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| Home > Statutes > Usa Arizona |
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USA Statutes : arizona
Title : Corporations and Associations
Chapter : MISCELLANEOUS PROVISIONS AND CORPORATIONS
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10-1801 Law applicable to close corporations
Close corporations organized pursuant to this article are subject to the provisions
of chapters 1 through 17 of this title except insofar as this article modifies or differs
from such provisions, in which case this article prevails. This article shall be
applicable to all close corporations except insofar as this article otherwise
provides. This article shall be construed to simplify the management, structure and
operations of close corporations.
10-1802 Definitions
In this article, unless the context otherwise requires:
1. "Capital units" means the proportions of the proprietary interest in the
corporation owned by the investors.
2. "Commission" means the ARIZONA corporation commission.
3. "Corporation" or "close corporation" means a corporation for profit organized
pursuant to the provisions of this article.
4. "Good faith" or "in good faith" means an act or thing done when it is in fact
done honestly, whether it be done negligently or not.
5. "Investor" means one who is the owner of capital units in a close corporation.
6. "Manager" means the person or persons named in the articles of incorporation
either originally or by amendment thereto in the capacity of manager or assistant manager
and does not include any person who is not so named.
10-1803 Mandatory provisions of articles of incorporation
A. The articles of incorporation of a close corporation shall set forth:
1. The name of the corporation which shall contain the words "ARIZONA close
corporation" or an abbreviation therefor.
2. The name and address of the manager or managers of the corporation.
3. The names, addresses and amount of initial contribution of capital units of each
of the original investors. The number of original investors shall not exceed ten.
4. The aggregate amount in dollars of the initial capital units to be paid to the
corporation.
5. The name, address and signature of the corporation's initial statutory agent.
B. It shall not be necessary to set forth in the articles of incorporation any
corporate powers or any corporate purposes.
10-1804 Optional provisions of articles of incorporation
The articles of incorporation of a close corporation may set forth any of the
following:
1. The period of duration, if less than perpetual.
2. Any restrictions on the authority of the manager or managers of the close
corporation.
3. Any reservations of authority to the investors.
4. Any restriction on the power of any investor to sell, to transfer or to create a
security interest in his capital units. No restriction on the power to sell, transfer or
create a security interest shall be binding except as to persons who have actual
knowledge thereof unless such restriction is set forth in the articles of incorporation.
5. Any restriction on the subsequent issuance of additional capital units.
6. If any preemptive right is to be granted to investors, the provisions therefor.
7. Whether the corporation will have the power to acquire its capital units and if
so any restrictions or limitations thereon. If no power to acquire its capital units is
set forth in the articles of incorporation, the corporation may not acquire any of its
outstanding capital units.
8. Any provisions which provide for arbitration or other non-judicial procedure
seeking resolution of any dispute as provided in section 10-1806.
9. Any provision for replacement or succession of a manager inconsistent with
section 10-1805, subsection D.
10. Any provision which either relieves the manager entirely of the obligation to
make accountings to investors or which modifies the period or form of such accounting in
a manner inconsistent with section 10-1805, subsection E.
11. Any provision for annual or other periodic meetings of investors. If no such
provision is set forth in the articles of incorporation, there shall be no requirement
for meetings for investors.
12. Any requirement for bond or other security to be given to the corporation by a
manager to secure the faithful performance of his duties.
13. Any restrictions upon competition by investors directly or indirectly with the
business of the corporation.
14. Any provision for delegation of his authority by a manager.
15. Any provision for a dissolution option pursuant to section 10-1807.
16. Any provision for varying relationships among investors as to relative rights in
capital units.
17. Any other provisions which are consistent with law and which the incorporators
elect to set forth.
10-1805 Managers
A. All managers named in the articles of incorporation shall be natural
persons. It is the purpose of this article that the corporation be operated on a
day-to-day basis by one manager, by managers having divided functions or by assistant
managers who can serve either as alternates to the manager or assume some portion of
managerial responsibility. As among the corporation, its investors and any manager,
there shall be no limitations on the authority of a manager unless specifically limited
by provisions of the articles of incorporation, the written employment contract of such
manager or the records of the corporation evidencing the acts of the investors. Any
person other than a manager or investor who deals in good faith with the corporation is
not subject to any limitation on the authority of any manager, even though such manager's
authority is expressly limited in the articles of incorporation.
B. No manager may delegate any of his authority to any other agent, employee or
representative of a corporation unless authority to do so is contained in the articles of
incorporation or is granted by act of the investors.
