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| Home > Statutes > Usa Arizona |
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USA Statutes : arizona
Title : Corporations and Associations
Chapter : PROFESSIONAL CORPORATIONS
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10-2201 Definitions
In this chapter, unless the context otherwise requires:
1. "Disqualified person" means an individual or entity that is not or ceases to be
a qualified person.
2. "Foreign professional corporation" means a corporation or association for profit
incorporated for the purpose of rendering professional services under a law other than
the law of this state.
3. "License" or "licensed" means any license, authorization, certificate,
registration, certificate of registration, membership or other evidence of the
satisfaction of the requirements of this state for the practice of a professional
service.
4. "Licensing authority" means the officer, board, agency, court or other authority
in this state empowered by law to license or otherwise authorize the rendition of a
professional service.
5. "Professional corporation" or "domestic professional corporation" means a
corporation for profit that is not a foreign professional corporation and that is
incorporated under or subject to this chapter.
6. "Professional service" means a service that may be lawfully rendered only by a
person licensed or otherwise authorized by a licensing authority in this state to render
the service.
7. "Qualified person" means a person that is eligible under this chapter to be
issued shares by a professional corporation.
8. "Voting shares" means shares entitled to vote for election of directors of the
professional corporation.
10-2202 Application of ARIZONA business corporation act
Chapters 1 through 17 of this title apply to professional corporations, both
domestic and foreign, to the extent they are not inconsistent with the express provisions
of this chapter.
10-2210 Election of professional corporation status
A. One or more persons may incorporate a professional corporation by delivering to
the commission for filing a certificate of disclosure that contains the information set
forth in section 10-202, subsection D and is subject to the requirements of section
10-202, subsection F and articles of incorporation that state, with respect to the
character of its business:
1. It is a professional corporation.
2. Its purpose is to render the specified professional services.
B. A corporation incorporated under a general law of this state other than this
chapter may elect professional corporation status by amending its articles of
incorporation to comply with subsection A of this section and section 10-2215.
10-2211 Purposes
A. Except to the extent authorized by subsection B of this section or the other
provisions of this chapter, a corporation may elect professional corporation status under
section 10-2210 solely for the purpose of rendering professional services, including
services ancillary to them, and solely within a single profession.
B. A corporation may elect professional corporation status under section 10-2210
for the purpose of rendering professional services within two or more categories of
professional service, and for the purpose of engaging in any lawful business authorized
by section 10-301, unless the combination of professional purposes or of professional and
business purposes is expressly prohibited by a licensing law of this state applicable to
one or more of the professions in the combination or by a licensing authority with
jurisdiction over one or more of the professions in the combination.
10-2212 General powers
A. Except as provided in subsection B of this section, a professional corporation
has the powers enumerated in section 10-302.
B. A professional corporation may be a general partner of a partnership, a trustee
of a trust, a co-venturer of a joint venture or a manager of a limited liability company
or any other entity, only if the partnership, trust, joint venture, limited liability
company or other entity is engaged solely in rendering professional services or in
carrying on business authorized by the professional corporation's articles of
incorporation.
10-2213 Rendering professional services; applicability
A. A domestic or foreign professional corporation may render professional services
in this state only through individuals licensed in this state to render the services.
B. Subsection A of this section does not:
1. Require an individual employed by a professional corporation to be licensed to
perform services for the corporation if a license is not otherwise required or prohibit
the professional corporation from employing that individual.
2. Prohibit a licensed individual from rendering professional services in an
individual capacity although the licensed individual is a shareholder, director, officer,
employee or agent of a domestic or foreign professional corporation or any other person
or from being a shareholder, director, officer, employee or agent of more than one
domestic or foreign professional corporation or other person.
3. Prohibit an individual licensed in another state from rendering professional
services for a domestic or foreign professional corporation in this state if not
prohibited by the licensing authority.
