enact. Acts 1988, ch. 23, § 124, effective January 1, 1989; 2007, ch. 137, § 67, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 67, effective July 15, 2010; 2012, ch. 81, § 93, effective July 12, 2012; 2012, ch. 81, § 93, effective July 12, 2012; 2015 ch. 34, § 11, effective June 24, 2015; 2017 ch. 28, § 8, effective June 29, 2017.

NOTES TO DECISIONS

1.Notice of Merger.

Where no attempt to deceive stockholders was shown, court did not err in finding that corporate officers had no duty to volunteer information on the requirements necessary to qualify as objecting shareholders to a proposed merger. Acree v. E. I. F. C., Inc., 502 S.W.2d 43, 1973 Ky. LEXIS 59 ( Ky. 1973 ) (decided under prior law).

Where corporation could not show that stockholders were given adequate notice of a proposed merger, failure to file a written objection with the corporation before vote on the merger did not prevent them from qualifying as objecting shareholders. Acree v. E. I. F. C., Inc., 502 S.W.2d 43, 1973 Ky. LEXIS 59 ( Ky. 1973 ) (decided under prior law).

Where stockholders were given notice of a corporate reorganization meeting but were not specifically put on notice of a merger, failure to comply with requirement of filing written objections did not preclude them from qualifying as objecting shareholders. Acree v. E. I. F. C., Inc., 502 S.W.2d 43, 1973 Ky. LEXIS 59 ( Ky. 1973 ) (decided under prior law).

2.Computation of Fair Value of Stock.

Where in determining the fair value of the stock of dissenting stockholders, the evidence showed that the court-appointed appraisers considered all the factors or elements that they could possibly have been required to, the appraisers did not err in applying a 25 percent reduction in net asset value of the stock based on its marketability since the discount was not an arbitrary or clearly erroneous figure. Ford v. Courier-Journal Job Printing Co., 639 S.W.2d 553, 1982 Ky. App. LEXIS 251 (Ky. Ct. App. 1982), overruled in part, Brooks v. Brooks Furniture Mfgrs, Inc., 325 S.W.3d 904, 2010 Ky. App. LEXIS 207 (Ky. Ct. App. 2010), overruled in part, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ), overruled in part as stated, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ) (decided under prior law).

3.Award of Interest.

The trial court did not abuse its discretion in adding an award of interest of eight percent (8%) to the judgment in favor of the stockholders who dissented from a sale of corporate assets where the evidence showed that the purchasing corporation would pay between six (6) and nine (9) percent interest on the purchase price and that an award of eight percent would be fair and equitable under the totality of the circumstances. Ford v. Courier-Journal Job Printing Co., 639 S.W.2d 553, 1982 Ky. App. LEXIS 251 (Ky. Ct. App. 1982), overruled in part, Brooks v. Brooks Furniture Mfgrs, Inc., 325 S.W.3d 904, 2010 Ky. App. LEXIS 207 (Ky. Ct. App. 2010), overruled in part, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ), overruled in part as stated, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ) (decided under prior law).

4.Remedy.

Although the Legislature intended, as a general rule, that the appraisal remedy provided for in former statute was the only remedy for a dissenting stockholder in the case of a merger, it did not appear likely that it intended dissenting stockholders to be so limited where a merger was being effected in contravention of law, or where some species of fraud was being worked upon the dissenters. Yeager v. Paul Semonin Co., 691 S.W.2d 227, 1985 Ky. App. LEXIS 530 (Ky. Ct. App. 1985) (decided under prior law).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Dolson, Contractual Dissenters’ Rights for Kentucky LLCs, Volume 75, No. 1, January 2011, Ky. Bench & Bar 18.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

ALR

Timeliness and sufficiency of dissenting stockholder’s notice of his objection to consolidation or merger of his demand for payment for his shares. 40 A.L.R.3d 260.

Valuation of stock of dissenting stockholders in case of consolidation or merger of corporation, sale of its assets, or the like. 48 A.L.R.3d 430.

271B.13-030. Dissent by nominees and beneficial owners.

  1. A record shareholder may assert dissenters’ rights as to fewer than all the shares registered in his name only if he shall dissent with respect to all shares beneficially owned by any one (1) person and notify the corporation in writing of the name and address of each person on whose behalf he asserts dissenters’ rights. The rights of a partial dissenter under this subsection shall be determined as if the shares as to which he dissents and his other shares were registered in the names of different shareholders.
  2. A beneficial shareholder may assert dissenters’ rights as to shares held on his behalf only if:
    1. He submits to the corporation the record shareholder’s written consent to the dissent not later than the time the beneficial shareholder asserts dissenters’ rights; and
    2. He does so with respect to all shares of which he is the beneficial shareholder or over which he has power to direct the vote.

History. Enact. Acts 1988, ch. 23, § 125, effective January 1, 1989.

Procedure for Exercise of Dissenters’ Rights

271B.13-200. Notice of dissenters’ rights.

  1. If proposed corporate action creating dissenters’ rights under KRS 271B.13-020 is submitted to a vote at a shareholders’ meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters’ rights under this subtitle and the corporation shall undertake to provide a copy of this subtitle to any shareholder entitled to vote at the shareholders’ meeting upon request of that shareholder.
  2. If corporate action creating dissenters’ rights under KRS 271B.13-020 is taken without a vote of shareholders, the corporation shall notify in writing all shareholders entitled to assert dissenters’ rights that the action was taken and send them the dissenters’ notice described in KRS 271B.13-220 .

History. Enact. Acts 1988, ch. 23, § 126, effective January 1, 1989.

271B.13-210. Notice of intent to demand payment.

  1. If proposed corporate action creating dissenters’ rights under KRS 271B.13-020 is submitted to a vote at a shareholders’ meeting, a shareholder who wishes to assert dissenters’ rights:
    1. Shall deliver to the corporation before the vote is taken written notice of his intent to demand payment for his shares if the proposed action is effectuated; and
    2. Shall not vote his shares in favor of the proposed action.
  2. A shareholder who does not satisfy the requirements of subsection (1) of this section shall not be entitled to payment for his shares under this chapter.

History. Enact. Acts 1988, ch. 23, § 127, effective January 1, 1989.

271B.13-220. Dissenters’ notice.

  1. If proposed corporate action creating dissenters’ rights under KRS 271B.13-020 is authorized at a shareholders’ meeting, the corporation shall deliver a written dissenters’ notice to all shareholders who satisfied the requirements of KRS 271B.13-210 .
  2. The dissenters’ notice shall be sent no later than ten (10) days after the date the proposed corporate action was authorized by the shareholders, or, if no shareholder authorization was obtained, by the board of directors, and shall:
    1. State where the payment demand must be sent and where and when certificates for certificated shares must be deposited;
    2. Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received;
    3. Supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and requires that the person asserting dissenters’ rights certify whether or not he acquired beneficial ownership of the shares before that date;
    4. Set a date by which the corporation must receive the payment demand, which date may not be fewer than thirty (30), nor more than sixty (60) days after the date the notice provided in subsection (1) of this section is delivered; and
    5. Be accompanied by a copy of this subtitle.

History. Enact. Acts 1988, ch. 23, § 128, effective January 1, 1989.

271B.13-230. Duty to demand payment.

  1. A shareholder who is sent a dissenters’ notice described in KRS 271B.13-220 shall demand payment, certify whether he acquired beneficial ownership of the shares before the date required to be set forth in the dissenters’ notice pursuant to subsection (2)(c) of KRS 271B.13-220 , and deposit his certificates in accordance with the terms of the notice.
  2. The shareholder who demands payment and deposits his share certificates under subsection (1) of this section shall retain all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.
  3. A shareholder who does not demand payment or deposit his share certificates where required, each by the date set in the dissenters’ notice, shall not be entitled to payment for his shares under this subtitle.

History. Enact. Acts 1988, ch. 23, § 129, effective January 1, 1989.

271B.13-240. Share restrictions.

  1. The corporation may restrict the transfer of uncertificated shares from the date the demand for their payment is received until the proposed corporate action is taken or the restrictions released under KRS 271B.13-260 .
  2. The person for whom dissenters’ rights are asserted as to uncertificated shares shall retain all other rights of a shareholder until these rights are canceled or modified by the taking of the proposed corporate action.

History. Enact. Acts 1988, ch. 23, § 130, effective January 1, 1989.

271B.13-250. Payment.

  1. Except as provided in KRS 271B.13-270 , as soon as the proposed corporate action is taken, or upon receipt of a payment demand, the corporation shall pay each dissenter who complied with KRS 271B.13-230 the amount the corporation estimates to be the fair value of his shares, plus accrued interest.
  2. The payment shall be accompanied by:
    1. The corporation’s balance sheet as of the end of a fiscal year ending not more than sixteen (16) months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year, and the latest available interim financial statements, if any;
    2. A statement of the corporation’s estimate of the fair value of the shares;
    3. An explanation of how the interest was calculated; and
    4. A statement of the dissenter’s right to demand payment under KRS 271B.13-280 .

History. Enact. Acts 1988, ch. 23, § 131, effective January 1, 1989.

271B.13-260. Failure to take action.

  1. If the corporation does not take the proposed action within sixty (60) days after the date set for demanding payment and depositing share certificates, the corporation shall return the deposited certificates and release the transfer restrictions imposed on uncertificated shares.
  2. If after returning deposited certificates and releasing transfer restrictions, the corporation takes the proposed action, it shall send a new dissenters’ notice under KRS 271B.13-220 and repeat the payment demand procedure.

History. Enact. Acts 1988, ch. 23, § 132, effective January 1, 1989.

271B.13-270. After-acquired shares.

  1. A corporation may elect to withhold payment required by KRS 271B.13-250 from a dissenter unless he was the beneficial owner of the shares before the date set forth in the dissenters’ notice as the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action.
  2. To the extent the corporation elects to withhold payment under subsection (1) of this section, after taking the proposed corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenter’s right to demand payment under KRS 271B.13-280 .

History. Enact. Acts 1988, ch. 23, § 133, effective January 1, 1989.

271B.13-280. Procedure if shareholder dissatisfied with payment or offer.

  1. A dissenter may notify the corporation in writing of his own estimate of the fair value of his shares and amount of interest due, and demand payment of his estimate (less any payment under KRS 271B.13-250 ), or reject the corporation’s offer under KRS 271B.13-270 and demand payment of the fair value of his shares and interest due, if:
    1. The dissenter believes that the amount paid under KRS 271B.13-250 or offered under KRS 271B.13-270 is less than the fair value of his shares or that the interest due is incorrectly calculated;
    2. The corporation fails to make payment under KRS 271B.13-250 within sixty (60) days after the date set for demanding payment; or
    3. The corporation, having failed to take the proposed action, does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within sixty (60) days after the date set for demanding payment.
  2. A dissenter waives his right to demand payment under this section unless he shall notify the corporation of his demand in writing under subsection (1) of this section within thirty (30) days after the corporation made or offered payment for his shares.

History. Enact. Acts 1988, ch. 23, § 134, effective January 1, 1989.

Judicial Appraisal of Shares

271B.13-300. Court action.

