# Corporations and Associations (GCA)

## Title 4. Close Corporations

### Subtitle 1. Definitions; General Provisions

#### Section 4-101

(a) In this title the following words have the meanings indicated.

(b) "Close corporation" means a corporation which elects to be a close corporation in accordance with Sec. 4-201 of this title.

(c) "Unanimous stockholders' agreement" means an agreement to which every stockholder of a close corporation actually has assented and which is contained in its charter or bylaws or in a written instrument signed by all the stockholders.

#### Section 4-102

Notwithstanding any contrary provision of law, an individual who holds more than one office in a close corporation may act in more than one capacity to execute, acknowledge, or verify any instrument required to be executed, acknowledged, or verified by more than one officer.

### Subtitle 2. Election to Be a Close Corporation

#### Section 4-201

(a) A corporation may elect to be a close corporation under this title by including in its charter a statement that it is a close corporation.

(b) The statement that a corporation is a close corporation shall be:

  (1) Contained in the articles of incorporation originally filed with the Department; or

  (2) Added to the charter by an amendment which is approved:

    (i) Under the provisions of Sec. 2-603 of this article, if at the time of the adoption of the amendment no stock of the corporation is either outstanding or subscribed for; or

    (ii) By the affirmative vote of every stockholder and every subscriber for stock of the corporation.

#### Section 4-202

(a) Clear reference to the fact that the corporation is a close corporation shall appear prominently:

  (1) At the head of the charter document in which the election to be a close corporation is made;

  (2) In each subsequent charter document of the corporation; and

  (3) On each certificate representing outstanding stock of the corporation.

(b) The status of a corporation as a close corporation is not affected by the failure of any charter document or stock certificate to contain the reference required by this section.

#### Section 4-203

The charter of a close corporation may be amended to remove the statement of election to be a close corporation, but only by the affirmative vote of every stockholder and every subscriber for stock of the corporation.

### Subtitle 3. Board of Directors

#### Section 4-301

A close corporation shall have at least one director until an election by the corporation in its charter to have no board of directors becomes effective.

#### Section 4-302

(a) An election to have no board of directors becomes effective at the later of:

  (1) The time that the organization meeting of directors and the issuance of at least one share of stock of the corporation are completed;

  (2) The time the charter document in which the election is made becomes effective; or

  (3) The time specified in the charter document in which the election is made.

(b) A director automatically ceases to be a director when an election to have no board of directors becomes effective.

#### Section 4-303

If there is an election to have no board of directors:

(1) The stockholders may exercise all powers of directors, and the business and affairs of the corporation shall be managed under their direction;

(2) The stockholders of the corporation are responsible for taking any action required by law to be taken by the board of directors;

(3) Action by stockholders shall be taken by the voting of shares of stock as provided in this article;

(4) The stockholders may take any action for which this article otherwise would require both a resolution of directors and a vote of stockholders;

(5) By the affirmative vote of a majority of all the votes entitled to be cast, the stockholders may take any action for which this article otherwise would require a vote of a majority of the entire board of directors;

(6) A statement that the corporation is a close corporation which has no board of directors satisfies any requirement that an instrument filed with the Department contain a statement that a specified action was taken by the board of directors;

(7) The special liabilities imposed on directors by Sec. 2-312(a) of this article and the provisions of Sec.Sec. 2-312(b) and 2-410 of this article apply to the stockholders of the corporation and, for this purpose, "present" in Sec. 2-410 of this article means present in person or by proxy; and

(8) A stockholder is not liable for any action taken as a result of a vote of the stockholders, unless he was entitled to vote on the action.

### Subtitle 4. Stockholders

#### Section 4-401

(a) Under a unanimous stockholders' agreement, the stockholders of a close corporation may regulate any aspect of the affairs of the corporation or the relations of the stockholders, including:

  (1) The management of the business and affairs of the corporation;

  (2) Restrictions on the transfer of stock;

  (3) The right of one or more stockholders to dissolve the corporation at will or on the occurrence of a specified event or contingency;

  (4) The exercise or division of voting power;

  (5) The terms and conditions of employment of an officer or employee of the corporation, without regard to the period of his employment;

  (6) The individuals who are to be directors and officers of the corporation; and

  (7) The payment of dividends or the division of profits.

(b) A unanimous stockholders' agreement may be amended, but only by the unanimous written consent of the stockholders then parties to the agreement.

(c) A stockholder who acquires his stock after a unanimous stockholders' agreement becomes effective is considered to have actually assented to the agreement and is a party to it:

  (1) Whether or not he has actual knowledge of the existence of the agreement at the time he acquires the stock, if acquired by gift or bequest from a person who was a party to the agreement; and

  (2) If he has actual knowledge of the existence of the agreement at the time he acquires the stock, if acquired in any other manner.

(d)

  (1) A court of equity may enforce a unanimous stockholders' agreement by injunction or by any other relief which the court in its discretion determines to be fair and appropriate in the circumstances.

  (2) As an alternative to the granting of an injunction or other equitable relief, on motion of a party to the proceeding, the court may order dissolution of the corporation under the provisions of Subtitle 6 of this title.

(e) This section does not affect any otherwise valid agreement among stockholders of a close corporation or of any other corporation.

#### Section 4-402

(a) The bylaws of a close corporation shall provide for an annual meeting of stockholders in accordance with Title 2 of this article, but the meeting need not be held unless requested by a stockholder.

(b) A request for an annual meeting shall be in writing and delivered to the president or secretary of the corporation:

  (1) At least 30 days before the date specified in the bylaws for the meeting; or

  (2) If the bylaws specify a period during which the date for the meeting may be set, at least 30 days before the beginning of that period.