C. Nothing contained in this chapter alters the right of persons licensed to engage
in the rendering of a professional service from rendering a professional service, and
those persons may render a professional service, in any other business form or entity,
including a corporation incorporated under a general law of this state other than this
chapter, unless the use of the form or entity is expressly prohibited by the licensing
law of this state applicable to the profession or by the licensing authority with
jurisdiction over the profession.
D. This chapter does not apply to any persons in this state who before January 1,
1996 were permitted to render personal services or professional services by means of a
corporation other than a professional corporation incorporated under chapter 3, article 1
of this title prior to January 1, 1996 or other business form or entity, or to any
corporations other than professional corporations incorporated under chapter 3, article 1
of this title prior to January 1, 1996 or other business forms or entities organized by
them unless an exempt corporation or other business form or entity elects professional
corporation status pursuant to section 10-2210.
10-2214 Prohibited activities; authorized investments
A. A professional corporation may not render any professional service or engage in
any business other than the professional service, including services ancillary to the
professional service, and the business authorized by its articles of incorporation,
except to the extent that the other service or business is incidental to or an
inconsequential portion of the authorized service or business of that corporation.
B. A professional corporation may invest its monies in or otherwise own real
estate, mortgages, stocks, bonds, partnership interests, limited liability company
memberships, securities or any other type of investment or property.
10-2215 Corporation name
A. The name of a domestic professional corporation and of a foreign professional
corporation authorized to transact business in this state, in addition to satisfying the
requirements of sections 10-401 and 10-1506, shall:
1. Contain the words "professional corporation", "professional association",
"service corporation", "limited" or "chartered" or the abbreviation "P.C.", "P.A.",
"S.C.", "Ltd." or "Chtd."
2. Not contain language stating or implying that it is incorporated for a purpose
other than that authorized by section 10-2211 and its articles of incorporation.
3. Conform with any rule adopted by the licensing authority having jurisdiction
over a professional service described in the corporation's articles of incorporation.
B. Sections 10-401 and 10-1506 do not prevent the use of a name otherwise
prohibited by those sections if it is the personal name of a shareholder or former
shareholder of the domestic or foreign professional corporation or the name of an
individual who was associated with a predecessor of the corporation.
10-2220 Issuance of shares
A. A professional corporation may issue voting shares, fractional voting shares and
rights or options to purchase voting shares only to:
1. Individuals who are licensed by law in this or another state to render a
professional service described in the corporation's articles of incorporation.
2. General partnerships, registered limited liability partnerships and other
partnerships and joint ventures, domestic or foreign, in which all of the partners are
qualified persons with respect to the professional corporation and in which at least one
partner is authorized by law in this state to render a professional service described in
the corporation's articles of incorporation.
3. Professional corporations, professional limited liability companies and other
persons, domestic or foreign, authorized by law in this state to render a professional
service described in the corporation's articles of incorporation.
4. Other persons, if after the issuance of voting shares the other persons in the
aggregate do not hold more than forty-nine per cent of the voting shares, unless a
greater or lesser percentage is prescribed by the licensing authority.
5. An employee stock ownership plan as defined in section 4975(e)(7) of the
internal revenue code of 1986, as amended, if both of the following apply:
(a) All of the voting trustees of the plan are professionals who are licensed to
provide at least one category of the professional services described in the corporation's
articles of incorporation.
(b) The ownership interests are not directly issued to persons other than the
employee stock ownership plan trust or professionals who are licensed to provide at least
one category of the professional services described in the corporation's articles of
incorporation.
B. The following are not violations of subsection A, paragraph 1 of this section:
1. Any community interest of an unlicensed spouse in the voting shares issued to a
licensed spouse in which the unlicensed spouse with a community interest in the voting
shares does not have the right to vote the shares.
2. Issuance of voting shares to a trust established for the benefit of the licensed
individual or members of the licensed individual's immediate family in which the licensed
individual has the right to vote the shares and the trust and the members of the licensed
individual's immediate family do not have the right to vote the shares.