  1. If a demand for payment under KRS 271B.13-280 remains unsettled, the corporation shall commence a proceeding within sixty (60) days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the sixty (60) day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.
  2. The corporation shall commence the proceeding in the Circuit Court of the county where a corporation’s principal office (or, if none in this state, its registered office) is located. If the corporation is a foreign corporation without a registered office in this state, it shall commence the proceeding in the county in this state where the registered office of the domestic corporation merged with or whose shares were acquired by the foreign corporation was located.
  3. The corporation shall make all dissenters (whether or not residents of this state) whose demands remain unsettled parties to the proceeding as in an action against their shares and all parties shall be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law.
  4. The jurisdiction of the court in which the proceeding is commenced under subsection (2) of this section shall be plenary and exclusive. The court may appoint one (1) or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it. The dissenters shall be entitled to the same discovery rights as parties in other civil proceedings.
  5. Each dissenter made a party to the proceeding shall be entitled to judgment:
    1. For the amount, if any, by which the court finds the fair value of his shares, plus interest, exceeds the amount paid by the corporation; or
    2. For the fair value, plus accrued interest, of his after-acquired shares for which the corporation elected to withhold payment under KRS 271B.13-270 .

History. Enact. Acts 1988, ch. 23, § 135, effective January 1, 1989.

NOTES TO DECISIONS

1.Fair Value.

In appraising a dissenter’s shares pursuant to KRS 271B.13-300 following a cash-out merger, a marketability discount was inappropriate at the shareholder level in determining fair value as defined in KRS 271B.13-010 (3), and use of the Delaware block appraisal method was not necessary. Net asset value could be considered on remand, and an entity-level discount would be permissible. Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 )(.Overruling to the extent inconsistent: Ford v. Courier-Journal Job Printing Co., 639 S.W.2d 553, 1982 Ky. App. LEXIS 251 (Ky. Ct. App. 1982), overruled in part, Brooks v. Brooks Furniture Mfgrs, Inc., 325 S.W.3d 904, 2010 Ky. App. LEXIS 207 (Ky. Ct. App. 2010), overruled in part, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ).

Because a hypothetical market price for the dissenter’s particular shares as a commodity is not the value being sought in an appraisal proceeding under KRS 271B.13-300 , market adjustments to arrive at such a price, such as discounts for lack of control or lack of marketability, are inappropriate in determining fair value as defined in KRS 271B.13-010 (3). The dissenting shareholder is entitled to the fair value of his or her shares as measured by the proportionate interest those shares represent in the value of the company as a going concern, a value determined in accord with generally accepted valuation concepts and techniques, as to which the Delaware block approach is not required. Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 )(Overruling to the extent inconsistent: Ford v. Courier-Journal Job Printing Co., 639 S.W.2d 553, 1982 Ky. App. LEXIS 251 (Ky. Ct. App. 1982), overruled in part, Brooks v. Brooks Furniture Mfgrs, Inc., 325 S.W.3d 904, 2010 Ky. App. LEXIS 207 (Ky. Ct. App. 2010), overruled in part, Shawnee Telecom Res., Inc. v. Brown, 354 S.W.3d 542, 2011 Ky. LEXIS 159 ( Ky. 2011 ).

271B.13-310. Court costs and counsel fees.

  1. The court in an appraisal proceeding commenced under KRS 271B.13-300 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under KRS 271B.13-280 .
  2. The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:
    1. Against the corporation and in favor of any or all dissenters, if the court finds the corporation did not substantially comply with the requirements of KRS 271B.13-200 to 271B.13-280 ; or
    2. Against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this subtitle.
  3. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefited.

History. Enact. Acts 1988, ch. 23, § 136, effective January 1, 1989.

Subtitle 14. Dissolution

Voluntary Dissolution

271B.14-010. Dissolution by incorporators or initial directors.

A majority of the incorporators or initial directors of a corporation that has not issued shares or has not commenced business may dissolve the corporation by delivering to the Secretary of State for filing articles of dissolution that set forth:

  1. The name of the corporation;
  2. The date of its incorporation;
  3. Either:
    1. That none of the corporation’s shares has been issued; or
    2. That the corporation has not commenced business;
  4. That no debt of the corporation remains unpaid;
  5. That the net assets of the corporation remaining after winding up have been distributed to the shareholders, if shares were issued; and
  6. That a majority of the incorporators or initial directors authorized the dissolution.

History. Enact. Acts 1988, ch. 23, § 137, effective January 1, 1989.

NOTES TO DECISIONS

1.Application.

This chapter, by allowing the corporate entity to continue to exist after dissolution to carry on “winding up” activities, continues to provide the traditional corporate protections for shareholders, directors, and officers in their limited activities of “winding up.” 2003 U.S. Dist. LEXIS 13268.

271B.14-020. Dissolution by board of directors and shareholders.

  1. A corporation’s board of directors may propose dissolution for submission to the shareholders.
  2. For a proposal to dissolve to be adopted:
    1. The board of directors shall recommend dissolution to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders; and
    2. The shareholders entitled to vote shall approve the proposal to dissolve as provided in subsection (5) of this section.
  3. The board of directors may condition its submission of the proposal for dissolution on any basis.
  4. The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with KRS 271B.7-050 . The notice shall also state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation.
  5. Unless the articles of incorporation or the board of directors (acting pursuant to subsection (3)) of this section require a greater vote or a vote by voting groups, the proposal to dissolve to be adopted shall be approved by a majority of all votes entitled to be cast on that proposal.

History. Enact. Acts 1988, ch. 23, § 138, effective January 1, 1989.

Research References and Practice Aids

ALR

Dissolution of corporation on ground of intracorporate deadlock or dissension. 83 A.L.R.3d 458.

271B.14-030. Articles of dissolution.

  1. At any time after dissolution is authorized, the corporation may dissolve by delivering to the Secretary of State for filing an original and three (3) exact or conformed copies of articles of dissolution setting forth:
    1. The name of the corporation;
    2. The date dissolution was authorized;
    3. If dissolution was approved by the shareholders:
      1. The number of votes entitled to be cast on the proposal to dissolve; and
      2. Either the total number of votes cast for and against dissolution or the total number of undisputed votes cast for dissolution and a statement that the number cast for dissolution was sufficient for approval; and
    4. If voting by voting groups was required, the information required by subsection (1)(c) of this section shall be separately provided for each voting group entitled to vote separately on the plan to dissolve.
  2. The Secretary of State shall immediately forward one (1) of the exact or conformed copies of the articles of dissolution to the secretary of revenue.
  3. A corporation shall be dissolved upon the effective date of its articles of dissolution.

History. Enact. Acts 1988, ch. 23, § 139, effective January 1, 1989.

271B.14-040. Revocation of dissolution.

  1. A corporation may revoke its dissolution within one hundred twenty (120) days of its effective date.
  2. Revocation of dissolution shall be authorized in the same manner as the dissolution was authorized unless that authorization permitted revocation by action of the board of directors alone, in which event the board of directors may revoke the dissolution without shareholder action.
  3. After the revocation of dissolution is authorized, the corporation may revoke the dissolution delivering to the Secretary of State for filing articles of revocation of dissolution, together with a copy of its articles of dissolution, that set forth:
    1. The name of the corporation;
    2. The effective date of the dissolution that was revoked;
    3. The date that the revocation of dissolution was authorized;
    4. If the corporation’s board of directors (or incorporators) revoked the dissolution, a statement to that effect;
    5. If the corporation’s board of directors revoked a dissolution authorized by the shareholders, a statement that revocation was permitted by action by the board of directors alone pursuant to that authorization; and
    6. If shareholder action was required to revoke the dissolution, the information required by subsection (1)(c) or (1)(d) of KRS 271B.14-030 .
  4. Revocation of dissolution shall be effective upon the effective date of the articles of revocation of dissolution.
  5. When the revocation of dissolution is effective, it shall have the effect provided in KRS 14A.7-030 (3).

History. Enact. Acts 1988, ch. 23, § 140, effective January 1, 1989; 2012, ch. 81, § 94, effective July 12, 2012.

271B.14-050. Effect of dissolution.

  1. A dissolved corporation shall continue its corporate existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs, including:
    1. Collecting its assets;
    2. Disposing of its properties that will not be distributed in kind to its shareholders;
    3. Discharging or making provision for discharging its liabilities, including as appropriate, entering into agreements with creditors for the satisfaction thereof;
    4. Distributing its remaining property among its shareholders according to their interests; and
    5. Doing every other act necessary to wind up and liquidate its business and affairs.
  2. Dissolution of a corporation shall not:
    1. Transfer title to the corporation’s property;
    2. Prevent transfer of its shares or securities, although the authorization to dissolve may provide for closing the corporation’s share transfer records;
    3. Subject its directors or officers to standards of conduct different from those prescribed in Subtitle 8 of this chapter;
    4. Change quorum or voting requirements for its board of directors or shareholders; change provisions for selection, resignation, or removal of its directors or officers or both; or change provisions for amending its bylaws;
    5. Prevent commencement of a proceeding by or against the corporation in its corporate name;
    6. Abate or suspend a proceeding pending by or against the corporation on the effective date of dissolution;
    7. Terminate the authority of the registered agent of the corporation;
    8. Alter the obligations and responsibilities of the corporation as prescribed by applicable federal or state law with regard to the filing or examination of all federal and state tax returns or the payment, assessment, or collection of any federal or state tax due with respect to those returns; or
    9. Abate or suspend KRS 271B.6-220 .

History. Enact. Acts 1988, ch. 23, § 141, effective January 1, 1989; 2007, ch. 137, § 68, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 68, effective July 15, 2010; 2012, ch. 81, § 95, effective July 12, 2012.

NOTES TO DECISIONS

1.Duration of Dissolution Period.

For the purpose of being sued, a corporation was deemed to exist until its debts were paid. Economy Bldg. & Loan Ass'n v. Paris Ice Mfg. Co., 113 Ky. 246 , 68 S.W. 21, 24 Ky. L. Rptr. 107 , 1902 Ky. LEXIS 46 ( Ky. 1902 ).

A corporation, though properly dissolved, was still in existence for purpose of settling its affairs and adjusting or paying the claims of its creditors. Stearns Coal & Lumber Co. v. Douglas, 299 Ky. 314 , 185 S.W.2d 385, 1944 Ky. LEXIS 1045 ( Ky. 1944 ).

2.Real Estate.

Upon dissolution of corporation, through expiration of its charter, the title to the real estate owned by the corporation did not revert to the stockholders. Stearns Coal & Lumber Co. v. Douglas, 299 Ky. 314 , 185 S.W.2d 385, 1944 Ky. LEXIS 1045 ( Ky. 1944 ).

Dissolved corporate entity may not carry on any business other than winding up and liquidating its business and affairs, and thus, in a case involving enforcement of a restrictive covenant, the property owners’ argument that the original corporate developer, which had since been dissolved, was the only entity with approval authority over their proposed garage was without merit. Colliver v. Stonewall Equestrian Estates Ass'n, 139 S.W.3d 521, 2003 Ky. App. LEXIS 307 (Ky. Ct. App. 2003).

3.Production of Corporate Records.

Business owner did not have to produce pre-incorporation documents to the IRS because they were not “corporate records,” but the post-dissolution records had to be produced because they were not personal records and therefore, not subject to the Fifth Amendment privilege against production. 2003 U.S. Dist. LEXIS 13268.

4.Personal Liability.

