Section 10A-30-2.05

Issuance or transfer of shares of a close corporation in breach of qualifying conditions; applicable to corporations formed as close corporations or electing close corporation status prior to January 1, 1995.

(a) If shares of a close corporation are issued or transferred to any person who is not entitled under any provision of the certificate of formation permitted by Section 10A-30-2.02 to be a holder of record of shares of the corporation, and if the certificate for shares conspicuously notes the qualifications of the persons entitled to be holders of record thereof, such person is conclusively presumed to have notice of the fact of his or her ineligibility to be a shareholder.

(b) If a certificate for shares of any close corporation conspicuously notes the fact of a restriction on transfer of shares of the corporation and the restriction is one which is permitted by former Section 10-2A-41 or any successor statute, including Section 10A-2-6.27, the transferee of the shares is conclusively presumed to have notice of the fact that he or she has acquired shares in violation of the restriction, if such acquisition violates the restriction.

(c) Whenever any person to whom shares of a close corporation have been issued or transferred has, or is conclusively presumed under this section to have notice either that he or she is a person not eligible to be a holder of shares of the corporation, or that the transfer of shares is in violation of a restriction on transfer of shares, the corporation may, at its option, refuse to register transfer of the shares into the name of the transferee in addition to any remedies which may be available under former Section 10-2A-41 or any successor statute, including Section 10A-2-6.27 or otherwise.

(d) The provisions of subsection (c) shall not be applicable if the transfer of shares even though otherwise contrary to subsections (a) or (b), has been consented to by all the shareholders of the close corporation, or if the close corporation has amended its certificate of formation in accordance with Section 10A-30-2.04.

(e) The term "transfer," as used in this section, is not limited to a transfer for value.

(f) The provisions of this section do not in any way impair any rights of a transferee regarding any right to rescind the transaction or to recover under any applicable warranty express or implied.

(Acts 1980, No. 80-633, p. 1094, §166; §10-2A-305; amended and renumbered by Act 2009-513, p. 967, §374.)