C. Subsection B of this section does not prohibit an issuance to an unlicensed
spouse or to a trust in accordance with subsection A, paragraph 4 of this section or
section 10-2231, subsection B.
D. An issuance made in violation of subsection A of this section is void.
10-2221 Shares and professional corporation status on shares
Notwithstanding section 10-627, no statement or notice of any restrictions imposed
by this chapter on the transfer of shares of a professional corporation is required to
appear on any share certificate issued by a professional corporation or to otherwise be
provided to the shareholders of a professional corporation.
10-2222 Share transfer restriction
A. Voting shares, fractional voting shares and rights or options to purchase voting
shares of a professional corporation that are held by persons described in section
10-2220, subsection A, paragraphs 1, 2 and 3 may be transferred or pledged, whether
voluntarily, involuntarily, by operation of law or by court judgment or otherwise, only
to those persons. Voting shares, fractional voting shares and rights or options to
purchase voting shares of a professional corporation that are held by persons described
in section 10-2220, subsection A, paragraph 4 may be transferred or pledged, whether
voluntarily, involuntarily, by operation of law or by court judgment or otherwise, only
to persons qualified under section 10-2220 to be issued voting shares.
B. A transfer or pledge made in violation of subsection A of this section is void.
10-2223 Compulsory acquisition of shares after death, dissolution or disqualification of shareholder
A. Except as provided in subsection C of this section, and unless the shares are
otherwise acquired by a qualified person within the applicable time period specified in
section 10-2227, a professional corporation shall acquire the voting shares of its
shareholder within the applicable time period if any of the following occurs:
1. The shareholder dies or dissolves and any person to whom the shares are to
devolve is not a person to whom section 10-2222 permits the shares to be transferred.
2. The shareholder becomes a disqualified person.
B. The price shall be as follows:
1. If a price for the shares is fixed in accordance with the articles of
incorporation or bylaws or by private agreement, that price controls and sections
10-2224, 10-2225 and 10-2226 are inapplicable.
2. If a price is not fixed, in accordance with the articles of incorporation or
bylaws or by private agreement, the corporation shall offer to acquire the shares in
accordance with section 10-2224, and if the disqualified shareholder rejects the
corporation's purchase offer, either the shareholder or the corporation may commence a
proceeding under section 10-2225 to determine the fair value of the shares.
C. This section does not require the acquisition of shares if the disqualification
of the shareholder or the transferee lasts no more than five months from the date the
disqualification or transfer occurs.
D. This section and section 10-2224 do not prevent or relieve a professional
corporation from paying pension benefits or other deferred compensation for services
rendered to a former shareholder if otherwise permitted by law.
E. A provision for the acquisition of shares contained in a professional
corporation's articles of incorporation or bylaws or in a private agreement is
specifically enforceable.
10-2224 Acquisition procedure
A. If shares must be acquired under section 10-2223 and the price is not fixed as
described in section 10-2223, subsection B, paragraph 1, the professional corporation
shall deliver within the applicable time period specified in section 10-2227 a written
notice to the disqualified shareholder, offering to purchase the shares at a price the
corporation believes represents their fair value as of the date of death, dissolution,
disqualification or transfer. The offer notice shall be accompanied by the corporation's
balance sheet for a fiscal year ending not more than sixteen months before the effective
date of the offer notice, an income statement for that year, a statement of changes in
shareholders' equity for that year and the latest available interim financial statements,
if any.
B. The disqualified shareholder has thirty days after the effective date of the
offer notice to accept the corporation's offer or demand that the corporation commence a
proceeding under section 10-2225 to determine the fair value of the disqualified
shareholder's shares. If the disqualified shareholder accepts the offer, the corporation
shall make payment for the shares within sixty days after the effective date of the offer
notice, unless a later date is agreed on, on the disqualified shareholder's surrender of
the disqualified shareholder's shares to the corporation.
C. After the corporation makes payment for the shares, the disqualified person has
no further interest in them.