Where the one owner continued to reach agreements with the construction company that was owed money by one owner’s administratively dissolved corporation, in the years after the money was owed, the one owner could not show that the one owner was not personally liable for the agreement the one owner made to guarantee the construction company payment in return for the construction company executing a lien waiver, which was an agreement the one owner did not fully perform. The one owner was not protected by KRS 271B.14-050 since the one owner’s conduct did not involve winding up the business and even though the one owner would normally be shielded from personal liability as a shareholder, the one owner was not so protected by KRS 271B.6-220 (2) because the administratively dissolved corporation had been dissolved by the time the one owner entered into the agreement. Martin v. Pack's Inc., 358 S.W.3d 481, 2011 Ky. App. LEXIS 187 (Ky. Ct. App. 2011).

Cited:

In re Nix Heating & Air Conditioning, Inc., 108 B.R. 1012, 1990 Bankr. LEXIS 269 (Bankr. W.D. Ky. 1990 ).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

ALR

Criminal proceedings, maintainability against dissolved corporation. 40 A.L.R.2d 1396.

Arbitration proceedings, dissolved corporation’s power to participate in. 71 A.L.R.2d 1121.

271B.14-060. Known claims against dissolved corporation.

  1. A dissolved corporation may dispose of the known claims against it by following the procedure described in this section.
  2. The dissolved corporation shall notify its known claimants in writing of the dissolution at any time after its effective date. The written notice shall:
    1. Describe information that must be included in a claim;
    2. Provide a mailing address where a claim may be sent;
    3. State the deadline, which may not be fewer than one hundred twenty (120) days from the effective date of the written notice, by which the dissolved corporation must receive the claim; and
    4. State that the claim will be barred if not received by the deadline.
  3. A claim against the dissolved corporation shall be barred:
    1. If a claimant who was given written notice under subsection (2) of this section does not deliver the claim to the dissolved corporation by the deadline;
    2. If a claimant whose claim was rejected by the dissolved corporation does not commence a proceeding to enforce the claim within ninety (90) days from the effective date of the rejection notice.
  4. For purposes of this section, “claim” shall not include a contingent liability, a claim based on an event occurring after the effective date of dissolution or any liability to the Commonwealth or the United States for any state or federal tax liability.

History. Enact. Acts 1988, ch. 23, § 142, effective January 1, 1989.

NOTES TO DECISIONS

1.Assets.

Where a corporation was dissolved or consolidated, its assets became a trust fund for payment of its debts. A successor corporation was liable for deficiency assessments against dissolved corporation for income taxes. Reeves v. East Cairo Ferry Co., 289 Ky. 384 , 158 S.W.2d 937, 1942 Ky. LEXIS 554 ( Ky. 1942 ) (decided under prior law).

2.Corporate Obligations.

Liquidation of a corporation did not extinguish obligation due by or to it. Castle's Adm'r v. Acrogen Coal Co., 145 Ky. 591 , 140 S.W. 1034, 1911 Ky. LEXIS 908 ( Ky. 1911 ); Hauger v. International Trading Co., 184 Ky. 794 , 214 S.W. 438, 1919 Ky. LEXIS 144 ( Ky. 1919 ); United States v. Lam, 26 F.2d 830, 1927 U.S. Dist. LEXIS 1772 (W.D. Ky. 1927 ) (decided under prior law).

3.Foreign Corporation.

Former section, pertaining to the rights and remedies of a dissolved corporation in closing out its affairs, did not extend these benefits to foreign corporations, and a foreign corporation that was not qualified or authorized to do business in Kentucky derived its powers and existence solely from the law of the state of creation, and so a foreign corporation, a plaintiff in a civil action, which was dissolved under the laws of the state of its creation, during the pendency of the action, was “dead in law,” and was not capable of prosecution of the action subsequent to the dissolution, and the judgment rendered was void. Leiserson & Adler, Inc. v. Keam, 266 S.W.2d 352, 1954 Ky. LEXIS 822 ( Ky. 1954 ) (decided under prior law).

4.Winding Up.

A corporation had existence beyond its corporate life for the purpose of winding up its affairs. Crabtree v. Petroleum Exploration, Inc., 282 Ky. 32 , 137 S.W.2d 713, 1940 Ky. LEXIS 119 ( Ky. 1940 ) (decided under prior law).

271B.14-070. Unknown claims against dissolved corporation.

  1. A dissolved corporation may also publish notice of its dissolution and request that persons with claims against the corporation present them in accordance with the notice.
  2. The notice shall:
    1. Be published one (1) time in a newspaper of general circulation in the county where the dissolved corporation’s principal office (or, if none in this state, its registered office) is or was last located;
    2. Describe the information that must be included in a claim and provide a mailing address where the claim may be sent; and
    3. State that a claim against the corporation will be barred unless a proceeding to enforce the claim is commenced within two (2) years after the publication of the notice.
  3. If the dissolved corporation publishes a newspaper notice in accordance with subsection (2) of this section, the claim of each of the following claimants shall be barred unless the claimant commences a proceeding to enforce the claim against the dissolved corporation within two (2) years after the publication date of the newspaper notice:
    1. A claimant who did not receive written notice under KRS 271B.14-060 ;
    2. A claimant whose claim was timely sent to the dissolved corporation but not acted on; and
    3. A claimant whose claim is contingent or based on an event occurring after the effective date of dissolution.
  4. A claim may be enforced under this section:
    1. Against the dissolved corporation, to the extent of its undistributed assets; or
    2. If the assets have been distributed in liquidation, against a shareholder of the dissolved corporation to the extent of his pro rata share of the claim or the corporate assets distributed to him in liquidation, whichever is less, but a shareholder’s total liability for all claims under this section shall not exceed the total amount of assets distributed to him.

History. Enact. Acts 1988, ch. 23, § 143, effective January 1, 1989.

NOTES TO DECISIONS

1.Time Limitation.

The language of former law barring claims not commenced within two (2) years after the date of dissolution applied only to claims which arose “prior” to dissolution; accordingly, former law could not be applied to bar a plaintiff’s claim that a corporation’s majority shareholder, its accountants, and its attorney were negligent in liquidating the corporation’s assets and, consequently, that the corporation was required to pay additional taxes, penalties, lawyer’s fees, and accountant’s fees, since such a claim could not have arisen until after dissolution and the winding-up period. Gross v. Hougland, 712 F.2d 1034, 1983 U.S. App. LEXIS 25908 (6th Cir. 1983), cert. denied, 465 U.S. 1025, 104 S. Ct. 1281, 79 L. Ed. 2d 684, 1984 U.S. LEXIS 1087 (1984) (decided under prior law).

The stockholders, at the time the corporation became extinct for all purposes, including the two-year period allowed by former section for the winding up of its business, acquired the title to and became the owners of the judgment in favor of the corporation for deficiency in a mortgage foreclosure suit. Levy v. Liebling, 238 F.2d 505, 1956 U.S. App. LEXIS 4427 (6th Cir. 1956), cert. denied, 353 U.S. 936, 77 S. Ct. 812, 1 L. Ed. 2d 759, 1957 U.S. LEXIS 1040 (1957) (decided under prior law).

Administrative Dissolution

271B.14-200. Grounds for administrative dissolution. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 144; 2010, ch. 133, § 7) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.7-010 .

271B.14-210. Procedure for and effect of administrative dissolution. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 69; 2010, ch. 133, § 8) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.7-020 .

271B.14-220. Reinstatement following administrative dissolution or revocation under prior law — Exception — Amendment to extend or delete period of duration. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 70; 2010, ch. 133, § 9) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.7-030 .

271B.14-225. Permissibility of merger of subsequent reincorporation with reinstated prior corporation — Effect.

The General Assembly finds and declares it to be the public policy of the Commonwealth of Kentucky that each corporation which was refused reinstatement either orally or in writing and subsequently reincorporated as a second corporation may reinstate the first corporation and merge the second corporation into the first corporation. The first corporation shall then be treated as if it had continuous and uninterrupted existence and that the administrative dissolution or revocation had never occurred.

History. Enact. Acts 1992, ch. 161, § 3, effective April 1, 1992.

Research References and Practice Aids

Northern Kentucky Law Review.

Montague and Muehlenkamp, Kentucky Corporate Law Developments, 21 N. Ky. L. Rev. 413 (1994).

271B.14-230. Appeal from denial of reinstatement. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 147; 1992, ch. 161, § 2) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.7-040 .

Judicial Dissolution

271B.14-300. Grounds for judicial dissolution.

The Circuit Court may dissolve a corporation:

  1. In a proceeding by the Attorney General if it is established that:
    1. The corporation obtained its articles of incorporation through fraud; or
    2. The corporation has continued to exceed or abuse the authority conferred upon it by law;
  2. In a proceeding by a shareholder if it is established that:
    1. The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered, or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally, because of the deadlock;
    2. The directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal or fraudulent; or
    3. The shareholders are deadlocked in voting power and have failed, for a period that includes at least two (2) consecutive annual meeting dates, to elect successors to directors whose terms have expired;
  3. In a proceeding by a creditor if it is established that:
    1. The creditor’s claim has been reduced to judgment, the execution on the judgment returned unsatisfied, and the corporation is insolvent; or
    2. The corporation has admitted in writing that the creditor’s claim is due and owing and the corporation is insolvent; or
  4. In a proceeding by the corporation to have its voluntary dissolution continued under court supervision.

History. Enact. Acts 1988, ch. 23, § 148, effective January 1, 1989.

NOTES TO DECISIONS

1.Judicial Discretion.

Dismissal of plaintiffs’ claims for dissolution of a corporation brought in federal court was affirmed; the District Court did not abuse its discretion in abstaining because there was no reason to disturb the important state interests in the case. Caudill v. Eubanks Farms, Inc., 301 F.3d 658, 2002 FED App. 0297P, 2002 U.S. App. LEXIS 18145 (6th Cir. Ky. 2002 ).

2.Grounds for Dissolution.

Forfeiture of charter should not be sought for failures or abuses for which adequate penalties are enforceable by criminal action, either under statute or common law. Commonwealth v. Newport, L. & A. Turnpike Co., 97 S.W. 375, 29 Ky. L. Rptr. 1285 (Kan. Ct. App. 1906) (decided under prior law).

Failure of a corporation to engage in business or to comply with the law does not ipso facto forfeit its charter. Reichert v. Ellis Ferry Co., 184 Ky. 150 , 211 S.W. 403, 1919 Ky. LEXIS 19 ( Ky. 1919 ) (decided under prior law).

Minority stockholders were not entitled to a decree dissolving corporation merely because it was not profitable. Weisert v. Kraft, 209 Ky. 741 , 273 S.W. 462, 1925 Ky. LEXIS 592 ( Ky. 1925 ) (decided under prior law).

Agreement between two (2) tobacco warehouse corporations to conduct a joint venture of the two (2) businesses by a committee of six (6) members composed of three (3) directors of each corporation in which venture they were to share equally in the net proceeds and share the losses equally did not furnish grounds for forfeiture of charter proceedings. Commonwealth v. United Warehouse Co., 293 Ky. 502 , 169 S.W.2d 300, 1943 Ky. LEXIS 644 ( Ky. 1943 ) (decided under prior law).

Cited:

Dingus v. Fada Serv. Co., 856 S.W.2d 45, 1993 Ky. App. LEXIS 79 (Ky. Ct. App. 1993).

Research References and Practice Aids

ALR

Estoppel of one selling or conveying property to dissolved or defunct corporation to deny its existence. 20 A.L.R.2d 1084.

What amounts to “oppressive” conduct under statute authorizing dissolution of corporation at suit of minority stockholders. 56 A.L.R.3d 358.

271B.14-310. Procedure for judicial dissolution.

