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§ 2571. Application and effect of subchapter

Purdon's Pennsylvania Statutes and Consolidated StatutesTitle 15 Pa.C.S.A. Corporations and Unincorporated AssociationsEffective: January 3, 2023

Purdon's Pennsylvania Statutes and Consolidated Statutes
Title 15 Pa.C.S.A. Corporations and Unincorporated Associations (Refs & Annos)
Part II. Corporations (Refs & Annos)
Subpart B. Business Corporations (Refs & Annos)
Article C. Domestic Business Corporation Ancillaries
Chapter 25. Registered Corporations
Subchapter H. Disgorgement by Certain Controlling Shareholders Following Attempts to Acquire Control (Refs & Annos)
Effective: January 3, 2023
15 Pa.C.S.A. § 2571
§ 2571. Application and effect of subchapter
Currentness
(a) General rule.--Except as otherwise provided in this section, this subchapter shall apply to every registered corporation.
(b) Exceptions.--This subchapter shall not apply to any transfer of an equity security:
(1) Of a registered corporation described in section 2502(1)(ii) or (2) (relating to registered corporation status).
(2) Of a corporation:
(i) the bylaws of which explicitly provide that this subchapter shall not be applicable to the corporation by amendment adopted by the board of directors on or before July 26, 1990, in the case of a corporation:
(A) which on April 27, 1990, was a registered corporation described in section 2502(1)(i); and
(B) did not on that date have outstanding one or more classes or series of preference shares entitled, upon the occurrence of a default in the payment of dividends or another similar contingency, to elect a majority of the members of the board of directors (a bylaw adopted on or before July 26, 1990, by a corporation excluded from the scope of this subparagraph by this clause shall be ineffective unless ratified under subparagraph (ii));
(ii) the bylaws of which explicitly provide that this subchapter shall not be applicable to the corporation by amendment ratified by the board of directors on or after December 19, 1990, and on or before March 19, 1991, in the case of a corporation:
(A) which on April 27, 1990, was a registered corporation described in section 2502(1)(i);
(B) which on that date had outstanding one or more classes or series of preference shares entitled, upon the occurrence of a default in the payment of dividends or another similar contingency, to elect a majority of the members of the board of directors; and
(C) the bylaws of which on that date contained a provision described in subparagraph (i); or
(iii) in any other case, the articles of which explicitly provide that this subchapter shall not be applicable to the corporation by a provision included in the original articles, or by an articles amendment adopted at any time while it is a corporation other than a registered corporation described in section 2502(1)(i) or on or before 90 days after the corporation first becomes a registered corporation described in section 2502(1)(i).
(3) Consummated before October 17, 1989, if both the acquisition and disposition of such equity security were consummated before October 17, 1989.
(4) Consummated by a person or group who first became a controlling person or group prior to:
(i) October 17, 1989, if such person or group does not after such date commence a tender or exchange offer for or proxy solicitation with respect to voting shares of the corporation, in the case of a corporation which was a registered corporation described in section 2502(1)(i) on that date; or
(ii) in any other case, the date this subchapter becomes applicable to the corporation.
(5) Constituting:
(i) In the case of a person or group that, as of October 17, 1989, beneficially owned shares entitling the person or group to cast at least 20% of the votes that all shareholders would be entitled to cast in an election of directors of the corporation:
(A) The disposition of equity securities of the corporation by the person or group.
(B) Subsequent dispositions of any or all equity securities of the corporation disposed of by the person or group where such subsequent dispositions are effected by:
(I) the direct purchaser of the securities from the person or group if, as a result of the acquisition by the purchaser of the securities disposed of by the person or group, the purchaser, immediately following the acquisition, is entitled to cast at least 20% of the votes that all shareholders would be entitled to cast in an election of directors of the corporation;
(II) a person that acquired the securities from the person or group in a transaction or series of transactions each of which is described in this paragraph if at the time of the subsequent disposition the person disposing of the securities is entitled to cast at least 20% of the votes that all shareholders would be entitled to cast in an election of directors of the corporation; or
(III) an affiliate or associate of the person or group.
(ii) The transfer of the beneficial ownership of the equity security by:
(A) Gift, devise, bequest or otherwise through the laws of inheritance or descent.