C. Any manager shall have the same rights, duties, obligations and privileges as a
person who is both a director and officer of a corporation for profit under the
provisions of chapters 1 through 17 of this title and the other articles of this chapter,
except as specifically modified in this article.
D. Any manager may be replaced or succeeded by a new manager at any time by a
majority of the voting power of the investors, unless otherwise provided by the articles
of incorporation. Such replacement shall be effective when a certificate of change of
manager, sworn under oath by an investor, is filed with the commission stating the name
of the replaced manager and the name and address of the new manager and that such new
manager was elected by the required vote.
E. Unless the articles of incorporation or vote of the investors provide otherwise,
a manager shall mail to each investor an annual accounting which complies with section
10-1622. Such annual accounting shall be mailed or delivered to the investors within
thirty days after the date filing is required with the commission by section
10-1622. Such annual accounting shall be acknowledged by the manager or certified by an
independent public accountant.
10-1806 Settlement of disputes; arbitration
The articles of incorporation may provide for arbitration of any deadlock or dispute
involving the internal affairs of the corporation. To the extent the articles of
incorporation do not provide to the contrary, such arbitration shall be governed by the
provisions of title 12, chapter 9, article 1. Unless otherwise provided in the articles
of incorporation, if the arbitrators determine that such deadlock or dispute either
impairs or threatens to impair the value of the assets or continued conduct of the
business of the corporation, then the arbitrators may appoint a conservator or interim
manager to preserve the business and assets of the corporation or to continue the
operation of the business of the corporation, or both, during the pendency of such
arbitration proceedings. If such arbitrators appoint a conservator or interim manager,
the arbitrators may suspend, revoke or nullify the authority of any existing manager or
managers. The articles of incorporation may also provide that the arbitrators may
suspend, revoke or nullify the employment or any employment contract of any existing
manager or managers without payment of compensation and without liability for damages or
breach of contract. Unless provided otherwise in the articles of incorporation, the
arbitrators may define the authority and set the compensation of the conservator or
interim manager, and shall immediately file a certificate of the appointment of such
conservator or interim manager with the commission. Such arbitration proceedings shall
not supersede the power of the superior court of ARIZONA to appoint an interim manager
under section 10-1814. A court appointed interim manager shall replace any conservator or
interim manager appointed under the provisions of this section.
10-1807 Option to dissolve
A. The articles of incorporation of any corporation may include a provision
granting to any investor or investors an option to have the corporation dissolved at will
or upon the performance or occurrence of any specified event or contingency. Whenever
any such option to dissolve is exercised, the investor or investors exercising such
option shall give written notice thereof to all other investors. After the expiration of
thirty days following the mailing of such notice, the dissolution of the corporation
shall proceed as if the required vote power had consented to the dissolution of the
corporation as provided by section 10-1402.
B. If the articles of incorporation as originally filed do not contain a provision
authorized by subsection A of this section, the articles of incorporation may be amended
to include such provision if adopted by the affirmative vote of all investors. If the
articles of incorporation as originally filed contain a provision authorized by
subsection A of this section, such provision may be amended only by the affirmative vote
of all investors.
C. Sections 10-1401, 10-1402 and 10-1801 shall be applicable to voluntary
dissolution notwithstanding the reference in subsection A of this section to section
10-1402.
10-1808 Purposes
Close corporations may be organized under this article for any lawful purpose or
purposes except for those purposes set forth in titles 6, 20 or 40.
10-1809 Capital units, transfers and encumbrances
A. Until a statement substantially in the form set forth in subsection B of this
section has been filed with the commission, any transfer, hypothecation, other voluntary
encumbrance or security interest in or of any capital unit or units shall be void as to
creditors and subsequent purchasers for valuable consideration without notice.
B. The statement of transfer, hypothecation or other voluntary encumbrance or
security interest in or of any capital unit or units in a close corporation shall be
acknowledged and be substantially in one of the following forms:
1. Transfer:
On the ___________________ day of _______________, _____________, the undersigned
(name of transferor) transferred to (name of transferee) , whose address is (address
of transferee) (all or a stated percentage) of the undersigned's interest in the
capital units of (name of corporation) , an ARIZONA close corporation.
(signature of transferor)
acknowledgment
2. Hypothecation, other voluntary encumbrance or security interest:
On the __________ day of _______________, ___________, the undersigned (name of
debtor) hypothecated and voluntarily encumbered to (name of creditor) (all or a
stated percentage) of the undersigned's interest in the capital units of (name of
corporation) , an ARIZONA close corporation.