  1. Venue for a proceeding by the Attorney General to dissolve a corporation shall lie in Franklin County. Venue for a proceeding brought by any other party named in KRS 271B.14-300 shall lie in the county where a corporation’s principal office (or, if none in this state, its registered office) is or was last located.
  2. It shall not be necessary to make shareholders parties to a proceeding to dissolve a corporation unless relief is sought against them individually.
  3. A court in a proceeding brought to dissolve a corporation may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the corporate assets wherever located, and carry on the business of the corporation until a full hearing can be held.

History. Enact. Acts 1988, ch. 23, § 149, effective January 1, 1989.

NOTES TO DECISIONS

Cited:

Caudill v. Eubanks Farms, Inc., 301 F.3d 658, 2002 U.S. App. LEXIS 18145 (6th Cir. 2002).

271B.14-320. Receivership or custodianship.

  1. A court in a judicial proceeding brought to dissolve a corporation may appoint one (1) or more receivers to wind up and liquidate, or one (1) or more custodians to manage, the business and affairs of the corporation. The court shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian. The court appointing a receiver or custodian shall have exclusive jurisdiction over the corporation and all of its property wherever located.
  2. The court may appoint an individual or a domestic or foreign corporation (authorized to transact business in this state) as a receiver or custodian. The court may require the receiver or custodian to post bond, with or without sureties, in an amount the court directs.
  3. The court shall describe the powers and duties of the receiver or custodian in its appointing order, which may be amended from time to time. Among other powers:
    1. The receiver:
      1. May dispose of all or any part of the assets of the corporation wherever located, at a public or private sale, if authorized by the court; and
      2. May sue and defend in his own name as receiver of the corporation in all courts of this state; and
    2. The custodian may exercise all of the powers of the corporation, through or in place of its board of directors or officers, to the extent necessary to manage the affairs of the corporation in the best interests of its shareholders and creditors.
  4. The court during a receivership may redesignate the receiver a custodian, and during a custodianship may redesignate the custodian a receiver, if doing so is in the best interests of the corporation, its shareholders, and creditors.
  5. The court from time to time during the receivership or custodianship may order compensation paid and expense disbursements or reimbursements made to the receiver or custodian and his counsel from the assets of the corporation or proceeds from the sale of assets.

History. Enact. Acts 1988, ch. 23, § 150, effective January 1, 1989.

NOTES TO DECISIONS

1.Receivers.
2.—Appointment.

Action of board of directors of warehouse corporation in entering into partnership agreement with another warehouse corporation for joint operation of warehouses was not grounds for appointment of a receiver. Kehoe v. United Warehouse Co., 293 Ky. 525 , 169 S.W.2d 604, 1943 Ky. LEXIS 661 ( Ky. 1943 ) (decided under prior law).

Suits for the appointment of a receiver are equitable in nature. Diamonite Mfg. Corp. v. Clark Constr. Co., 446 S.W.2d 285, 1969 Ky. LEXIS 114 ( Ky. 1969 ) (decided under prior law).

3.—Sale of Property.

Where court, in suit by creditor, appointed receiver for corporation, with consent of corporation and other creditors, and receiver, after operating property for several years, reported that he could not find capital to continue operations, the court had jurisdiction to order a sale of the property by the receiver. Max Ams, Inc. v. Barker, 293 Ky. 698 , 170 S.W.2d 45, 1943 Ky. LEXIS 700 ( Ky. 1943 ) (decided under prior law).

4.—Unpaid Subscriptions.

A receiver could collect unpaid subscriptions in one suit to settle the corporate affairs, regardless of the residences of the stockholders. Lock v. Stout, 173 Ky. 304 , 191 S.W. 90, 1917 Ky. LEXIS 460 ( Ky. 1 917 ). See also James v. Bosworth, 223 Ky. 1 , 2 S.W.2d 1075, 1927 Ky. LEXIS 959 ( Ky. 1927 ) (decided under prior law).

5.—Attorney Fees.

While an order for a receiver’s fees was not error per se, since there was no authority for allowing a fee based on a commission, that fee had to be reversed. However, an award of the receiver’s reasonable attorney fees was proper and allowable under KRS 271B.14-320 (5). Monin v. Monin, 156 S.W.3d 309, 2004 Ky. App. LEXIS 367 (Ky. Ct. App. 2004).

6.—Liability.

Court-appointed receiver for a business, as an officer of the court, was entitled to quasi-judicial immunity related to the performance of the receiver's court-ordered duties as to the claims of a co-owner of the business because no evidence was presented to show that the receiver was either negligent or acted in bad faith in handling the tasks assigned to the receiver. Farmer v. Miller, 496 S.W.3d 485, 2016 Ky. App. LEXIS 121 (Ky. Ct. App. 2016).

271B.14-330. Decree of dissolution.

  1. If after a hearing the court determines that one (1) or more grounds for judicial dissolution described in KRS 271B.14-300 exist, it may enter a decree dissolving the corporation, and the clerk of the court shall deliver a certified copy of the decree to the Secretary of State, who shall file it. The dissolution shall be effective upon the latter of the filing of the decree by the Secretary of State or such later date as is specified in the decree.
  2. The effect of the dissolution shall be as set forth in KRS 271B.14-050 .
  3. After entering the decree of dissolution, the court shall direct the winding up and liquidation of the corporation’s business and affairs, including as provided in KRS 271B.14-320 , and the notification of claimants in accordance with KRS 271B.14-060 and 271B.14-070 .

History. Enact. Acts 1988, ch. 23, § 151, effective January 1, 1989; 2011, ch. 29, § 10, effective June 8, 2011; 2012, ch. 81, § 96, effective July 12, 2012.

Research References and Practice Aids

ALR

Preferred stockholders’ rights, upon liquidation or dissolution, to dividends. 25 A.L.R.2d 788.

Stockholders’ rights to patent, copyright, or trademark owned by corporation on dissolution thereof. 30 A.L.R.2d 938.

Miscellaneous

271B.14-400. Deposit with State Treasurer.

Assets of a dissolved corporation that should be transferred to a creditor, claimant, or shareholder of the corporation who cannot be found or who is not competent to receive them shall be reduced to cash and deposited with the State Treasurer or other appropriate state official for safekeeping. When the creditor, claimant, or shareholder furnishes satisfactory proof of entitlement to the amount deposited, the State Treasurer or other appropriate state official shall pay him or his representative that amount.

History. Enact. Acts 1988, ch. 23, § 152, effective January 1, 1989.

Subtitle 15. Foreign Corporations

Certificate of Authority

271B.15-010. Annual report.

A foreign corporation transacting business in this Commonwealth is subject to KRS 14A.6-010 .

History. Enact. Acts 1988, ch. 23, § 153, effective January 1, 1989; 1990, ch. 199, § 1, effective July 13, 1990; 2007, ch. 137, § 71, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 151, § 55, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed and reenacted without change to the existing language by 2010 Ky. Acts ch. 51, effective 7/15/10, and repealed and reenacted with the new language by 2010 Ky. Acts ch. 151, effective 1/1/2011. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment by ch. 51 not serve to void amendments made by other bills, and these Acts do not appear to be in conflict, therefore, they have been codified together.

NOTES TO DECISIONS

1.Transacting Business in Kentucky.

Where steeplechase association sanctioned race meetings, approved race courses, officials and financial responsibility of sponsoring organizations and prepared booklets and badges for meets, all from its New York office; maintained no offices or employes in Kentucky and conducted all communications by mail and telephone, the association did not transact business in Kentucky so as to require it to obtain a certificate of authority. Commonwealth ex rel. Stephens v. National Steeplechase & Hunt Asso., 612 S.W.2d 347, 1981 Ky. App. LEXIS 220 (Ky. Ct. App. 1981) (decided under prior law).

2.Interstate Commerce.

New York steeplechase association’s leasing of fences and jumps to local racing organizations, was within the exception provided for interstate commerce under former statute and thus such association was not required to obtain a certificate of authority as a foreign business transacting business in Kentucky. Commonwealth ex rel. Stephens v. National Steeplechase & Hunt Asso., 612 S.W.2d 347, 1981 Ky. App. LEXIS 220 (Ky. Ct. App. 1981) (decided under prior law).

3.Isolated Transactions.

Where national steeplechase association driver transported steeplechase jumps to Kentucky, but did not assist local agency in setting them up, and where association’s employes occasionally acted as stewards in race meetings, such meetings each being held three (3) or four (4) days each calendar year, these activities together were isolated transactions so as to fall under exception contained in former statute for interstate commerce and thus association was not required to obtain a certificate of authority as a foreign business transacting business in Kentucky. Commonwealth ex rel. Stephens v. National Steeplechase & Hunt Asso., 612 S.W.2d 347, 1981 Ky. App. LEXIS 220 (Ky. Ct. App. 1981) (decided under prior law).

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.15-020. Consequences of transacting business without authority. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 154) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.9-020 .

Research References and Practice Aids

ALR

Compliance after commencement of action as affecting application of statute denying access to courts or invalidating contracts where corporation fails to comply with regulatory statute. 6 A.L.R.3d 326.

271B.15-030. Application for certificate of authority — Requirement for agent’s written acceptance of appointment. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 155; 1998, ch. 341, § 10) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.9-030 .

271B.15-040. Amended certificate of authority. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 156) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.9-040 .

271B.15-050. Effect of certificate of authority. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 72) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.9-050 .

271B.15-060. Corporate name of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 73) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.3-040 .

271B.15-070. Registered office and registered agent of foreign corporation — Requirement for agent’s written acceptance of appointment. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 159; 1998, ch. 341, § 11) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.4-010 .

271B.15-080. Change of registered office or registered agent of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 160) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.4-020 .

271B.15-090. Resignation of registered agent of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 161) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.4-030 .

271B.15-100. Service on foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 162) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.4-040 .

Withdrawal

271B.15-200. Withdrawal of foreign corporation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 163) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.9-060 .

Revocation of Certificate of Authority

271B.15-300. Grounds for revocation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 164; 2010, ch. 133, § 10) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.9-070 .

271B.15-310. Procedure for an effective revocation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 165; 2010, ch. 133, § 11) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.9-080 .

271B.15-320. Appeal from revocation. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1988, ch. 23, § 166) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.9-090 .

Subtitle 16. Records and Reports

Records

271B.16-010. Corporate records.

  1. A corporation shall keep as permanent records minutes of all meetings of its shareholders and board of directors, a record of all actions taken by the shareholders or board of directors without a meeting, and a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation.
  2. A corporation shall maintain appropriate accounting records.
  3. A corporation or its agent shall maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, by class of shares showing the number and class of shares held by each.
  4. A corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time.
  5. A corporation shall keep a copy of the following records at its principal office:
    1. Its articles or restated articles of incorporation and all amendments to them currently in effect;
    2. Its bylaws or restated bylaws and all amendments to them currently in effect;
    3. Resolutions adopted by its board of directors creating one (1) or more classes or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding;
    4. The minutes of all shareholders’ meetings, and records of all action taken by shareholders without a meeting, for the past three (3) years;
    5. All written communications to shareholders generally within the past three (3) years, including the financial statements furnished for the past three (3) years under KRS 271B.16-200 ;
    6. A list of the names and business addresses of its current directors and officers; and
    7. Its most recent annual report delivered to the Secretary of State under KRS 14A.6-010 .

History. Enact. Acts 1988, ch. 23, § 167, effective January 1, 1989; 2010, ch. 151, § 123, effective January 1, 2011.

