Colorado § 7-113-301 - Court action.

§ 7-113-301. Court action.

(1) If a demand for payment under section 7-113-207 remains unresolved, the corporation shall commence a proceeding within sixty 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-day period, it shall pay in cash to each shareholder the amount the shareholder demanded pursuant to section 7-113-207 plus interest.

(2) The corporation shall commence the proceeding described in subsection (1) of this section in:

(a) The district court for the county in this state in which the street address of the corporation's principal office is located;

(b) The district court for the county in which the street address of its registered agent is located if the corporation has no principal office in this state; or

(c) The district court for the city and county of Denver if the corporation has no registered agent; except that, if the corporation is a foreign corporation without a registered agent, the corporation shall commence the proceeding in the county in this state where the principal office or registered office of the domestic corporation that merged with the foreign corporation was located at the time of the merger.

(3) (a) The corporation shall:

(I) Make all shareholders whose demands remain unresolved, whether or not residents of this state, parties to the proceeding as in an action against their shares; and

(II) Serve all parties with a copy of the petition.

(b) Service on each shareholder demanding appraisal rights must be by registered or certified mail or by electronic transmission to the address stated in the shareholder's payment demand or, if no such address is stated in the payment demand, to the address shown on the corporation's current record of shareholders for the shareholder holding the shares as to which appraisal rights are demanded, or as provided by law.

(4) The jurisdiction of the court in which the proceeding is commenced under subsection (2) of this section is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them or in any amendment to the order. The shareholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings. There is no right to a jury trial.

(5) Each shareholder made a party to the proceeding commenced under subsection (2) of this section is entitled to judgment:

(a) For the amount, if any, by which the court finds the fair value of the shareholder's shares, plus interest, exceeds the amount paid by the corporation for the shares; or

(b) For the fair value, plus interest, of the shareholder's shares for which the corporation elected to withhold payment under section 7-113-206.

Source: L. 2019: Entire article R&RE, (SB 19-086), ch. 166, p. 1958, § 56, effective July 1, 2020. L. 2021: (3)(b) amended, (HB 21-1124), ch. 41, p. 171, § 27, effective April 19.

Editor's note: This section is similar to former § 7-113-301 as it existed prior to 2020.

ANNOTATION

Law reviews. For article, "Dissenter's Rights in Colorado", see 18 Colo. Law. 1101 (1989).

Annotator's note. Since § 7-113-301 is similar to § 7-4-124 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 have been included in the annotations to this section.

Interpretation of "fair value". Relying on case law interpreting "fair value" within the context of dissenters' rights statutes in other states, a determination of fair value is based on all relevant value factors considering the particular circumstances of the corporation involved. Such a determination is not premised upon any precise mathematical formula. Pioneer Bancorporation, Inc. v. Waters, 765 P.2d 597 (Colo. App. 1988).

"Shall" as used in former subsection (8)(f) (now subsection (1)) is mandatory. Egret Energy Corp. v. Peierls, 796 P.2d 25 (Colo. App. 1990).

Dissenter entitled to amount demanded with interest. Egret Energy Corp. v. Peierls, 796 P.2d 25 (Colo. App. 1990).

Minority discount should not, as a matter of law, be applied in valuing dissenting shareholder's stock. Pueblo Bancorporation v. Lindoe, Inc., 37 P.3d 492 (Colo. App. 2001), aff'd on other grounds, 63 P.3d 353 (Colo. 2003).

Marketability discount should not be applied absent extraordinary circumstances in valuing dissenting shareholder's stock; the conversion to an S corporation by merger is not such an extraordinary circumstance. Pueblo Bancorporation v. Lindoe, Inc., 37 P.3d 492 (Colo. App. 2001) (declining to follow M Life Ins. Co. v. Sapers & Wallack Ins. Agency, Inc., 40 P.3d 6 (Colo. App. 2001)) (supreme court in Pueblo Bancorporation v. Lindoe, Inc., 63 P.3d 353 (Colo. 2003), annotated below, disagreed with the reasoning of the court of appeals).

Marketability discount should not be applied; fair value means neither fair market value nor that value determined on a case-by-case approach, but rather the shareholder's proportionate ownership interest in the value of the corporation. Pueblo Bancorporation v. Lindoe, Inc., 63 P.3d 353 (Colo. 2003) (disagreeing with the reasoning of the court of appeals in Pueblo Bancorporation v. Lindoe, Inc., annotated above).

Interest on the judgment that is available does not include interest under § 5-12-102 (1)(a) in an amount that recognizes the gain or benefit realized by the person wrongfully withholding such money. Pueblo Bancorporation v. Lindoe, Inc., 37 P.3d 492 (Colo. App. 2001), aff'd on other grounds, 63 P.3d 353 (Colo. 2003).