(signature of debtor)
acknowledgment
C. Sections 47-8101 through 47-8407 and title 47, chapter 9, articles 3, 4 and 5 do
not apply to any hypothecation, other voluntary encumbrance or any creation of a security
interest in or of capital units of a close corporation. Title 47, chapter 9, article 6
applies to defaults and the rights and remedies for the enforcement of defaults.
10-1810 Definition of relative rights of capital units
"Relative rights of capital units" means all the rights, privileges, obligations and
duties of the capital units and may include, but are not limited to, disproportionate
variations of the following:
1. Participation in dividends or distributions from operating income.
2. Participation in dividends or distributions from income other than operating
income.
3. Participation in distributions of the proceeds of a sale of all or substantially
all of the assets of the corporation with further disproportionate variation depending
upon the degree of gain or loss.
4. Participation in distributions upon liquidation or dissolution.
5. Voting rights.
6. Restrictions or limitations on transfer.
7. The obligation to perform services or provide goods or other property to the
corporation.
8. The obligation to devote time and energies which are collateral to corporate
purposes.
9. Assessments, if any.
10-1811 Changes in investor relationships
Any redemption, termination or cancellation of capital units, acquisition of capital
units by the corporation, issuance of additional units or change in the relative rights
of capital units other than transfers or encumbrances provided for in section 10-1809
shall be effective only upon an amendment of the articles of incorporation. The
unanimous vote of all outstanding capital units shall be required to amend the articles
of incorporation to create or to change the relative rights in capital units.
10-1812 Variable relative rights
The articles of incorporation may provide for varying relationships among investors
as to relative rights in capital units. It is not necessary that each close corporation
provide in its articles of incorporation for variable relative rights of capital units as
enumerated in this section. Only those variable relative rights of capital units set
forth in the articles of incorporation shall apply to the particular close
corporation. When no provision is made in the articles of incorporation concerning a
particular relative right of capital units, then that particular relative right of
capital units shall be proportionate to the dollar amount of the capital units.
10-1813 Limitation of liability
The investors shall not be liable for the debts, obligations or liabilities of the
close corporation.
10-1814 Appointment of conservator
A. The superior court in the county in which the known place of business or
statutory agent of the corporation is situated, may in an action by any investor, appoint
a conservator or interim manager of the corporation if the court finds that a deadlock or
dispute involving the internal affairs of the corporation impairs or threatens to impair
the value of the assets or the continued conduct of the business of the
corporation. Upon or subsequent to appointing such a conservator or interim manager, the
court may enter orders which, despite any contract or provision of the articles of
incorporation to the contrary:
1. Suspend, revoke or nullify the authority, in whole or in part, of any existing
manager or managers or any conservator or interim manager appointed pursuant to section
10-1806.
2. Define the authority of such conservator or interim manager.
3. Set the compensation of such conservator or interim manager to be paid by the
corporation.
4. Resolve, partially resolve or aid in the resolution of any such deadlock or
dispute.
B. When any order or appointment is issued pursuant to subsection A of this
section, the clerk of the court shall immediately supply a copy thereof to the
commission.
10-1815 Involuntary dissolution or liquidation pursuant to court order
The superior court shall have full power to liquidate the assets and business of a
close corporation:
1. In an action filed by an investor when the court finds:
(a) That a deadlock or dispute involving the internal affairs of the corporation,
continues to impair or threatens to impair the value of the assets or the continued
conduct of the business of the corporation, notwithstanding bona fide attempts to utilize
the arbitration provisions in the articles of incorporation if available and the
provisions of section 10-1814.
(b) That a deadlock or dispute involving the internal affairs of the corporation,
impairs or threatens to impair the value of the assets or the continued conduct of the
business of the corporation and no provision is contained in the articles of
incorporation for arbitration of such disputes and that it would be useless effort to
invoke the provisions of section 10-1814.
(c) That the investors are so divided respecting the management of the business and
affairs of the corporation that either the corporation is suffering or will suffer
irreparable injury, or the business and affairs of the corporation can no longer be
conducted to the advantage of the investors generally, and the provisions of sections
10-1806 and 10-1814 are inapplicable.
(d) That the corporation has abandoned its business and has failed within a
reasonable period of time to take steps to dissolve and liquidate its affairs and
distribute its assets.
2. In an action by a creditor of the corporation in the manner provided by section
10-1430, subsection B.
3. In an action filed by the attorney general in the manner provided by section
10-1430, subsection A.
