N.Y. BSC Law § 623 — New York Code / Act BSC / Article 6 / Section 623
Procedure to enforce shareholder's right to receive payment for shares
Status: in_force

§ 623. Procedure to enforce shareholder's right to receive payment for\n         shares.\n  (a) A shareholder intending to enforce his right under a section of\nthis chapter to receive payment for his shares if the proposed corporate\naction referred to therein is taken shall file with the corporation,\nbefore the meeting of shareholders at which the action is submitted to a\nvote, or at such meeting but before the vote, written objection to the\naction. The objection shall include a notice of his election to dissent,\nhis name and residence address, the number and classes of shares as to\nwhich he dissents and a demand for payment of the fair value of his\nshares if the action is taken.  Such objection is not required from any\nshareholder to whom the corporation did not give notice of such meeting\nin accordance with this chapter or where the proposed action is\nauthorized by written consent of shareholders without a meeting.\n  (b) Within ten days after the shareholders' authorization date, which\nterm as used in this section means the date on which the shareholders'\nvote authorizing such action was taken, or the date on which such\nconsent without a meeting was obtained from the requisite shareholders,\nthe corporation shall give written notice of such authorization or\nconsent by registered mail to each shareholder who filed written\nobjection or from whom written objection was not required, excepting any\nshareholder who voted for or consented in writing to the proposed action\nand who thereby is deemed to have elected not to enforce his right to\nreceive payment for his shares.\n  (c) Within twenty days after the giving of notice to him, any\nshareholder from whom written objection was not required and who elects\nto dissent shall file with the corporation a written notice of such\nelection, stating his name and residence address, the number and classes\nof shares as to which he dissents and a demand for payment of the fair\nvalue of his shares. Any shareholder who elects to dissent from a merger\nunder section 905 (Merger of subsidiary corporation) or paragraph (c) of\nsection 907 (Merger or consolidation of domestic and foreign\ncorporations) or from a share exchange under paragraph (g) of section\n913 (Share exchanges) shall file a written notice of such election to\ndissent within twenty days after the giving to him of a copy of the plan\nof merger or exchange or an outline of the material features thereof\nunder section 905 or 913.\n  (d) A shareholder may not dissent as to less than all of the shares,\nas to which he has a right to dissent, held by him of record, that he\nowns beneficially. A nominee or fiduciary may not dissent on behalf of\nany beneficial owner as to less than all of the shares of such owner, as\nto which such nominee or fiduciary has a right to dissent, held of\nrecord by such nominee or fiduciary.\n  (e) Upon consummation of the corporate action, the shareholder shall\ncease to have any of the rights of a shareholder except the right to be\npaid the fair value of his shares and any other rights under this\nsection. A notice of election may be withdrawn by the shareholder at any\ntime prior to his acceptance in writing of an offer made by the\ncorporation, as provided in paragraph (g), but in no case later than\nsixty days from the date of consummation of the corporate action except\nthat if the corporation fails to make a timely offer, as provided in\nparagraph (g), the time for withdrawing a notice of election shall be\nextended until sixty days from the date an offer is made. Upon\nexpiration of such time, withdrawal of a notice of election shall\nrequire the written consent of the corporation. In order to be\neffective, withdrawal of a notice of election must be accompanied by the\nreturn to the corporation of any advance payment made to the shareholder\nas provided in paragraph (g).  If a notice of election is withdrawn, or\nthe corporate action is rescinded, or a court shall determine that the\nshareholder is not entitled to receive payment for his shares, or the\nshareholder shall otherwise lose his dissenters' rights, he shall not\nhave the right to receive payment for his shares and he shall be\nreinstated to all his rights as a shareholder as of the consummation of\nthe corporate action, including any intervening preemptive rights and\nthe right to payment of any intervening dividend or other distribution\nor, if any such rights have expired or any such dividend or distribution\nother than in cash has been completed, in lieu thereof, at the election\nof the corporation, the fair value thereof in cash as determined by the\nboard as of the time of such expiration or completion, but without\nprejudice otherwise to any corporate proceedings that may have been\ntaken in the interim.\n  (f) At the time of filing the notice of election to dissent or within\none month thereafter the shareholder of shares represented by\ncertificates shall submit the certificates representing his shares to\nthe corporation, or to its transfer agent, which shall forthwith note\nconspicuously thereon that a notice of election has been filed and shall\nreturn the certificates to the shareholder or other person who submitted\nthem on his behalf. Any shareholder of shares represented by\ncertificates who fails to submit his certificates for such notation as\nherein specified shall, at the option of the corporation exercised by\nwritten notice to him within forty-five days from the date of filing of\nsuch notice of election to dissent, lose his dissenter's rights unless a\ncourt, for good cause shown, shall otherwise direct. Upon transfer of a\ncertificate bearing such notation, each new certificate issued therefor\nshall bear a similar notation together with the name of the original\ndissenting holder of the shares and a transferee shall acquire no rights\nin the corporation except those which the original dissenting\nshareholder had at the time of transfer.