Colorado § 7-112-102 - Sale of property requiring shareholder approval.

§ 7-112-102. Sale of property requiring shareholder approval.

(1) A corporation may sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property, with or without its good will, other than in the usual and regular course of business on the terms and conditions and for the consideration determined by the board of directors, if the board of directors proposes and the shareholders approve the transaction. A sale, lease, exchange, or other disposition of all, or substantially all, of the property of a corporation, with or without its good will, in connection with its dissolution, other than in the usual and regular course of business, and other than pursuant to a court order, shall be subject to the requirements of this section; but a sale, lease, exchange, or other disposition of all, or substantially all, of the property of a corporation, with or without its good will, pursuant to a court order shall not be subject to the requirements of this section.

(2) If a corporation is entitled to vote or otherwise consent, other than in the usual and regular course of its business, with respect to the sale, lease, exchange, or other disposition of all, or substantially all, of the property with or without the good will of another entity which it controls, and if the shares or other interests held by the corporation in such other entity constitute all, or substantially all, of the property of the corporation, then the corporation shall consent to such transaction only if the board of directors proposes and the shareholders approve the giving of consent.

(3) For a transaction described in subsection (1) of this section or a consent described in subsection (2) of this section to be approved by the shareholders:

(a) The board of directors shall recommend the transaction or the consent 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 transaction; and

(b) The shareholders entitled to vote on the transaction or the consent shall approve the transaction or the consent as provided in subsection (6) of this section.

(4) The board of directors may condition the effectiveness of the transaction or the consent on any basis.

(5) The corporation shall give notice, in accordance with section 7-107-105, to each shareholder entitled to vote on the transaction described in subsection (1) of this section or the consent described in subsection (2) of this section, of the shareholders' meeting at which the transaction or the consent will be voted upon. The notice shall:

(a) State that the purpose, or one of the purposes, of the meeting is to consider:

(I) In the case of action pursuant to subsection (1) of this section, the sale, lease, exchange, or other disposition of all, or substantially all, of the property of the corporation; or

(II) In the case of action pursuant to subsection (2) of this section, the corporation's consent to the sale, lease, exchange, or other disposition of all, or substantially all, of the property of another entity (which entity shall be identified in the notice), shares or other interests of which are held by the corporation and constitute all, or substantially all, of the property of the corporation; and

(b) Contain or be accompanied by a description of the transaction, in the case of action pursuant to subsection (1) of this section, or by a description of the transaction underlying the consent, in the case of action pursuant to subsection (2) of this section.

(6) Unless articles 101 to 117 of this title (including the provisions of section 7-117-101 (9)), the articles of incorporation, bylaws adopted by the shareholders, or the board of directors acting pursuant to subsection (4) of this section require a greater vote, the transaction described in subsection (1) of this section or the consent described in subsection (2) of this section shall be approved by each voting group entitled to vote separately on the transaction or consent by a majority of all the votes entitled to be cast on the transaction or the consent by that voting group.

(7) After a transaction described in subsection (1) of this section or a consent described in subsection (2) of this section is authorized, the transaction may be abandoned or the consent withheld or revoked, subject to any contractual rights or other limitations on such abandonment, withholding, or revocation, without further shareholder action.

(8) A transaction that constitutes a distribution is governed by section 7-106-401 and not by this section.

Source: L. 93: Entire article added, p. 811, § 1, effective July 1, 1994.

ANNOTATION

Law reviews. For note, "Consolidations, Mergers, Sales of Assets Under the New Colorado Corporation Act", see 31 Rocky Mt. L. Rev. 66 (1958). For comment on shareholder approval of substantial asset sales in the multisubsidiary context, see 45 U. Colo. L. Rev. 339 (1974). For article, "Conflict of Interest Transactions: Fiduciary Duties of Corporate Directors Who Are Also Controlling Shareholders", see 57 Den. L.J. 609 (1980). For article, "Signatures on Documents Affecting Title to Colorado Real Property — Part III", see 12 Colo. Law. 447 (1983). For article, "The 1985 Proposed Revisions to the Colorado Corporation Code", see 14 Colo. Law. 34 (1985). For article, "Continuing Liability for Unpaid Corporate Debts After a Corporation Ceases Business", see 14 Colo. Law 40 (1985). For article, "1985 Amendments to the Colorado Corporation Code", see 14 Colo. Law. 2173 (1985). For article, "Sale of Substantially All Corporate Assets", see 16 Colo. Law. 455 (1987). For article, "Dissenter's Rights in Colorado", see 18 Colo. Law. 1101 (1989).

Annotator's note. Since § 7-112-102 is similar to § 7-5-112 as it existed prior to the 1993 recodification of the "Colorado Business Corporation Act", articles 101 to 117 of title 7, cases construing that provision and its predecessors have been included in the annotations to this section.

This section prescribes one of those instances where it is mandatory that all stockholders vote despite restrictions contained in the articles of incorporation. Hampton v. Tri-State Fin. Corp., 30 Colo. App. 420, 495 P.2d 566 (1972).

Section held not applicable to nonprofit corporations. Morris Alpert & Sons v. Kahler, 31 Colo. App. 345, 502 P.2d 98 (1972).

To legally effect a change in the two-thirds approval requirement of an asset sale in this section, a provision must be added to the articles of incorporation. Dominick v. Marcove, 809 F. Supp. 805 (D. Colo. 1992) (decided under former § 7-5-112 as it existed prior to the 1993 recodification of the "Colorado Business Corporation Act", articles 101 to 117 of title 7).

Applied in People v. Cameron, 197 Colo. 330, 595 P.2d 677 (1979).

ARTICLE 113

Appraisal Rights

PART 1

RIGHT TO APPRAISAL AND PAYMENT FOR SHARES

7-113-101. Definitions.

7-113-102. Right to appraisal.

7-113-103. Assertion of rights by nominees and beneficial owners.

PART 2

PROCEDURE FOR EXERCISE OF APPRAISAL RIGHTS

7-113-201. Notice of appraisal rights.

7-113-202. Notice of intent to demand payment.

7-113-203. Appraisal notice and form.

7-113-204. Perfection of rights - right to withdraw.

7-113-205. Payment.

7-113-206. After-acquired shares.

7-113-207. Procedure if shareholder is dissatisfied with payment or offer.

PART 3

JUDICIAL APPRAISAL OF SHARES

7-113-301. Court action.

7-113-302. Court costs and expenses.

PART 4

OTHER REMEDIES

7-113-401. Other remedies limited.

PART 1

RIGHT TO APPRAISAL AND PAYMENT FOR SHARES