10-1816 Court relief other than dissolution, liquidation or appointment of conservator
A. The superior court in an action filed either by an investor or by a creditor
seeking relief under section 10-1815 shall have full power to make any such order or
grant any such relief other than dissolution or liquidation as in its discretion it may
deem appropriate including but not limited to:
1. Canceling, altering or amending any provision contained in the articles of
incorporation of such close corporation.
2. Directing, prohibiting or enjoining any act of the corporation or other persons
who are parties to the court action.
3. Providing for the purchase by the corporation or by other investors at their
fair market value of the capital units or claims of the person bringing such action.
B. Relief under this section may be granted even though the court does not find any
of the elements prescribed for relief under section 10-1815.
10-1817 Merger of close corporations
A. Any two or more ARIZONA close corporations may merge. The plan of merger shall
contain the requirements set forth in section 10-1101, except that the reference to
"shares" shall be deemed a reference to capital units. Such plan of merger shall be
signed by all of the investors of all of the close corporations being merged, and may be
signed in counterparts. After all required signatures have been obtained, such plan of
merger shall be filed with the commission under the procedure provided under section
10-1105.
B. An ARIZONA close corporation may not merge with any corporation other than
another ARIZONA close corporation.
10-1818 Conversion of corporate status
A. A close corporation may convert its status to that of a corporation organized
pursuant to chapter 2, article 1 of this title by amending its articles of incorporation
to delete therefrom all reference to the term "close corporation" including its use in
the name of the corporation, and to comply with section 10-202, subsection A. Such an
amendment shall be adopted by a two-thirds vote of the voting rights of the capital units
unless the articles of incorporation require a greater vote to convert. The articles of
incorporation as amended shall also provide for the cancellation of capital units and the
basis on which shares will be issued in lieu thereof.
B. The conversion of a close corporation is effected if there has been substantial
compliance in good faith with the requirements of subsection A of this section.
C. A corporation organized pursuant to chapters 1 through 17 of this title having
ten or fewer shareholders may convert its status to that of a close corporation and be
subject to the provisions of this article by amending its articles of incorporation to
comply with section 10-1803. A resolution so amending its articles of incorporation
shall be adopted by the unanimous vote of all shareholders whether otherwise entitled to
vote or not. The resolution amending the articles of incorporation shall provide for the
cancellation of all issued and outstanding shares of stock and state the relative rights
of capital units.
D. No conversion pursuant to this section shall be deemed a termination or
dissolution of the corporate entity or a sale or exchange of the shares of capital units.
10-1841 Claim for unclaimed shares or dividends
A. A person who is the owner, or the heir, devisee, successor or assign of the
owner, of monies or securities acquired by the state pursuant to article XI, section 8,
Constitution of ARIZONA, as unclaimed shares or dividends of a corporation, may file a
verified claim for them with the department of administration alleging the nature of the
claim and praying that the monies or shares be paid or delivered to him.
B. Claims for monies or securities acquired before June 16, 1941 shall be filed
within ten years after that date. Claims for monies or securities thereafter acquired
shall be filed within twenty years after the date of acquisition.
C. A claim filed under the provisions of this section shall be accompanied by the
certificate of stock upon which it is based, together with a statement signed and sworn
to by the person having lawful custody of the books of the corporation, stating that the
claimant, or his predecessor in interest, appears on the books as the rightful owner of
the stock. If the claimant is the heir, devisee, successor or assign of the owner shown
on the books of the corporation, he shall also make satisfactory proof of his claim of
ownership.
10-1842 Payment of claim
A. If the department of administration is satisfied that the person making a claim,
as provided by section 10-1841, is entitled to the monies or securities claimed, the
director of the department of administration shall approve the claim and order the
department of revenue to deliver the securities to the claimant or draw a warrant for
payment to the claimant of the money claimed, as the case may be.
B. All monies acquired by the state as unclaimed shares or dividends of a
corporation shall be deposited, pursuant to sections 35-146 and 35-147, into a clearing
account from which payment of claims for the money may be made. The monies shall remain
in the clearing account until the expiration of the period in which claims thereon may be
filed, as prescribed by section 10-1841, and shall, during such period, be available for
payment of such claims without further appropriation. On expiration of the claim period,
the monies shall be credited to the permanent state school fund.
10-1843 Court action upon refusal to pay claim
In the event the director of the department of administration refuses to approve any
claim presented as provided in section 10-1841, the claimant may file a complaint in the
superior court in Maricopa county, and shall serve a copy thereof upon the attorney
general, alleging the nature of his claim and praying that the money or securities be
paid or delivered to him. If the court finds for the plaintiff, judgment shall be
entered accordingly, and the court shall certify the judgment to the director of the
department of administration, who shall thereupon issue the order or draw the warrant as
provided in section 10-1842. Appeal may be taken from the judgment of the superior court
as in other cases.