NOTES TO DECISIONS

1.Inspection Rights.

While KRS 271B.16-010 (2) states that a corporation must maintain “appropriate accounting records,” there is not a corollary statutory right for a shareholder to inspect those records. Therefore, a corporation’s argument that a shareholder was not entitled to inspect requested records because they were not “appropriate” accounting records was unpersuasive. Cardiovascular Specialists, P.S.C. v. Xenopoulos, 328 S.W.3d 215, 2010 Ky. App. LEXIS 216 (Ky. Ct. App. 2010).

2.Corporation as alter ego.

Husband and wife who owned and operated a Kentucky oil and gas drilling company were ordered to pay investors $5,662,662 in compensatory damages plus prejudgment interest because they committed fraud, breach of contract, and conversion when they made misrepresentations that induced an elderly investor, members of his family, and family trusts to invest in nonexistent and worthless gas wells, and the debt was nondischargeable under 11 U.S.C.S. § 523. The court found that the husband and wife were personally liable for the fact that the company breached contracts with the investors because the company was the husband and wife’s alter ego and piercing the corporate veil was necessary to prevent the husband and wife from perpetuating a fraud and committing other illegal acts in the name of the company and then avoiding responsibility by hiding behind the corporate shield; the company did not maintain permanent corporate records, as required by KRS 271B.16-010 , and the husband and wife transferred significant amounts of money from the company to their personal bank accounts and used the money to pay personal expenses. Fontaine v. P&J Resources, Inc. (In re P&J Resources Inc.), 475 B.R. 838, 2012 Bankr. LEXIS 2167 (Bankr. E.D. Ky. 2012 ).

271B.16-020. Inspection of records by shareholders.

  1. A shareholder of a corporation shall be entitled to inspect and copy, during regular business hours at the corporation’s principal office, any of the records of the corporation described in subsection (5) of KRS 271B.16-010 if he gives the corporation written notice of his demand at least five (5) business days before the date on which he wishes to inspect and copy.
  2. A shareholder of a corporation shall be entitled to inspect and copy during regular business hours at a reasonable location specified by the corporation any of the following records of the corporation if the shareholder meets the requirements of subsection (3) of this section and gives the corporation written notice of his demand at least five (5) business days before the date on which he wishes to inspect and copy:
    1. Excerpts from minutes of any meeting of the board of directors, records of any action of a committee of the board of directors while acting in place of the board of directors on behalf of the corporation, minutes of any meeting of the shareholders, and records of action taken by the shareholders or board of directors without a meeting, to the extent not subject to inspection under subsection (1) of this section;
    2. Accounting records of the corporation; and
    3. The record of shareholders.
  3. A shareholder may inspect and copy the records described in subsection (2) of this section only if:
    1. His demand is made in good faith and for a proper purpose;
    2. He describes with reasonable particularity his purpose and the records he desires to inspect; and
    3. The records are directly connected with his purpose.
  4. The right of inspection granted by this section shall not be abolished or limited by a corporation’s articles of incorporation or bylaws.
  5. This section shall not affect:
    1. The right of a shareholder to inspect records under KRS 271B.7-200 or, if the shareholder is in litigation with the corporation, to the same extent as any other litigant;
    2. The power of a court, independently of this chapter, to compel the production of corporate records for examination.
  6. For purposes of this section, “shareholder” includes a beneficial owner whose shares are held in a voting trust or by a nominee on his behalf.

History. Enact. Acts 1988, ch. 23, § 168, effective January 1, 1989.

NOTES TO DECISIONS

1.Action for Inspection.

In action by minority shareholder of family business to inspect the books and records of a corporation under subsection (2) of this section, evidence that shareholder’s father had transferred 90 shares to each of his three children and shareholder had transferred her shares back to her father, that she had another action pending to recover these shares and in which she seeks to enjoin corporation from paying dividends on these shares until their ownership is determined, that she had received 14 shares upon distribution of her father’s estate, that she had transferred two (2) shares to each of her six (6) children, that prior to the transfer stockholder’s brother, the secretary-treasurer of the corporation, had advised her that such transfer would cause the corporation to lose its right to file federal tax reports under Subchapter S, that the children of shareholder’s brothers have shares of stock in the corporation, that although shareholder’s husband stated that he would spend $2,000,000 in an effort to destroy the corporation there was no evidence showing that husband had legal control over wife’s stock, nor that he controlled her or her demands and fact that husband was engaged in competition with the corporation was irrelevant to wife’s request, sustained finding that corporation had not met its burden that action for inspection was for an improper purpose. Bennett v. Mack's Supermarkets, Inc., 602 S.W.2d 143, 1979 Ky. LEXIS 324 ( Ky. 1979 ) (decided under prior law).

Where there was a controversy not only as to the ownership of 90 shares of stock but also a controversy as to the propriety of paying dividends on these shares, an action for inspection of the corporate books was for a proper purpose. Bennett v. Mack's Supermarkets, Inc., 602 S.W.2d 143, 1979 Ky. LEXIS 324 ( Ky. 1979 ) (decided under prior law).

2.— Common Law.

The common-law right of a stockholder to inspect all books and papers of the corporation remained in effect in Kentucky and was enforceable by mandatory injunction. Otis-Hidden Co. v. Scheirich, 187 Ky. 423 , 219 S.W. 191, 1920 Ky. LEXIS 139 ( Ky. 1920 ) (decided under prior law).

3.— Laches.

A stockholder, or his agent, had the right of access to the books and records of the corporation at reasonable times and upon reasonable notice, for the purpose of inspection, and failure to exercise the right for several years would not be laches, since it could not prejudice the corporation. Pilcher v. Stadler, 276 Ky. 450 , 124 S.W.2d 475, 1939 Ky. LEXIS 530 ( Ky. 1939 ) (decided under prior law).

4.— Purpose.

While a shareholder could examine the books only for a proper corporate purpose, an intent to destroy a corporation, to bring vexatious suits, or to take unfair advantage for competitive reasons was not considered a proper corporate purpose and denial of access to the books on any of these grounds would be justified. Keeneland Asso. v. Pessin, 484 S.W.2d 849, 1972 Ky. LEXIS 156 ( Ky. 1972 ) (decided under prior law).

5.Motive of Shareholder.

When a shareholder makes a demand to examine the books and records of a corporation and the corporation denies the demand asserting the shareholder is motivated by an improper purpose, the corporation has the burden of proving the affirmative defense that the shareholder’s motive is improper. Bennett v. Mack's Supermarkets, Inc., 602 S.W.2d 143, 1979 Ky. LEXIS 324 ( Ky. 1979 ) (decided under prior law).

6.Litigation Discovery.

During litigation, the procedures allowed under Kentucky’s civil discovery rules are broader than those allowed under KRS 271B.16-020 and KRS 362.409 or KRS 362.1-403 , assuming that the plaintiff has made a colorable claim for something other than mere enforcement of those shareholder/partner statutes. Edwards v. Hickman, 237 S.W.3d 183, 2007 Ky. LEXIS 218 ( Ky. 2007 ).

7.Foreign Corporations.

Minority shareholders’ claim demanding inspection of corporate records under KRS 271B.16-020 (1) failed because foreign corporations, including those incorporated in Delaware, were exempt from inspection pursuant to KRS 271B.15-050 (3).2815 Grand Realty Corp. v. Goose Creek Energy, Inc., 656 F. Supp. 2d 707, 2009 U.S. Dist. LEXIS 84107 (E.D. Ky. 2009 ).

8.Findings.

In a case where a shareholder was seeking corporate records, it was unclear whether the requested records were accounting records of the corporation under KRS 271B.16-020 (2)(b), and there were no findings as to whether the records were directly connected to the shareholder’s alleged purpose of valuing his shares. Therefore, a remand was necessary for a determination of these issues. Cardiovascular Specialists, P.S.C. v. Xenopoulos, 328 S.W.3d 215, 2010 Ky. App. LEXIS 216 (Ky. Ct. App. 2010).

Research References and Practice Aids

Kentucky Law Journal.

Booth and Rutledge, The Limited Liability Company Act: Understanding Kentucky’s New Organizational Option, 83 Ky. L.J. 1 (1994-95).

ALR

Purposes for which stockholder may exercise right to examine corporate books and records. 15 A.L.R.2d 11.

271B.16-030. Scope of inspection right.

  1. A shareholder’s agent or attorney shall have the same inspection and copying rights as the shareholder he represents.
  2. The right to copy records under KRS 271B.16-020 shall include, if reasonable, the right to receive copies made by photographic, xerographic, or other means.
  3. The corporation may impose a reasonable charge, covering the costs of labor and material, for copies of any documents provided to the shareholder. The charge shall not exceed the estimated cost of production or reproduction of the records.
  4. The corporation may comply with a shareholder’s demand to inspect the record of shareholders under subsection (2)(c) of KRS 271B.16-020 by providing him with a list of its shareholders that was compiled no earlier than the date of the shareholder’s demand.

History. Enact. Acts 1988, ch. 23, § 169, effective January 1, 1989.

271B.16-040. Court-ordered inspection.

  1. If the corporation does not allow a shareholder who complies with subsection (1) of KRS 271B.16-020 to inspect and copy any records required by that subsection to be available for inspection, the Circuit Court of the county where the corporation’s principal office (or, if none in this state, its registered office) is located may summarily order inspection and copying of records demanded at the corporation’s expense upon application of the shareholder.
  2. If a corporation does not within a reasonable time allow a shareholder to inspect and copy any other record, the shareholder who complies with subsections (2) and (3) of KRS 271B.16-020 may apply to the Circuit Court of the county where the corporation’s principal office (or, if none in this state, its registered office) is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis.
  3. If the court orders inspection and copying of the records demanded, it shall also order the corporation to pay the shareholder’s costs (including reasonable counsel fees) incurred to obtain the order unless the corporation proves that it refused inspection in good faith because it had a reasonable basis for doubt about the right of the shareholder to inspect the records demanded.
  4. If the court orders inspection and copying of the records demanded, it may impose reasonable restrictions on the use or distribution of the records by the demanding shareholder.

History. Enact. Acts 1988, ch. 23, § 170, effective January 1, 1989.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Reports

271B.16-200. Financial statements for shareholders.

Upon the written request of any shareholder or holder of voting trust certificates for shares of a corporation the corporation shall mail to such shareholder or holder of voting trust certificates its most recent financial statements showing in reasonable detail its assets and liabilities and the results of its operations.

History. Enact. Acts 1988, ch. 23, § 171, effective January 1, 1989.

271B.16-210. Other reports to shareholders — Other requirements of a public benefit corporation.

  1. If a corporation indemnifies or advances expenses to a director under KRS 271B.8-510 to 271B.8-540 in connection with a proceeding by or in the right of the corporation, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders’ meeting.
  2. A public benefit corporation shall no less than annually provide its stockholders with a statement as to the corporation’s promotion of the public benefit or public benefits identified in the articles of incorporation and of the best interests of those materially affected by the corporation’s conduct. The statement shall include:
    1. The objectives that the board of directors has established to promote the public benefit or public benefits and interests;
    2. The standards that the board of directors has adopted to measure the corporation’s progress in promoting the public benefit or public benefits and interests;
    3. Objective factual information based on those standards regarding the corporation’s success in meeting the objectives for promoting the public benefit or public benefits and interests; and
    4. An assessment of the corporation’s success in meeting the objectives and promoting the public benefit or public benefits and interests.
  3. The articles of incorporation or bylaws of a public benefit corporation may require that the corporation:
    1. Make the statement described in subsection (2) of this section available to the public; or
    2. Use a third-party standard in connection with, or attain a periodic third-party certification addressing, the corporation’s promotion of the public benefit or public benefits identified in the articles of incorporation or the best interests of those materially affected by the corporation’s conduct.