\n  (g) Within fifteen days after the expiration of the period within\nwhich shareholders may file their notices of election to dissent, or\nwithin fifteen days after the proposed corporate action is consummated,\nwhichever is later (but in no case later than ninety days from the\nshareholders' authorization date), the corporation or, in the case of a\nmerger or consolidation, the surviving or new corporation, shall make a\nwritten offer by registered mail to each shareholder who has filed such\nnotice of election to pay for his shares at a specified price which the\ncorporation considers to be their fair value. Such offer shall be\naccompanied by a statement setting forth the aggregate number of shares\nwith respect to which notices of election to dissent have been received\nand the aggregate number of holders of such shares. If the corporate\naction has been consummated, such offer shall also be accompanied by (1)\nadvance payment to each such shareholder who has submitted the\ncertificates representing his shares to the corporation, as provided in\nparagraph (f), of an amount equal to eighty percent of the amount of\nsuch offer, or (2) as to each shareholder who has not yet submitted his\ncertificates a statement that advance payment to him of an amount equal\nto eighty percent of the amount of such offer will be made by the\ncorporation promptly upon submission of his certificates. If the\ncorporate action has not been consummated at the time of the making of\nthe offer, such advance payment or statement as to advance payment shall\nbe sent to each shareholder entitled thereto forthwith upon consummation\nof the corporate action. Every advance payment or statement as to\nadvance payment shall include advice to the shareholder to the effect\nthat acceptance of such payment does not constitute a waiver of any\ndissenters' rights. If the corporate action has not been consummated\nupon the expiration of the ninety day period after the shareholders'\nauthorization date, the offer may be conditioned upon the consummation\nof such action. Such offer shall be made at the same price per share to\nall dissenting shareholders of the same class, or if divided into\nseries, of the same series and shall be accompanied by a balance sheet\nof the corporation whose shares the dissenting shareholder holds as of\nthe latest available date, which shall not be earlier than twelve months\nbefore the making of such offer, and a profit and loss statement or\nstatements for not less than a twelve month period ended on the date of\nsuch balance sheet or, if the corporation was not in existence\nthroughout such twelve month period, for the portion thereof during\nwhich it was in existence. Notwithstanding the foregoing, the\ncorporation shall not be required to furnish a balance sheet or profit\nand loss statement or statements to any shareholder to whom such balance\nsheet or profit and loss statement or statements were previously\nfurnished, nor if in connection with obtaining the shareholders'\nauthorization for or consent to the proposed corporate action the\nshareholders were furnished with a proxy or information statement, which\nincluded financial statements, pursuant to Regulation 14A or Regulation\n14C of the United States Securities and Exchange Commission. If within\nthirty days after the making of such offer, the corporation making the\noffer and any shareholder agree upon the price to be paid for his\nshares, payment therefor shall be made within sixty days after the\nmaking of such offer or the consummation of the proposed corporate\naction, whichever is later, upon the surrender of the certificates for\nany such shares represented by certificates.\n  (h) The following procedure shall apply if the corporation fails to\nmake such offer within such period of fifteen days, or if it makes the\noffer and any dissenting shareholder or shareholders fail to agree with\nit within the period of thirty days thereafter upon the price to be paid\nfor their shares:\n  (1) The corporation shall, within twenty days after the expiration of\nwhichever is applicable of the two periods last mentioned, institute a\nspecial proceeding in the supreme court in the judicial district in\nwhich the office of the corporation is located to determine the rights\nof dissenting shareholders and to fix the fair value of their shares.\nIf, in the case of merger or consolidation, the surviving or new\ncorporation is a foreign corporation without an office in this state,\nsuch proceeding shall be brought in the county where the office of the\ndomestic corporation, whose shares are to be valued, was located.\n  (2) If the corporation fails to institute such proceeding within such\nperiod of twenty days, any dissenting shareholder may institute such\nproceeding for the same purpose not later than thirty days after the\nexpiration of such twenty day period. If such proceeding is not\ninstituted within such thirty day period, all dissenter's rights shall\nbe lost unless the supreme court, for good cause shown, shall otherwise\ndirect.\n  (3) All dissenting shareholders, excepting those who, as provided in\nparagraph (g), have agreed with the corporation upon the price to be\npaid for their shares, shall be made parties to such proceeding, which\nshall have the effect of an action quasi in rem against their shares.\nThe corporation shall serve a copy of the petition in such proceeding\nupon each dissenting shareholder who is a resident of this state in the\nmanner provided by law for the service of a summons, and upon each\nnonresident dissenting shareholder either by registered mail and\npublication, or in such other manner as is permitted by law. The\njurisdiction of the court shall be plenary and exclusive.\n  (4) The court shall determine whether each dissenting shareholder, as\nto whom the corporation requests the court to make such determination,\nis entitled to receive payment for his shares. If the corporation does\nnot request any such determination or if the court finds that any\ndissenting shareholder is so entitled, it shall proceed to fix the value\nof the shares, which, for the purposes of this section, shall be the\nfair value as of the close of business on the day prior to the\nshareholders' authorization date. In fixing the fair value of the\nshares, the court shall consider the nature of the transaction giving\nrise to the shareholder's right to receive payment for shares and its\neffects on the corporation and its shareholders, the concepts and\nmethods then customary in the relevant securities and financial markets\nfor determining fair value of shares of a corporation engaging in a\nsimilar transaction under comparable circumstances and all other\nrelevant factors. The court shall determine the fair value of the shares\nwithout a jury and without referral to an appraiser or referee.  