10-2225 Court action to appraise shares
A. If a disqualified shareholder does not accept the professional corporation's
offer under section 10-2224, subsection B within the thirty day period or if the
professional corporation does not make an offer pursuant to section 10-2224, subsection A
within the applicable time period, the shareholder during the following thirty day period
may deliver a written notice to the corporation demanding that it commence a proceeding
to determine the fair value of the shares. The corporation may commence a proceeding at
any time during the sixty days following the effective date of its offer notice. If it
does not do so within the sixty day period or thirty days after the shareholder demand,
whichever is earlier, the shareholder may commence a proceeding against the corporation
to determine the fair value of its shares.
B. The corporation or disqualified shareholder shall commence the proceeding in the
superior court in the county in which the corporation's principal office is located or,
if the corporation's principal office is not located in this state, the county in which
the corporation's known place of business is located. The corporation shall make the
disqualified shareholder a party to the proceeding as in an action against the
disqualified party's shares. The jurisdiction of the court in which the proceeding is
commenced is plenary and exclusive.
C. 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 power
described in the order appointing them, or in any amendment to it.
D. The disqualified shareholder is entitled to judgment for the fair value of the
disqualified shareholder's shares determined by the court as of the date of death,
dissolution, disqualification or transfer together with interest from that date at a rate
found by the court to be fair and equitable.
E. The court may order the judgment to be paid in installments determined by the
court.
10-2226 Court costs and fees of experts
A. The court in an appraisal proceeding commenced under section 10-2225 shall
determine all costs of the proceeding, including the reasonable compensation and expenses
of appraisers appointed by the court, and shall assess the costs against the professional
corporation unless the court assesses costs against the disqualified shareholder, in an
amount the court finds equitable, if the court finds the shareholder acted arbitrarily,
vexatiously or not in good faith in refusing to accept the corporation's offer.
B. The court may also assess the fees and expenses of counsel and experts for the
disqualified shareholder against the corporation and in favor of the shareholder if the
court finds that the fair value of the disqualified shareholder's shares substantially
exceeded the amount offered by the corporation or that the corporation did not make an
offer.
10-2227 Cancellation of disqualified shares
If the shares of a disqualified shareholder are not acquired pursuant to section
10-2223 within ten months after the death or dissolution of the shareholder or within
five months after the disqualification or transfer, the professional corporation shall
immediately cancel the shares on its books and the disqualified shareholder shall have no
further interest as a shareholder in the corporation other than the right to payment of
the price specified in section 10-2223, subsection B.
10-2228 Definition of disqualified shareholder
In this article, unless the context otherwise requires, "disqualified shareholder"
means a shareholder described in subsection 10-2223, subsection A, paragraph 1 or 2 or
the legal representative of that shareholder.
10-2230 Directors and officers
At least one-half of the directors of a professional corporation and its president,
if any, shall be licensed in this or another state to render a professional service
described in the corporation's articles of incorporation.
10-2231 Voting of shares
A. Only a qualified person may be appointed a proxy to vote any voting shares of a
professional corporation.
B. A voting trust with respect to voting shares of a professional corporation is
not valid unless all of its trustees and beneficiaries are qualified persons. If a
trustee or beneficiary who is a qualified person dies or dissolves and the person to whom
the trusteeship or beneficial interest is to devolve is not a person to whom section
10-2222 would permit the shares held by the trust to be transferred or a trustee or
beneficiary becomes disqualified, a voting trust valid under this subsection continues to
be valid for ten months after the date of death or for five months after the
disqualification occurred.
10-2232 Professional relationship
Nothing in this chapter shall be construed to alter any law applicable to the
relationship between persons furnishing and receiving professional service.
10-2233 Privileged communications
Nothing in this chapter shall be construed to alter any privilege applicable to
communications between an individual rendering professional services and the person
receiving the services recognized under any applicable law. The privilege applies to a
domestic or foreign professional corporation and to its employees in all situations in
which it applies to communications between an individual rendering professional services
on behalf of the corporation and the person receiving the services.