10-1871 Definitions
In this article, unless the context otherwise requires:
1. "Business trust" means an unincorporated association or trust of the type which
at common law was known as a "business trust" or "Massachusetts trust", created by an
instrument under which property is held and managed by trustees for the benefit and
profit of such persons as are or may become the holders of transferable certificates
evidencing beneficial interests in the trust estate.
10-1872 Classifications of business trusts
Business trusts shall be either domestic or foreign. A domestic business trust is a
business trust organized under the laws of this state. A foreign business trust includes
every other business trust.
10-1873 Form of association authorized
A business trust is permitted as a recognized form of association for the conduct of
business within this state.
10-1874 Required delivery to commission; certified copy of trust instrument
A. Any business trust desiring to transact business in this state shall deliver to
the commission:
1. An executed copy of the articles, declaration of trust or trust agreement by
which the trust was created and all amendments thereto, or a true copy thereof certified
to be such by a trustee of the trust before an official authorized to administer oaths or
by a public official of another state, territory or country in whose office an executed
copy thereof is on file. Such true copy shall be certified within sixty days before it
is delivered to the commission.
2. A verified list of the names, residences and post office addresses of its
trustees.
3. An affidavit setting forth its assumed business name, if any.
4. If a domestic business trust, the name of its statutory agent appointed as
provided for domestic corporations in section 10-501. A foreign business trust shall
deliver to the commission, as provided for in section 10-501, the location of its
statutory office, the name of its statutory agent and its irrevocable consent to service
of process, duly signed by a sufficient number of its trustees to bind the business trust
by such irrevocable consent, or accompanied by a duly certified copy of an order or
resolution of its trustees authorizing the execution and delivery of such irrevocable
consent.
B. The business trust shall file a copy of its articles, declaration of trust or
trust agreement by which it was created, certified by the corporation commission, in the
office of the county recorder in the county where the principal place of business of the
trust is located, where such certified copy shall be indexed and recorded.
C. When a business trust has complied with the delivery requirements as provided in
subsections A and B of this section, the commission shall, after determining that the
requirements of chapters 1 through 17 of this title, this chapter and other provisions of
law have been satisfied, file such delivered documents of foreign and domestic business
trusts and such business trusts may thereupon commence business.
10-1876 Amendments to trust instrument; filing; recordation
The articles, declaration of trust or trust agreement by which any business trust
was created may be amended in the manner specified therein or in such manner as is valid
under the law applicable to such business trust, provided that no such amendment shall be
legally effective in this state until a copy thereof, certified as provided in section
10-1874, subsection A, paragraph 1, has been filed with the corporation commission and a
copy thereof, certified by the corporation commission, has been filed in the office of
the county recorder in the county where the principal place of business of the trust is
located, where such certified copy shall be indexed and recorded.
10-1877 Powers; construction of instrument; binding effect of terms and conditions
A. Subject to the provisions of section 10-1878, the powers and authority of any
business trust authorized under this article to transact business in this state shall be
as specified in the instrument by which it was created, as amended, which instrument
shall be construed and interpreted in accordance with the law applicable to such business
trust, provided that no business trust shall engage in any activity in this state which
would violate the public policy of this state or engage in any business in this state
which private corporations for profit organized under the laws of this state may not
legally transact.
B. Subject to the limitations on power and authority as provided in subsection A of
this section, any person dealing with a business trust authorized under this article to
transact business in this state shall be bound by the terms and conditions of the
instrument by which the business trust was created and by any amendments thereto which
have been filed and recorded in compliance with section 10-1876.
10-1878 Taxation
Any business trust created under this article or entering this state pursuant to
this article shall pay such taxes and fees as are imposed by the laws of this state or
any political subdivision thereof on domestic and foreign corporations, respectively, on
an identical basis therewith.
10-1879 Corporation laws applicable
Any business trust shall be subject to such applicable provisions of law from time
to time in effect with respect to domestic and foreign
corporations, respectively. These shall include, without limitation, such applicable
provisions of law as relate to the issuance of securities, filing of required statements
or reports, service of process, general grants of power to act, withdrawal, right to sue
and be sued, limitation of individual liability of shareholders, and rights to acquire,
mortgage, sell, lease, operate and otherwise deal in or with real and personal property.
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