Upon\napplication by the corporation or by any shareholder who is a party to\nthe proceeding, the court may, in its discretion, permit pretrial\ndisclosure, including, but not limited to, disclosure of any expert's\nreports relating to the fair value of the shares whether or not intended\nfor use at the trial in the proceeding and notwithstanding subdivision\n(d) of section 3101 of the civil practice law and rules.\n  (5) The final order in the proceeding shall be entered against the\ncorporation in favor of each dissenting shareholder who is a party to\nthe proceeding and is entitled thereto for the value of his shares so\ndetermined.\n  (6) The final order shall include an allowance for interest at such\nrate as the court finds to be equitable, from the date the corporate\naction was consummated to the date of payment. In determining the rate\nof interest, the court shall consider all relevant factors, including\nthe rate of interest which the corporation would have had to pay to\nborrow money during the pendency of the proceeding. If the court finds\nthat the refusal of any shareholder to accept the corporate offer of\npayment for his shares was arbitrary, vexatious or otherwise not in good\nfaith, no interest shall be allowed to him.\n  (7) Each party to such proceeding shall bear its own costs and\nexpenses, including the fees and expenses of its counsel and of any\nexperts employed by it. Notwithstanding the foregoing, the court may, in\nits discretion, apportion and assess all or any part of the costs,\nexpenses and fees incurred by the corporation against any or all of the\ndissenting shareholders who are parties to the proceeding, including any\nwho have withdrawn their notices of election as provided in paragraph\n(e), if the court finds that their refusal to accept the corporate offer\nwas arbitrary, vexatious or otherwise not in good faith. The court may,\nin its discretion, apportion and assess all or any part of the costs,\nexpenses and fees incurred by any or all of the dissenting shareholders\nwho are parties to the proceeding against the corporation if the court\nfinds any of the following: (A) that the fair value of the shares as\ndetermined materially exceeds the amount which the corporation offered\nto pay; (B) that no offer or required advance payment was made by the\ncorporation; (C) that the corporation failed to institute the special\nproceeding within the period specified therefor; or (D) that the action\nof the corporation in complying with its obligations as provided in this\nsection was arbitrary, vexatious or otherwise not in good faith. In\nmaking any determination as provided in clause (A), the court may\nconsider the dollar amount or the percentage, or both, by which the fair\nvalue of the shares as determined exceeds the corporate offer.\n  (8) Within sixty days after final determination of the proceeding, the\ncorporation shall pay to each dissenting shareholder the amount found to\nbe due him, upon surrender of the certificates for any such shares\nrepresented by certificates.\n  (i) Shares acquired by the corporation upon the payment of the agreed\nvalue therefor or of the amount due under the final order, as provided\nin this section, shall become treasury shares or be cancelled as\nprovided in section 515 (Reacquired shares), except that, in the case of\na merger or consolidation, they may be held and disposed of as the plan\nof merger or consolidation may otherwise provide.\n  (j) No payment shall be made to a dissenting shareholder under this\nsection at a time when the corporation is insolvent or when such payment\nwould make it insolvent. In such event, the dissenting shareholder\nshall, at his option:\n  (1) Withdraw his notice of election, which shall in such event be\ndeemed withdrawn with the written consent of the corporation; or\n  (2) Retain his status as a claimant against the corporation and, if it\nis liquidated, be subordinated to the rights of creditors of the\ncorporation, but have rights superior to the non-dissenting\nshareholders, and if it is not liquidated, retain his right to be paid\nfor his shares, which right the corporation shall be obliged to satisfy\nwhen the restrictions of this paragraph do not apply.\n  (3) The dissenting shareholder shall exercise such option under\nsubparagraph (1) or (2) by written notice filed with the corporation\nwithin thirty days after the corporation has given him written notice\nthat payment for his shares cannot be made because of the restrictions\nof this paragraph. If the dissenting shareholder fails to exercise such\noption as provided, the corporation shall exercise the option by written\nnotice given to him within twenty days after the expiration of such\nperiod of thirty days.\n  (k) The enforcement by a shareholder of his right to receive payment\nfor his shares in the manner provided herein shall exclude the\nenforcement by such shareholder of any other right to which he might\notherwise be entitled by virtue of share ownership, except as provided\nin paragraph (e), and except that this section shall not exclude the\nright of such shareholder to bring or maintain an appropriate action to\nobtain relief on the ground that such corporate action will be or is\nunlawful or fraudulent as to him.\n  (l) Except as otherwise expressly provided in this section, any notice\nto be given by a corporation to a shareholder under this section shall\nbe given in the manner provided in section 605 (Notice of meetings of\nshareholders).\n  (m) This section shall not apply to foreign corporations except as\nprovided in subparagraph (e) (2) of section 907 (Merger or consolidation\nof domestic and foreign corporations).\n