S-3247               _______________________________________________

                                                   SENATE BILL NO. 4520

                        _______________________________________________

State of Washington                              49th Legislature                              1986 Regular Session

By Senators Moore and Rasmussen

Read first time 1/14/86 and referred to Committee on Financial Institutions.

AN ACT Relating to closely held corporations; and adding a new section to chapter 23A.08 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1.  A new section is added to chapter 23A.08 RCW to read as follows:

          (1) "Closely held corporation," as used in this section, means a corporation in which ownership of shares of stock are not bought or sold on the open market.

          (2) "Illegal or corrupt operations," as used in this section, means the corporation has engaged in one or more of the following:

          (a) Wilfully violating city, county, state, or federal statutes or regulations, including the filing of false or misleading federal income tax returns;

          (b) Commingling assets, income, or expenses of separate businesses to conceal corporate income or assets; or

          (c) Engaging in transactions with related or affiliated parties or entities that are not arm's-length transactions in the best interests of all shareholders.

          (3) A minority shareholder of a closely held corporation who believes that the corporation has engaged in illegal or corrupt operations may make written demand on the corporation for the payment of the fair value of the shareholder's shares.  If the corporation denies the illegal or corrupt operations or fails to reach an agreement with the shareholder, the shareholder may bring an action in superior court to require an appraisal and redemption of the shares in the manner provided in RCW 23A.24.040.  If necessary to protect the interests of minority shareholders, the court may order that the corporation be dissolved and the assets distributed to the shareholders pursuant to chapter 23A.28 RCW.