§ 7-1.2-1701. Close corporations. (a) Provisions of the articles of incorporation or bylaws of a corporation organized under this chapter, or provisions of an agreement relating to a corporation, which would otherwise be invalid because they:

(1) Restrict, or assign to one or more shareholders or other individuals, any or all of the powers normally vested in the board of directors or provide that there is no board of directors; or

(2) Grant the right to one or more shareholders to dissolve the corporation at will or on the occurrence of a specified contingency; or

(3) Impose too great a restraint on the transfer of shares of the corporation; are nevertheless valid if the provisions have been approved by all the shareholders of the corporation and if the corporation's original or amended articles of incorporation contain a heading immediately after the name of the corporation stating that it is a close corporation pursuant to § 7-1.2-1701. This subsection does not invalidate any provision in articles of incorporation, bylaws, or agreements that would otherwise be valid.

(b) The provisions of § 7-1.2-709 limiting the duration of a voting trust or shareholders' agreement to ten (10) years is not applicable to a close corporation that complies with subsection (a). If close corporation status is terminated pursuant to subsection (d), the effective term of a voting trust or shareholders' agreement is ten (10) years from the termination or the term provided therein, whichever is shorter.

(c) The effect of any provision authorized by subsection (a)(1) is to relieve the directors and to impose on the individual or individuals undertaking to exercise responsibility the liability for managerial acts or omissions that would otherwise be imposed on directors to the extent that and so long as the discretion or powers of the board in its management of corporate affairs is controlled by any such provision. Action which is valid pursuant to subsection (a)(1) is deemed to be action by the board of directors for purposes of compliance with any provision of this chapter providing for action by the board of directors.

(d) If a close corporation's original or amended articles of incorporation so provide, the corporation need not hold an annual meeting of shareholders unless one or more shareholders deliver written notice to the corporation requesting a meeting at least thirty (30) days before the meeting date stated or fixed in accordance with the bylaws of the corporation.

(e)(1) The articles of incorporation must be amended to terminate close corporation status pursuant to this section if:

(i) All of the shareholders, or such lessor number as may be specified in the articles of incorporation, the bylaws, or an agreement relating to the corporation, approve the termination; or

(ii) There are more than thirty (30) shareholders of record and any shareholder, after thirty (30) days' notice to the corporation of his or her intention to do so during which time the number is not reduced to thirty (30) or less, demands termination; or

(iii) Any individual who acquires of record shares of the corporation without notice or knowledge of its close corporation status demands termination; provided, that notice shall be conclusively presumed if certificates representing the shares so acquired state on their face, under the name of the corporation, that it is a close corporation pursuant to this section.

(2) If the directors and shareholders fail to effect the amendment promptly, the superior court shall have jurisdiction to enter whatever order is necessary to effect the amendment. The termination shall not affect the validity of any provision relating to the corporation or its management which would be valid, notwithstanding the provisions of this section.

History of Section. (P.L. 2004, ch. 216, § 2; P.L. 2004, ch. 274, § 2; P.L. 2005, ch. 120, § 1; P.L. 2005, ch. 130, § 1.)