HISTORY: Enact. Acts 1988, ch. 23, § 172, effective January 1, 1989; 2017 ch. 28, § 9, effective June 29, 2017.

271B.16-220. Annual report.

Each domestic corporation and each foreign corporation qualified to transact business in this Commonwealth is subject to KRS 14A.6-010 .

History. Enact. Acts 1988, ch. 23, § 173, effective January 1, 1989; 2007, ch. 137, § 74, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 74, effective July 15, 2010; 2010, ch. 133, § 12, effective July 15, 2011; repealed and reenact., Acts 2010, ch. 151, § 56, effective January 1, 2011.

Legislative Research Commission Note.

(7/15/2010). This section was amended by 2010 Ky. Acts ch. 133, and repealed and reenacted by 2010 Ky. Acts ch. 51, both effective 7/15/2010. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear to be in conflict; therefore, they have been codified together. Effective 1/1/2011, this section was also repealed and reenacted by the omnibus Kentucky Business Entity Act, 2010 Ky. Acts ch. 151.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

Subtitle 17. Transition Provisions

271B.17-010. Application of chapter.

  1. This chapter shall apply to any corporation formed under the laws of this state unless the statutes relating to a corporation of that kind either are inconsistent with this chapter or state that the provisions of this chapter do not apply to it.
  2. Subject to the provisions of subsection (1) of this section, corporations may be organized under this chapter for any lawful purpose or purposes.

History. Enact. Acts 1988, ch. 23, § 191, effective January 1, 1989.

271B.17-020. Application to qualified foreign corporations.

A foreign corporation authorized to transact business in this state on January 1, 1989, shall be subject to this chapter but shall not be required to obtain a new certificate of authority to transact business under this chapter.

History. Enact. Acts 1988, ch. 23, § 192, effective January 1, 1989.

Research References and Practice Aids

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.17-030. Savings provisions.

  1. Except as provided in subsection (2) of this section, the repeal of a statute by 1988 Acts Ch. 23, sec. 248 does not affect:
    1. The operation of the statute or any action taken under it before its repeal;
    2. Any ratification, right, remedy, privilege, obligation, or liability acquired, accrued, or incurred under the statute before its repeal;
    3. Any violation of the statute, or any penalty, forfeiture, or punishment incurred because of the violation, before its repeal; or
    4. Any proceeding, reorganization or dissolution commenced under the statute before its repeal, and the proceeding, reorganization, or dissolution may be completed in accordance with the statute as if it had not been repealed.
  2. If a penalty or punishment imposed for violation of a statute repealed by 1988 Acts Ch. 23, sec. 248 is reduced by this chapter, the penalty or punishment if not already imposed shall be imposed in accordance with this chapter.

History. Enact. Acts 1988, ch. 23, § 193, effective January 1, 1989.

Research References and Practice Aids

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

271B.17-040. Severability of provisions.

If any provision of this chapter or its application to any person or circumstances is held invalid by a court of competent jurisdiction, the invalidity does not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.

History. Enact. Acts 1988, ch. 23, § 84, effective January 1, 1989.

271B.17-050. Acceleration and applicability of effective date.

  1. On January 1, 1989, and thereafter, this chapter shall apply to all domestic corporations in existence on the effective date that were incorporated under the present statutes or any prior law and those incorporated on or after January 1, 1989, to the extent provided in KRS 271B.17-010 .
  2. Before January 1, 1989, the provisions of this chapter shall not apply to any domestic corporation except in accordance with the following:
    1. The corporation’s board of directors may adopt a resolution electing to have the provisions of this chapter (except for KRS 271B.1-220 , 271B.2-010 , 271B.2-030 to 271B.2-070 , 271B.3-010 and 271B.16-220 ) apply to the corporation.
    2. The resolution shall specify a date (after July 15, 1988, and before January 1, 1989) on and after which the provisions will apply to the corporation.
    3. The resolution shall be filed in the office of the Secretary of State before the date specified in subsection (2)(b) of this section.
  3. The provisions of this chapter (except for KRS 271B.1-220 , 271B.2-010 , 271B.2-030 to 271B.2-070 , 271B.3-010 and 271B.16-220 ) apply to each domestic corporation that complies with all the conditions prescribed in subsection (2) of this section. In addition, such a corporation shall continue to comply with the requirements of KRS 271A.396 , 271A.397 , 271A.398 , 271A.399 , 271A.615 , 271A.620 , 271A.625 , 271A.630 , and 271A.635 until January 1, 1989, but it is not subject to the provisions of KRS 271A.010 to 271A.395 ; KRS 271A.400 to 271A.610 ; and KRS 271A.640 to 271A.675 .

History. Enact. Acts 1988, ch. 23, § 194, effective January 1, 1989.

Subtitle 18. Miscellaneous Provisions

271B.18-010. Validity of facsimile signature for corporation debt security.

On any bond, note, debenture or other debt security issued by a corporation, the signature of the officers of the corporation acting in connection with the issuance, and the seal of the corporation may be facsimiles if the instrument is authenticated or countersigned by a trustee or transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon a bond, note, debenture or other debt security shall have ceased to be such officer before such bond, note, debenture or other debt security is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue.

History. Enact. Acts 1972, ch. 274, § 138.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.685 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

271B.18-020. Retroactive validation of existing domestic corporations.

The corporate existence of each domestic corporation which, upon July 1, 1974, is listed as an existing corporation on the current corporate index maintained in the office of the secretary of state and is then engaged in the usual course of its business shall be, and it hereby is, validated retroactively to the date of its incorporation and continued for the period specified in its articles of incorporation and the amendments thereto, or for a period of one (1) year from July 1, 1974, whichever is greater, unless thereafter it is voluntarily dissolved or liquidated pursuant to law, or its separate existence ceases pursuant to KRS 271A.380 , or it has its corporate powers revoked pursuant to KRS 271A.470 , or its charter is repealed or vacated pursuant to KRS Chapter 415.

History. Enact. Acts 1972, ch. 274, § 139; 1974, ch. 158, § 1.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.690 and was renumbered by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

KRS 271A.380 and 271A.470 referred to in this section have been repealed.

271B.18-030. Acceptance of present Constitution.

Any corporation which was in existence at the time of the adoption of the present Constitution of this state and subsequent thereto has filed in the office of the Secretary of State any amendment of its charter or articles of incorporation shall thereby be deemed to have filed therein an acceptance of the provisions of that Constitution.

History. Enact. Acts 1972, ch. 274, § 140.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.695 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

271B.18-040. Purpose of filing articles of incorporation.

The purpose of the provisions of this chapter requiring the filing or recording of the articles of incorporation, amendments thereto, and other papers, is to afford all persons the opportunity of acquiring knowledge of the contents thereof, but no person dealing with the corporation shall be charged with constructive notice of the contents of any such articles or papers by reason of such filing or recording.

History. Enact. Acts 1972, ch. 274, § 141.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.700 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

271B.18-050. Revocation of charters and grants since 1856.

All corporate charters granted and grants made to corporations since February 14, 1856, may be revoked by the General Assembly, unless a contrary intent is plainly expressed; but no revocation or repeal shall impair other rights previously vested.

History. Enact. Acts 1972, ch. 274, § 143.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.710 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Shivel, Organizing the Corporation Under the New Kentucky Business Corporation Act — A Comparison with Prior Law, 61 Ky. L.J. 95 (1972).

271B.18-060. Incorporation for purposes of establishing a foreign trade zone within this state.

Any corporation may be organized and chartered under the provisions of this chapter or under the provisions of KRS 273.161 to 273.400 for the purposes of establishing, operating, and maintaining a foreign trade zone within this state, under the provisions of 19 U.S.C.A. 81, as amended or reenacted, and may apply to the board created under the federal act for a grant of the privilege of establishing, operating, and maintaining such a zone. If the application is granted, the corporation may accept the grant and establish, operate, and maintain such a zone subject to the federal act, as amended or reenacted, and rules adopted thereunder.

History. Enact. Acts 1984, ch. 305, § 2, effective July 13, 1984.

Compiler’s Notes.

This section was formerly compiled as KRS 271A.715 and was renumbered as this section by the Reviser of Statutes pursuant to KRS 7.136 , effective January 1, 1989.

NOTES TO DECISIONS

Cited:

Simpson v. JOC Coal, Inc., 677 S.W.2d 305, 1984 Ky. LEXIS 271 ( Ky. 1984 ).

271B.18-070. Additional penalties for violation of KRS 506.010, 506.030, 506.040, 521.020, or 521.050.

  1. If a domestic corporation is convicted of a violation of KRS 506.010 , 506.030 , 506.040 , 521.020 , or 521.050 , or if an officer, employee, or agent of the corporation is convicted of violating any section specified above under circumstances which bring corporate liability under KRS 502.050(1)(b), the court shall order that the charter of the corporation be suspended for a period of not more than five (5) years for a first offense, ten (10) years for a second offense, and permanently for a third or subsequent offense.
  2. If a foreign corporation is convicted of a violation of any section specified in subsection (1) of this section, or if an officer, employee, or agent of the corporation is convicted of violating any section specified in subsection (1) of this section under circumstances which bring corporate liability under KRS 502.050(1)(b), the court shall order that the corporation not be permitted to do business in Kentucky for the appropriate period specified in subsection (1) of this section.
  3. The penalties specified in this section shall be in addition to any other penalty specified by law for the commission of the offenses listed in subsection (1) of this section.

History. Enact. Acts 1994, ch. 477, § 6, effective July 15, 1994.

CHAPTER 272 Cooperative Corporations and Associations

272.010. Definitions.

  1. As used in KRS 272.020 to 272.044 :
    1. “Cooperative corporation” means a business concern that distributes the net profit of its business by first paying a fixed dividend upon its stock, if any, and then prorating the remainder of its profits as patronage refunds to its stockholders, members or customers, as provided in bylaws;
    2. “Patronage refund” means the portion of net profit returned to member patrons or to all patrons in proportion to their patronage. In the case of an employee cooperative in which only employees are voting members, “patronage” means the amount or value of work performed by an employee, as provided in bylaws;
    3. “Stockholder” means the holder of voting stock in a cooperative corporation organized with shares;
    4. “Member” means the holder of a membership in a cooperative corporation organized with memberships;
    5. “Membership” means a lifetime payment made to a cooperative corporation to secure or provide services, not made in expectation of dividend or profit, and without any redemption value except at time of dissolution. The articles of incorporation or bylaws may specify the conditions under which a membership may be terminated;
    6. “Nonprofit basis” means that no part of the income or profit of the cooperative corporation is distributable to its members, directors or officers except in the form of patronage refunds;
    7. “Entity” includes a domestic or foreign corporation and corporation; not-for-profit corporation; profit and not-for-profit unincorporated association; business or statutory trust; estate; partnership; limited partnership; limited liability company; trust; two (2) or more persons having a joint or common economic interest; and state, United States, and foreign government;
    8. “Name of record with the Secretary of State” means any real, fictitious, reserved, registered, or assumed name of a business entity; and
    9. “Real name” shall have the meaning set forth in KRS 365.015 .
  2. As used in KRS 272.360 to 272.510 , unless the content for such requires otherwise, the term:
    1. “Livestock” shall mean sheep, cattle, hogs, horses, jacks, mules, poultry, or any other animal or bird commonly kept on the farm;
    2. “Farmer” shall mean any individual, firm, partnership, limited partnership, limited liability company, corporation, or farm management group which derives a portion or all of its income from the production of live stock domiciled on a farm within the Commonwealth;
    3. “Member” shall include actual members of the association organized under KRS 272.360 to 272.510 ;
    4. “Association” means any corporation organized under KRS 272.360 to 272.510; and
    5. “Department” shall mean the Department of Agriculture.
  3. Associations organized under KRS 272.360 to 272.510 shall be termed nonprofit inasmuch as they are not organized to make profit for themselves.