10-2234 Responsibility for professional services
A shareholder of a professional corporation is personally and fully liable and
accountable for any negligent or wrongful act or misconduct committed by the shareholder
or by any person under the shareholder's direct supervision and control while rendering
professional services on behalf of the professional corporation to the person for whom
the professional services are rendered. The liability of a shareholder of the
professional corporation is several only, and a shareholder is not vicariously
responsible for the liability of another shareholder.
10-2240 Merger
A. If all of the shareholders of the disappearing and surviving corporations are
qualified to be shareholders of the surviving corporation, a professional corporation may
merge with another domestic or foreign professional corporation or with any domestic or
foreign business corporation, limited liability company, registered limited liability
partnership or other entity.
B. If the surviving corporation is to render professional services in this state,
it shall comply with this chapter.
10-2241 Termination of professional corporation status
A. If a professional corporation ceases to render professional services or
otherwise elects to terminate its professional corporation status, it shall amend its
articles of incorporation to:
1. Delete references to rendering professional services, unless as described in
section 10-2213 the services may be rendered in the business corporation form.
2. Delete references to it being a professional corporation.
3. Conform its corporation name to the requirements of section 10-401.
B. After the amendment becomes effective, the corporation may continue in existence
as a business corporation under chapters 1 through 17 of this title and it is no longer
subject to this chapter.
10-2242 Judicial dissolution
The attorney general may commence a proceeding under sections 10-1430 through
10-1433 to dissolve a professional corporation if:
1. The commission serves written notice on the corporation under section 10-504
that it has violated or is violating a provision of this chapter.
2. The corporation does not correct each alleged violation, or demonstrate to the
reasonable satisfaction of the commission that it did not occur, within sixty days after
service of the notice is perfected under section 10-504.
3. The commission certifies to the attorney general a description of the violation,
that it notified the corporation of the violation and that the corporation did not
correct it, or demonstrate that it did not occur, within sixty days after perfection of
service of the notice.
10-2244 Authority to transact business
A. Except as provided in subsection C of this section, a foreign professional
corporation shall not transact business in this state until it is granted authority
to transact business in this state from the commission.
B. A foreign professional corporation may not obtain authority to transact business
in this state unless:
1. Its corporate name satisfies the requirements of section 10-2215.
2. It is incorporated for one or more of the purposes described in section 10-2211.
3. At least one-half of its shareholders who are entitled to vote for the election
of directors, at least one-half of its directors and its president, if any, are licensed
in one or more states to render a professional service described in its articles of
incorporation.
C. A foreign professional corporation is not required to obtain authority to
transact business in this state unless it maintains or intends to maintain an office in
this state for the conduct of business or professional practice.
10-2245 Application for authority to transact business
The application of a foreign professional corporation for authority to
transact business in this state shall contain the information prescribed in section
10-1503 and shall include a statement that at least one-half of its shareholders who are
entitled to vote for the election of directors, at least one-half of its directors and
its president, if any, are licensed in one or more states to render a professional
service described in its articles of incorporation and be accompanied by a statement from
the licensing authority indicating that at least one of its shareholders or employees is
licensed in this state to render that professional service.
10-2246 Revocation of certificate of authority
Pursuant to chapter 15, article 3 of this title, the commission may administratively
revoke the authority of a foreign professional corporation to transact business in this
state if a licensing authority with jurisdiction over a professional service described in
the corporation's articles of incorporation certifies to the commission that the
corporation has violated or is violating a provision of this chapter and describes the
violation in the certificate.
10-2249 Application to existing corporations
A. This chapter applies to all ARIZONA corporations that were incorporated under or
that were subject to chapter 3, article 1 of this title on December 31, 1995. If an
existing corporation to which this chapter applies is required to amend its articles of
incorporation to comply with this chapter, it shall do so on or before April 1, 1996.
B. This chapter does not apply to a corporation now existing or later incorporated
under a law of this state other than this chapter unless the corporation elects
professional corporation status under section 10-2210.
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