Dissenting Minority Shareholders Interpretation Of Corporations Code § 1312(b),

Corporations Code section 1312 generally governs the rights of minority shareholders who dissent from mergers and buyouts. The court was faced with how section 1312(b), which involves buyouts when parties to a merger are under common control, interacts with section 1312(a) in light of the California Supreme Court’s holding [Steinberg v. Amplica, Inc. (1986) 42 Cal.3d 1198, [729 P.2d 683, 233 Cal.Rptr. 249]] that 1312(a) limits the rights of dissenting minority shareholders to an independent appraisal of the value of their shares. In the instant case, the plaintiffs argued subdivision (b) allows dissenting shareholders all common law rights, including the right to sue the majority owners and collaborating board members for damages arising out of a breach of fiduciary duty. Defendants, however, contended dissenting minority shareholders, in addition to their right to an appraisal, have the right under subdivision (b) of having a merger set aside or rescinded. The trial court sustained defendant’s demurrer.  The appellate court affirmed in part and reversed in part, agreeing with the trial court that plaintiffs are not entitled to seek damages.  But the appellate court noted the plaintiffs alleged an alternative right to set aside the merger and remanded the matter to the trial court for resolution of that question. (Busse v. United Paham Financial Corp.  (Cal. App. Fourth Dist., Div. 3; January 8, 2014) 222 Cal.App.4th 1028, [166 Cal.Rptr.3d 520].)