(A.1) Transfer, sale or other disposition by a beneficial owner or record holder of the equity security of the corporation, or by a fiduciary of a beneficial owner or record holder, either to, or in trust for, a spouse, parent, sibling, child or descendant of:
(I) the holder; or
(II) a spouse, parent, sibling, child or descendant of the holder.
(B) A settlor to a trustee under the terms of a family, testamentary or charitable trust.
(C) A trustee to a trust beneficiary or a trustee to a successor trustee under the terms of a family, testamentary or charitable trust.
(iii) The addition, withdrawal or demise of a beneficiary or beneficiaries of a family, testamentary or charitable trust.
(iv) The appointment of a guardian or custodian with respect to the equity security.
(v) The transfer of the beneficial ownership of the equity security from one spouse to another by reason of separation or divorce or pursuant to community property laws or other similar laws of any jurisdiction.
(vi) The transfer of record or the transfer of a beneficial interest or interests in the equity security where the circumstances surrounding the transfer clearly demonstrate that no material change in beneficial ownership has occurred.
(6) Consummated by:
(i) The corporation or any of its subsidiaries as a disposition of shares by it.
(ii) Any savings, stock ownership, stock option or other benefit plan of the corporation or any of its subsidiaries, or any fiduciary with respect to any such plan when acting in such capacity, or by any participant in any such plan with respect to any equity security acquired pursuant to any such plan or any equity security acquired as a result of the exercise or conversion of any equity security (specifically including any options, warrants or rights) issued to such participant by the corporation pursuant to any such plan.
(iii) A person engaged in business as an underwriter of securities who acquires the equity securities directly from the corporation or an affiliate or associate of the corporation through the person's participation in good faith in a firm commitment underwriting registered under the Securities Act of 1933.
(7)(i) Where the acquisition of the equity security has been approved by a resolution adopted prior to the acquisition of the equity security; or
(ii) where the disposition of the equity security has been approved by a resolution adopted prior to the disposition of the equity security if the equity security at the time of the adoption of the resolution is beneficially owned by a person or group that is or was a controlling person or group with respect to the corporation and is in control of the corporation if:
the resolution in either subparagraph (i) or (ii) is approved by the board of directors and ratified by the affirmative vote of the shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast thereon and identifies the specific person or group that proposes such acquisition or disposition, the specific purpose of such acquisition or disposition and the specific number of equity securities that are proposed to be acquired or disposed of by such person or group.
(8) Acquired at any time by a person or group who first became a controlling person or group:
(i) after April 27, 1990; and
(ii)(A) at a time when this subchapter was or is not applicable to the corporation; or
(B) on or before ten business days after the first public announcement by the corporation that this subchapter is applicable to the corporation, if this subchapter was not applicable to the corporation on July 27, 1990.
(c) Effect of distributions.--For purposes of this subchapter, equity securities acquired by a holder as a result of a stock split, stock dividend or other similar distribution by a corporation of equity securities issued by the corporation not involving a sale of the securities shall be deemed to have been acquired by the holder in the same transaction (at the same time, in the same manner and from the same person) in which the holder acquired the existing equity security with respect to which the equity securities were subsequently distributed by the corporation.
(d) Formation of group.--For the purposes of this subchapter, if there is no change in the beneficial ownership of an equity security held by a person, then the formation of or participation in a group involving the person shall not be deemed to constitute an acquisition of the beneficial ownership of such equity security by the group.
(e) Reversal of opt-out.--A provision of the articles or bylaws providing that this subchapter shall not be applicable to the corporation may be rescinded pursuant to the procedures required by this subpart and the articles and bylaws at the time to amend the articles or bylaws generally.

Credits

1990, April 27, P.L. 129, No. 36, § 6, imd. effective. Amended 1990, Dec. 19, P.L. 834, No. 198, § 102, imd. effective; 2022, Nov. 3, P.L. 1791, No. 122, § 68, effective in 60 days [Jan. 3, 2023].
15 Pa.C.S.A. § 2571, PA ST 15 Pa.C.S.A. § 2571
Current through Act 10 of the 2024 Regular Session. Some statute sections may be more current, see credits for details.
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