History. 883d-1, 883f-2: amend. Acts 1942, ch. 88, § 2; 1966, ch. 208, § 36; 1986, ch. 393, § 1, effective July 15, 1986; 2007, ch. 137, § 75, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 75, effective July 15, 2010; repealed and reenact., Acts 2010, ch. 151, § 135, effective January 1, 2011.

Compiler’s Notes.

A former subsection (2) of this section was repealed by Acts 1966, ch. 208, § 36 and the section was renumbered.

Legislative Research Commission Note.

(1/1/2011). This section was amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear in conflict, therefore, they have been codified together.

(6/26/2007). 2007 Ky. Acts ch. 137, sec. 75, subsection (1)(i) cited “Section 164 of this Act.” It is apparent from context that the section referred to should have been Section 163 of the Act, KRS 365.015 . The Reviser of Statutes has made this change under the authority of KRS 7.136 .

NOTES TO DECISIONS

Cited:

Walling v. McCracken County Peach Growers Asso., 50 F. Supp. 900, 1943 U.S. Dist. LEXIS 2515 (W.D. Ky. 1943 ); Ayers v. Burley Tobacco Growers Cooperative Asso., 344 S.W.2d 836, 1961 Ky. LEXIS 264 ( Ky. 1961 ).

Research References and Practice Aids

Cross-References.

Agriculture promotion, KRS Ch. 247.

Corporate and individual property taxes alike, Const., § 174.

Corporate franchise tax, procedure, evaluation of franchise; penalties, KRS 136.050 , 136.120 to 136.170 .

Corporate license tax, corporation included; amount; procedure, KRS 136.070 to 136.100 .

Facsimile signatures and seal on corporation debt security, KRS 271B.18-010 .

Marketing agricultural products, KRS Ch. 260.

Uniform Commercial Code, KRS Ch. 355.

Warehousing, KRS Chs. 251 and 359.

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

272.011. Definition of terms in KRS 272.101 to 272.341. [Renumbered as KRS 272.1001.]

Compiler’s Notes.

This section (Enact. Acts 1966, ch. 208, § 2; 1968, ch. 148, § 1; 1972, ch. 112, § 1) was renumbered by the Reviser of Statutes as KRS 272.1001 .

Cooperative Corporations Generally

272.020. Organization of cooperative corporation — Officers — Votes — Quorum.

  1. Any three (3) or more persons who are residents of this state may organize a cooperative corporation to conduct any agricultural, dairy, mercantile, mining, manufacturing, mechanical, service, or other lawful business, except organizations subject to any of the provisions of the banking laws of this state.
  2. The cooperative corporation shall be organized with shares or with memberships, as provided in articles of incorporation.
  3. The directors of the cooperative corporation shall be elected by the stockholders or members at such times and for such term of office as the bylaws prescribe, and shall hold office until their successors are elected. A majority of the stockholders or members at any regular or special stockholders’ or members’ meeting, legally called, may remove any director or official for cause, and fill the vacancy.
  4. There shall be a president, one (1) or more vice presidents, and a secretary and treasurer, or secretary treasurer, elected annually by and from the directors.
  5. No stockholder or member, regardless of the number of shares he may own, shall have more than one (1) vote upon any proposition.
  6. The articles of incorporation or bylaws of a cooperative corporation may prohibit voting by proxy or voting trusts.
  7. Unless otherwise provided in the articles of incorporation or bylaws, a majority of the stockholders or members entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders or members. In no event shall a quorum consist of less than one-third (1/3) of the stockholders or members entitled to vote, except that the articles of incorporation or bylaws of a cooperative corporation which prohibits both proxies and voting trusts may provide for a lower quorum; but in no event shall the quorum be set lower than one-tenth (1/10) of the stockholders or members entitled to vote or twenty (20) such stockholders or members, whichever is less.

History. 883d-1, 883d-5, 883d-6: amend. Acts 1986, ch. 393, § 2, effective July 15, 1986.

Opinions of Attorney General.

An affirmative declaration may be made in the articles of incorporation to organize as a cooperative corporation under KRS 272.020 to 272.050 , and the applicability of the general business code provisions depends upon whether or not the cooperative corporation is organized with shares or memberships interests. OAG 00-8 .

Research References and Practice Aids

Cross-References.

General corporation law, application, KRS 271B.3-010 .

Voting rights in private corporation, KRS 271B.7-200 to 271B.7-280 .

272.030. Reserve fund.

By a vote of at least two-thirds (2/3) of the stockholders or members, and after the payment of a fixed dividend upon its stock, but before the profits are prorated, any cooperative corporation may create a reserve fund by setting aside each year ten percent (10%) to twenty-five percent (25%) of the remainder of the net profits of its business.

History. 883d-7: amend. Acts 1986, ch. 393, § 3, effective July 15, 1986.

272.040. Cooperative companies may adopt KRS 272.020 to 272.050 — Filing fee.

Any cooperative company may become subject to the provisions of KRS 272.020 to 272.044 by filing with the Secretary of State a declaration signed and sworn to by the president and secretary that the company, by a majority vote of its stockholders or members, has decided to adopt KRS 272.020 to 272.044 . There shall be paid to the Secretary of State a fee of two dollars ($2) for filing the declaration.

History. 883d-8: amend. Acts 1946, ch. 141, § 14; 1986, ch. 393, § 4, effective July 15, 1986; 2010, ch. 151, § 136, effective January 1, 2011.

Opinions of Attorney General.

The payment of the filing fee is a condition precedent for filing documents with the Secretary of State, and the Secretary of State may void the filing and return a document after it has been received, stamped, and filed, if the check for payment of that fee has been dishonored. OAG 89-94 .

272.042. KRS provisions applicable to various cooperative corporation organizations.

Unless otherwise provided in KRS 272.010(1) and KRS 272.020 to 272.044 , a cooperative corporation organized with shares shall be subject to the provisions of KRS Chapter 271B, and a cooperative corporation organized with memberships and operated on a nonprofit basis shall be subject to the provisions of KRS 273.161 to 273.390 .

History. Enact. Acts 1986, ch. 393, § 5, effective July 15, 1986; 2010, ch. 151, § 137, effective January 1, 2011.

272.044. Applicability of KRS 272.010(1) and 272.020 to 272.044.

The provisions of KRS 272.010(1) and 272.020 to 272.044 are applicable only to cooperative associations organized under KRS 272.020 to 272.044 .

History. Enact. Acts 1986, ch. 393, § 6, effective July 15, 1986; 2010, ch. 151, § 138, effective January 1, 2011.

272.050. Limited use of word “cooperative.” [Repealed.]

Compiler’s Notes.

This section (Repealed and reenact., Acts 2010, ch. 51, § 76) was repealed by Acts 2010, ch. 151, § 151, effective January 1, 2011. See now KRS 14A.3-010 (13).

272.060. Reversion of unclaimed distributions. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1958, ch. 5, § 1) was repealed by Acts 1966, ch. 208, § 36.

Cooperative Marketing Associations

272.100. Who may organize; information furnished. [Repealed.]

Compiler’s Notes.

This section (883f-3, 883f-5) was repealed by Acts 1966, ch. 208, § 36.

Agricultural Cooperative Associations

272.1001. Definition of terms in KRS 272.101 to 272.341.

As used in KRS 272.101 to 272.341 , unless the context otherwise requires:

  1. “Agricultural products” includes horticultural, viticultural, floricultural, forestry, dairy, livestock, poultry, bee and any farm products;
  2. “Association” means a corporation organized under, or entitled to the benefits of, KRS 272.121 to 272.341 or a corporation which is organized under any general or special act of this state. Such an association shall be classed as and deemed to be a nonprofit corporation, since its primary object is not to make profits for itself, as such, or to pay dividends or invest its capital, but to provide service and a means whereby its members may have the economic advantage of cooperative action, including a reasonable and fair return for their products or service;
  3. “Member” means the holder of a membership in an association without capital stock (whether evidenced by a certificate of membership or other means of identification, including but not limited to the association’s records) or means the holder of voting stock in an association organized with capital stock;
  4. “Board” means the board of directors of the association;
  5. “Person” includes individuals, firms, partnerships, corporations, and associations;
  6. “Foreign association” means a corporation organized under any general or special act of another state, the United States, or the District of Columbia as a cooperative corporation or association for the mutual benefit of its members and other patrons, and which confines its operations to the purposes specified in the cooperative corporation statutes of the jurisdiction of its incorporation, and restricts the return on stock or membership capital, and the amount of its business with nonmembers to the limits placed thereon by the cooperative corporation statutes of the jurisdiction of its incorporation;
  7. “Corporation” means, except as used in subsections (2) and (6) of this section, a corporation for profit organized under any general or special act of this state or of another state, the United States, or the District of Columbia; and
  8. “Member-association” means an association or foreign association which is a member of another association or foreign association.

History. Enact. Acts 1966, ch. 208, § 2; 1968, ch. 148, § 1; 1972, ch. 112, § 1.

Compiler’s Notes.

This section was formerly compiled as KRS 272.011 .

Opinions of Attorney General.

If an entity organizes as an agricultural cooperative association, that entity is statutorily deemed a nonprofit and may organize with or without stock. OAG 00-8 .

Research References and Practice Aids

Kentucky Bench & Bar.

Rutledge, Recent Amendments to Kentucky Business Entity Laws, Vol. 71, No. 5, Sept. 2007, Ky. Bench & Bar 25.

272.101. Purpose of law.

In enacting KRS 272.1001 , 272.101 to 272.341 , it is the intention of the General Assembly to promote, foster and encourage the intelligent and orderly production and marketing of agricultural products through cooperation, to eliminate speculation and waste, to make the distribution of agricultural products between producer and consumer as direct as can be efficiently done, and to stabilize the marketing of agricultural products and to provide for the organization and incorporation of agricultural cooperative associations.

History. Enact. Acts 1966, ch. 208, § 1; 1984, ch. 111, § 115, effective July 13, 1984.

272.110. Powers of the association. [Repealed.]

Compiler’s Notes.

This section (883f-4, 883f-6) was repealed by Acts 1966, ch. 208, § 36.

272.111. Association — Purposes.

An association may be organized to engage in any activity in connection with the production, harvesting, marketing, selling, preserving, drying, processing, canning, packing, grading, storing, handling, shipping or utilization of the agricultural products owned, leased, handled or marketed by its members and other farmers, with the manufacture or marketing of the by-products thereof, in connection with the manufacturing, selling, or supplying to its members and other farmers of machinery, equipment or supplies, in the financing of the above-enumerated activities, in performing or furnishing services of economic or educational nature, on a cooperative basis for those engaged in agriculture, or in any one or more of the activities specified herein.

