148 S.W.3d 556 (2004)
Red was a shareholder at the time AW merged with another law firm. AWD’s board of directors noticed a shareholder meeting to vote on the combination of two firms. Red held Class B and C shares. AWD shareholders were eligible to become partners in the new combined firm if they signed the partnership agreement. Red did not sign the agreement, stopped working at the firm, and filed this suit “seeking a declaration of their rights.” Assets of AWD were combined into the newly merged business.
Whether Red was “entitled to dissenter’s rights under the Texas Business Corporation Act, including the right of redemption for the fair value of the shares.”
No, because AWD remained in the legal services industry after the sale and the transaction is classified as one being in the ordinary course of business.
- The sale of the company’s assets should first be determined to be in the “regular course of business.” A sale in the regular course of business can be authorized by the board of directors. If not, the board must obtain approval from 2/3 of the shares entitled to vote.
- When there’s a vote the dissenters have the right to redeem their shares for fair value.
- AWD followed the procedures of an unusual sale, but now claims the sale was in the usual course of business.
- A comment following the statute’s promulgation stated that a sale of assets will be ordinary if the company continues to do business following the sale.
- “In summary, a sale is made in the usual and regular course of business so long as the corporation is not liquidated and continues in some business, either directly or indirectly, after the sale.”
- AWD’s shareholders and employees continued to practice law after the sale.
- AWD held an ownership interest in the newly merged company.