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Question: The founder of the S corporation I work for owns 51% of the shares. I understand that under ORS 60.534, the company (property and goodwill) can be sold if the board adopts a resolution and the founding owner votes to sell, regardless of the votes of the other shareholders. Is this correct? Does ORS 60.564 allow me to demand to be paid in cash for my shares rather than company stock of the purchaser? Does the notice of intent to demand payment have to be made prior to voting on the sale, when ORS 60.567 allow 10 days after the vote for the company to send dissenters' notice?

Response: I'm assuming from your question that you are a minority shareholder of an Oregon Corporation (of a company for which you are also an employee) and that the majority shareholder has contracted to sell the assets of the corporation. You are against the sale and wish to oppose it. If the sale is to go through, however, you wish to assert dissenters' rights under Oregon law.

The first issue is the percentage of vote required to approve a sale of substantially all the assets of the company. ORS 60.534(5) states: "Unless the articles of incorporation or the board of directors, acting pursuant to subsection (3) of this section, require a greater vote or a vote by voting groups, the transaction to be authorized must be approved by a majority of all the votes entitled to be cast on the transaction." (Emphasis added.) I assume from the question that the majority shareholder has control of the board of directors and has already (or shall shortly) receive approval from the board of directors for the asset sale. It is important to check the bylaws to see if they require a larger percentage than a simple majority for shareholder approval of sale of substantially all the assets of the business. Absent a provision in the bylaws requiring a higher percentage, it appears your 51% shareholder could approve the sale through vote of his shares alone (after board approval).

Payment in Cash
The Oregon statutes containing dissenters rights (which you apparently have already read) appear in ORS Sections 60.551 to 60.594. The provisions of these sections are tedious and require strict compliance, therefore, you really should retain an attorney to assist you in asserting your dissenters rights as a shareholder of the corporation. It would be money well spent.

I assume from the question that the asset sale is in exchange for stock, not cash. There is a limitation upon dissenters rights where the asset sale is for cash "pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale". See ORS Section 60.554(1)(c). Let's assume you do have dissenters' rights and that they have been properly asserted (again, you really should get legal representation to do this as there are minefields hidden in the statute that blow up your right to be paid). The dissenters' payment statute is set forth below:
60.577 Payment.
(1) Except as provided in ORS 60.584, as soon as the proposed corporate action is taken, or upon receipt of a payment demand, the corporation shall pay each dissenter who complied with ORS 60.571, the amount the corporation estimates to be the fair value of the shareholder’s shares, plus accrued interest.
(2) The payment must be accompanied by:
  1. The corporation’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year and the latest available interim financial statements, if any;
  2. A statement of the corporation’s estimate of the fair value of the shares;
  3. An explanation of how the interest was calculated;
  4. A statement of the dissenter’s right to demand payment under ORS 60.587; and
  5. A copy of ORS 60.551 to 60.594. [1987 c.52 §132; 1987 c.579 §4]
Thus, the statute requires "payment" of "fair market value" to dissenters but does not explicitly state that payment is to be made in cash although this is strongly implied. As I only spend 15 minutes on each question, my time on this one is up; however, I highly suspect there are Oregon cases out there that make it clear that dissenters are to be paid in cash.
Submitted: 4-22-2005; Oregon, Ron
Response: 2-24-2005; JJR

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