History. Enact. Acts 1966, ch. 208, § 4; 1972, ch. 112, § 2; 1984, ch. 111, § 116, effective July 13, 1984.

272.120. Members of the association. [Repealed.]

Compiler’s Notes.

This section (883f-7) was repealed by Acts 1966, ch. 208, § 36.

272.121. Who may organize — Information as to probable success.

  1. Five (5) or more persons engaged in the production of agricultural products, or one or more associates of such producers, may form an association, with or without capital stock.
  2. The dean of the College of Agriculture of the University of Kentucky shall, upon request, inform any association or group of persons contemplating the organization of an association what the results of a survey of the economic conditions affecting the commodities or service proposed to be handled indicate regarding probable success.

History. Enact. Acts 1966, ch. 208, § 3; 1972, ch. 112, § 3.

272.130. Articles of incorporation; contents; filing; subscriptions to and issuance of capital stock. [Repealed.]

Compiler’s Notes.

This section (883f-8; amend. Acts 1944, ch. 48, § 1; 1946, ch. 141, § 25; 1960, ch. 133, § 1) was repealed by Acts 1966, ch. 208, § 36.

272.131. Articles of association, contents — Filing effect.

  1. The articles of incorporation of each association shall state:
    1. The name of the association that satisfies KRS 14A.3-010 ;
    2. The purposes for which it is formed;
    3. The place where its principal business will be transacted;
    4. The period of duration, which may be perpetual. When the articles of incorporation fail to state the period of duration, it shall be considered perpetual. Any association heretofore or hereafter organized for a period less than perpetual, may, by amendment to its articles of incorporation, extend the period of its duration for a specified period or perpetually;
    5. The names and addresses, not less than five (5), of those who are to serve as directors for the first term or until the election of their successors;
    6. If organized without capital stock, whether the property rights and interest of each member shall be equal or unequal; and if unequal, the articles shall set forth the general rules applicable to all members by which the property rights and interests, respectively, of each member shall be determined and fixed; and the association shall have the power to admit new members who shall be entitled to share in the property of the association with the old members in accordance with the general rules. These provisions of the articles of incorporation shall not be altered, amended, or repealed except by the affirmative vote of not less than two-thirds (2/3) of the votes entitled to be cast by members present in person, or by proxy, if permitted by the bylaws, and voting thereon at any regular or special meeting; and
    7. If organized with capital stock, the authorized amount of the stock and the number of shares into which it is divided and the par value thereof. Capital stock may be divided into preferred and common stock. The articles of incorporation must contain a statement of the number of shares of stock to which preference is granted and the number of shares of stock to which no preference is granted and the nature and extent of the preference and the privileges granted to each. No specific amount of the capital stock authorized is required to be subscribed before the association may transact business with other than its members; the board may determine the amount of capital stock to be issued as the business of the association may justify or demand, from time to time, within the amount of the total authorization.
  2. The articles of incorporation may contain any provision consistent with law with respect to management, regulation, government, financing, indebtedness, membership, the establishment of voting districts and the election of delegates for representative purposes, the issuance, retirement and transfer of its stock, if formed with capital stock, or any provisions relative to the way or manner in which it shall operate with respect to its members, officers, or directors, and any other provisions relating to its affairs; but nothing set forth in this section shall be construed as limiting any of the rights or powers otherwise given to such associations.
  3. The articles of incorporation must be subscribed by the incorporators and acknowledged by one (1) of them before an officer authorized by the laws of this state to take and certify acknowledgments of deeds and conveyances; and shall be filed and recorded in accordance with the statute relating to corporations generally; and when so filed, the articles of incorporation, or certified copies thereof, shall be received in all the courts of this state, and other places, as prima facie evidence of the facts contained therein, and of the due incorporation of the association. A copy of the articles of incorporation, indorsed by the Secretary of State with the fact and time of recording in his office, shall be filed with the dean of the College of Agriculture of the University of Kentucky and with the Commissioner of the Department of Agriculture.

History. Enact. Acts 1966, ch. 208, § 5; 1984, ch. 111, § 117, effective July 13, 1984; 2007, ch. 137, § 77, effective June 26, 2007; repealed and reenact., Acts 2010, ch. 51, § 77, effective July 15, 2010; repealed, reenact., and amend., Acts 2010, ch. 151, § 57, effective January 1, 2011.

Legislative Research Commission Note.

(1/1/2011). This section was repealed, reenacted, and amended by 2010 Ky. Acts ch. 151, and repealed and reenacted by 2010 Ky. Acts ch. 51. Pursuant to Section 184 of Acts ch. 51, it was the intent of the General Assembly that the repeal and reenactment not serve to void the amendment, and these Acts do not appear to be in conflict, therefore, they have been codified together.

Research References and Practice Aids

Cross-References.

Articles of incorporation of corporations generally, KRS 271B.2-020 .

Directors of ordinary private corporation, KRS 271B.8-010 .

Recording corporate instruments, name of draftsman thereon, KRS 382.335 .

Kentucky Law Journal.

Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 (2008).

272.140. Amendment to articles; filing fees for articles or amendments. [Repealed.]

Compiler’s Notes.

This section (883f-8, 883f-9, 883f-32: amend Acts 1946, ch. 141, § 26; 1960, ch. 133, § 2) was repealed by Acts 1966, ch. 208, § 36.

272.141. Amendments to articles, how made — Contents — Filing.

  1. Amendments to the articles of incorporation shall be made in the following manner: The board shall by an affirmative vote of not less than two-thirds (2/3) of its members, present and voting at any regular or special meeting, adopt a resolution approving the proposed amendment and directing that the proposed amendment be submitted to a vote of the association members at any annual or special meeting duly called. Written or printed notice setting forth the proposed amendment, or a summary of the changes to be effected thereby, shall be given to each member of the association entitled to vote at any such meeting, within the time and in the manner provided in KRS 272.161 . The proposed amendment, or amendments, shall be adopted by the affirmative vote of not less than a majority of the votes entitled to be cast by the members present in person, or by proxy (if permitted by the bylaws), and voting at any such meeting.
  2. Notwithstanding the provisions of subsection (1) of this section, an amendment whose only effect is to extend an association’s period of duration may be adopted by the affirmative vote of not less than two-thirds (2/3) of the directors present and voting at any duly called board meeting, and shall become effective when signed and acknowledged by the chairman, or other presiding officer, of the board and filed and recorded pursuant to KRS 272.131 .
  3. The articles of amendment shall set forth:
    1. The name of the association;
    2. The amendment adopted;
    3. A statement setting forth the date of the meeting of the board at which the amendment or amendments were approved; that the meeting was duly called and that a quorum was present; and that a resolution approving the proposed amendment, or amendments, received an affirmative vote of not less than two-thirds (2/3) of the members of the board present and voting at such meeting;
    4. A statement setting forth the date of the meeting of the members of the association at which the amendment was adopted; that the meeting was duly called and that a quorum was present; and that such amendment received an affirmative vote of not less than a majority of the votes entitled to be cast by members present in person, or by proxy (if permitted by the bylaws), and voting at such meeting.
  4. For the recording of articles of incorporation or amendments thereto by the Secretary of State and county clerk, and for the issuance of a certificate of incorporation or certificate of amendment by the Secretary of State, an association shall pay the same fees as are provided for such services in the statutes relating to corporations generally.
  5. A copy of the articles of amendment indorsed by the Secretary of State with the fact and time of recording in his office, shall be filed with the dean of the College of Agriculture of the University of Kentucky, and with the Commissioner of the Department of Agriculture.

History. Enact. Acts 1966, ch. 208, § 6; 1978, ch. 384, § 446, effective June 17, 1978; 1984, ch. 111, § 118, effective July 13, 1984.

NOTES TO DECISIONS

1.Extension of Period of Duration.

Law that permitted the directors to extend the corporate life of the association by amending its articles without the vote of its members did not constitute a substantial impairment of the members’ voting rights. Ayers v. Burley Tobacco Growers Cooperative Asso., 344 S.W.2d 836, 1961 Ky. LEXIS 264 ( Ky. 1961 ) (decided under prior law).

Research References and Practice Aids

Cross-References.

Amendment of articles of corporations generally, KRS 271B.10-010 to 271B.10-090 .

272.145. Effect of amendment to extend corporations duration. [Repealed.]

Compiler’s Notes.

This section (Enact. Acts 1960, ch. 133, § 3) was repealed by Acts 1966, ch. 208, § 36.

272.150. Bylaws of Association. [Repealed.]

Compiler’s Notes.

This section (883f-10: amend. Acts 1942, ch. 11, §§ 1 and 2) was repealed by Acts 1966, ch. 208, § 36.

272.151. Bylaws, adoption, contents — Withdrawal of member — Rights — Amendment of bylaws.

  1. Each association shall within thirty (30) days after its incorporation, adopt for its government and management a code of bylaws. The affirmative vote of not less than two-thirds (2/3) of the members present and voting at a meeting, of which reasonable notice of the proposed bylaws shall have been given, is sufficient to adopt such bylaws.
  2. An association in its bylaws may provide for any, or all, of the following:
    1. The time, place, and manner of calling and conducting its meetings.
    2. The number of members constituting a quorum.
    3. The right of members to vote by proxy or by mail, or by both, and the conditions, manner, form, and effects of such votes.
    4. The number of directors constituting a quorum.
    5. The offices, qualifications, compensations, duties and terms of office of directors and officers; time of their election, and the mode and manner of giving notice thereof.
    6. Penalties for violations of the bylaws.
    7. The amount of entrance, organization, and membership fees, if any; the manner and method of collection of the same, and the purposes for which they may be used.
    8. The amount which each member shall be required to pay annually, or from time to time, if at all, to carry on the business of the association; the charge, if any, to be paid by each member directly or by utilization of retained earnings for services rendered by the association to him, and the time of payment and the manner of collection; and the marketing agreement between the association and its members, which every member may be required to sign.
    9. The number and qualification of members of the association and the conditions precedent to membership; the method, time, and manner of permitting members to withdraw; the manner of assignment and transfer of the interest of members, and of stock; the conditions upon which, and the time when membership of any member shall cease; the automatic suspension of the rights of a member when he ceases to be eligible to membership in the association, and mode, manner, and effect of the expulsion of a member, manner of determining the value of a member’s interest and provision for its purchase by the association upon the death or withdrawal of a member, or upon the expulsion of a member or forfeiture of his membership, or at the option of the association, by conclusive appraisal by the board.
  3. Unless provided otherwise in an association’s bylaws, the board shall equitably and conclusively appraise the value of a withdrawing or expelled member’s property interest in the association and shall fix the amount thereof in money and shall determine the manner in which the association shall pay the member the value of his interest.
  4. The bylaws of an association may be amended, changed, or altered at any time by the affirmative vote of not less than two-thirds (2/3) of the members of the board present and voting at any regular or special meeting of the board of directors duly called and held.

History. Enact. Acts 1966, ch. 208, § 8; 1968, ch. 148, § 2.

NOTES TO DECISIONS

1.Voting Rights.

Where articles and bylaws expressly provided for revocation of voting rights on grounds of noncooperation and there was no statutory provision that invalidated such articles or bylaws and board of directors carefully followed these provisions in revoking voting rights, their action was valid. Thomason v. Clark County Farm Bureau Tobacco Cooperative, Inc., 259 S.W.2d 64, 1953 Ky. LEXIS 933 ( Ky. 1953 ) (decided under prior law).

Research References and Practice Aid