KRS 274.095: Withdrawing shareholders -- Procedure for redemption of stock --

Procedure upon death of sole shareholder -- Insolvency.

(1) The articles of incorporation may provide for the purchase or redemption of all of

the shares of any shareholder within a peri od not to exceed one (1) year after the

death or disqualification to practice the profession of such shareholder, or for the

purchase or redemption within said time of all of the shares of any shareholder

desiring to sell them, all of whom are herein somet imes called "withdrawing

shareholders" or, in default of such provisions in the articles of incorporation, the

foregoing provisions and time limitation may be included in the bylaws of a

professional service corporation, or, if no such provision and time l imitation is

made in the articles of incorporation or bylaws, they may be provided for by such

private agreement or agreements as the shareholders and corporation may enter into.

If such an article, bylaw or agreement is adopted or provided for and such st ock is

not redeemed by the corporation within said one (1) year period, then within ten

(10) days following the end of said period the president and/or secretary of the

corporation shall give notice thereof to the Secretary of State of Kentucky and, upon

receipt of such notice by the Secretary of State, the charter of the corporation shall

be immediately void.

(2) In the absence of such provisions in the articles of incorporation, bylaws or by

private agreement, a professional service corporation shall rede em the shares of a

withdrawing shareholder within ninety (90) days after the death or disqualification

of a shareholder or of the receipt by the corporation of written notice from a

shareholder that he desires to sell or transfer all his shares of stock in the

corporation upon terms mutually agreeable to the parties. Should a redemption not

occur within the time limit provided herein, the shares shall immediately be

cancelled on the books of the corporation and the holder of such shares shall be

reimbursed as provided in subsection (4) of this section as a general creditor of the

corporation.

(3) If the sole shareholder of a professional service corporation organized pursuant to

this chapter dies:

(a) It shall be the duty of his personal representative to so notify the Secretary of

State, whereupon the charter of such corporation shall lapse; or

(b) The administrator, executor, guardian, conservator, or receiver of the estate of

the deceased sole shareholder may amend the articles of incorporation by

signing a written consent to such amendment. Articles of amendment to be

adopted shall set forth:

1. The name of the corporation;

2. The amendments so adopted;

3. The date of adoption of the amendment by the administrator, executor,

guardian, conservator, or receiver;

4. The number of shares outstanding; and

5. The number of shares held by the administrator, executor, guardian,

conservator, or receiver.

The amendment to the articles of incorporation may allow the corporation to

continue as a professional service c orporation or may convert the corporation

to a private business corporation provided, however, that the corporation shall

not render professional services until such time as all outstanding shares are

held by qualified persons and the corporation conforms to the provisions of

this chapter; or

(c) The administrator, executor, guardian, conservator, or receiver of the estate of

the deceased shareholder shall transfer all outstanding shares of the

corporation to other qualified persons or person within the mea ning of this

chapter. The professional service corporation shall cease to render

professional services until such time as the transfer or transfers provided in

this subsection are completed.

(4) In the absence of an article, bylaw or agreement as provided for in subsection (1) of

this section, or a sale as provided for within the time stated in subsection (2) of this

section, a professional service corporation, within one hundred eighty (180) days

after the death or disqualification of a shareholder or within the same period after

receiving written notice from a shareholder that he desires the corporation to

redeem all of his stock in the corporation, shall institute an equitable action for a

determination of the fair market value of all of the shares of the corporation's

outstanding stock cancelled pursuant to subsection (2) of this section and owned by

such shareholder.

(a) The court shall designate a time for a hearing and at said hearing shall a ppoint

a disinterested appraiser to determine the fair market, pre-cancellation value of

such shares. The court shall administer an oath to the appraiser to honestly and

faithfully discharge his duties and shall fix a time and place for the appraiser

to begin hearing evidence on such fair market value. The appraiser shall have

the powers conferred upon master commissioners by KRS 31A.010 and shall

afford a reasonable opportunity to the corporation and the shareholder or

personal representative of a deceased shareholder to introduce pertinent

evidence on such fair market value. The appraiser shall conduct his hearings

as expeditiously as practicable, and upon completion of the hearing shall

report in writing to the court his determination of the fair market p re-

cancellation value of such shares and shall file with the court a written

transcript of the testimony heard by him, together with all exhibits introduced

in evidence.

(b) The corporation or any withdrawing shareholder may, within ten (10) days

after the filing of the appraiser's report, file exceptions thereto. Such

exceptions shall be heard and decided by the court upon the evidence

submitted to the appraiser as shown by the transcript. After hearing the

exceptions to the appraiser's report, or if no ex ceptions thereto have been filed

within the time hereinbefore provided for, the court shall enter final judgment

determining such fair market, pre -cancellation value of the shares of each

withdrawing shareholder and shall direct payment thereof by the corp oration

to each withdrawing shareholder and the surrender of the duly indorsed

certificate or certificates representing his shares. The court shall be

empowered to direct payment by the corporation in installments reasonably

calculated to avoid any impending corporate insolvency while reimbursing the

withdrawing shareholder in as direct a manner as may be practicable.

(5) If a professional service corporation fails to bring the above provided for action for

the redemption of its shares within the time provided, then within ten (10) days after

the end of said period, the president of the corporation, or if he be then dead, the

secretary thereof, shall so notify, in writing, the Secretary of State of Kentucky, and

upon receipt of such notice by the Secretary o f State of Kentucky, the charter of the

professional service corporation shall be void.

(6) If the obligation of the corporation to redeem any shares of its outstanding stock as

set out in subsections (1) to (5) of this section would render the corporation

insolvent and the court has deemed an installment redemption as provided in

subsection (4) of this section to be unwarranted, then without delay the corporation

shall commence to liquidate and dissolve, unless the remaining shareholders shall

have prior t hereto purchased or redeemed all of the withdrawing shareholder's

shares or satisfied such shareholder's claim against the corporation.