#### Section 4-403

A stockholder of a close corporation or his agent may inspect and copy during usual business hours any records or documents of the corporation relevant to its business and affairs, including any:

(1) Bylaws;

(2) Minutes of the proceedings of the stockholders and directors;

(3) Annual statement of affairs;

(4) Stock ledger; and

(5) Books of account.

#### Section 4-404

(a) Once during each calendar year, each stockholder of a close corporation may present to any officer of the corporation a written request for a statement of its affairs.

(b) Within 20 days after a request is made for a statement of a close corporation's affairs, the corporation shall prepare and have available on file at its principal office a statement verified under oath by its president or treasurer or one of its vice-presidents or assistant treasurers which sets forth in reasonable detail the corporation's assets and liabilities as of a reasonably current date.

### Subtitle 5. Stock Restrictions

#### Section 4-501

If there is any stock of a close corporation outstanding, the corporation may not issue or sell any of its stock, including treasury stock, unless the issuance or sale is:

(1) Approved by the affirmative vote of the holders of all outstanding stock; or

(2) Permitted by a unanimous stockholders' agreement.

#### Section 4-502

A close corporation may not have outstanding any:

(1) Securities which are convertible into its stock;

(2) Voting securities other than stock; or

(3) Options, warrants, or other rights to subscribe for or purchase any of its stock, unless they are nontransferable.

#### Section 4-503

(a)

  (1) In this section, "transfer" means the transfer of any interest in the stock of a close corporation, except:

    (i) A transfer by operation of law to a personal representative, trustee in bankruptcy, receiver, guardian, or similar legal representative;

    (ii) The acquisition of a lien or power of sale by an attachment, levy, or similar procedure; or

    (iii) The creation or assignment of a security interest.

  (2) A foreclosure sale or other transfer by a person who acquired his interest or power in a transaction described in paragraph (1) of this subsection is a transfer subject to all the provisions of this section. For purposes of the transfer, the person effecting the foreclosure sale or other transfer shall be treated as and have the rights of a holder of the stock under this section and Sec. 4-602(b) of this title.

(b) A transfer of the stock of a close corporation is invalid unless:

  (1) Every stockholder of the corporation consents to the transfer in writing within the 90 days before the date of the transfer; or

  (2) The transfer is made under a provision of a unanimous stockholders' agreement permitting the transfer to the corporation or to or in trust for the principal benefit of:

    (i) One or more of the stockholders or security holders of the corporation or their wives, children, or grandchildren; or

    (ii) One or more persons named in the agreement.

#### Section 4-504

(a) A close corporation may deny or restrict the voting rights of any of its stock as provided in this article. Notwithstanding any denial or restriction, all stock has voting rights on any matter required by this title to be authorized by the affirmative vote of every stockholder or every subscriber for stock of a close corporation.

(b) Notwithstanding the provisions of Sec. 2-104(b)(5) of this article, the charter of a close corporation may not lower the proportion of votes required to approve any action for which this title requires the affirmative vote or assent of every stockholder or every subscriber for stock of the corporation.

### Subtitle 6. Termination of Existence

#### Section 4-601

(a) Subject to subsection (b) of this section, a consolidation, merger, share exchange, transfer of assets, or conversion of a close corporation shall be made in accordance with the provisions of Title 3 of this article.

(b) Approval of a proposed consolidation or merger, a transfer of assets, a conversion, or an acquisition of stock in a share exchange requires the affirmative vote of every stockholder of the close corporation.

#### Section 4-602

(a) Any stockholder of a close corporation may petition a court of equity for dissolution of the corporation on the grounds set forth in Sec. 3-413 of this article or on the ground that there is such internal dissension among the stockholders of the corporation that the business and affairs of the corporation can no longer be conducted to the advantage of the stockholders generally.

(b)

  (1) Unless a unanimous stockholders' agreement provides otherwise, a stockholder of a close corporation has the right to require dissolution of the corporation if:

    (i) The stockholder made a written request for consent to a proposed bona fide transfer of his stock in accordance with the provisions of Sec. 4-503(b)(1) of this title, specifying the proposed transferee and the consideration, and the consent was not received by him within 30 days after the date of the request; or

    (ii) Another party to a unanimous stockholders' agreement defaulted in an obligation, set forth in or arising under the agreement, to purchase or cause to be purchased stock of the stockholder, and the default was not remedied within 30 days after the date for performance of the obligation.

  (2) A petition for dissolution under this subsection shall be filed within 60 days after the date of the request or the default, as the case may be.

(c) A proceeding for dissolution authorized by this section shall be in accordance with the provisions of Sec. 3-414 of this article.

#### Section 4-603

(a) Any one or more stockholders who desire to continue the business of a close corporation may avoid the dissolution of the corporation or the appointment of a receiver by electing to purchase the stock owned by the petitioner at a price equal to its fair value.

(b)

  (1) If a stockholder who makes the election is unable to reach an agreement with the petitioner as to the fair value of the stock, then, if the electing stockholder gives bond or other security sufficient to assure payment to the petitioner of the fair value of the stock, the court shall stay the proceeding and determine the fair value of the stock.

  (2) Fair value shall be determined in accordance with the procedure set forth in Title 3, Subtitle 2 of this article, as of the close of business on the day on which the petition for dissolution was filed.

(c) After the fair value of the stock is determined, the order of the court directing the purchase shall set the purchase price and the time within which payment shall be made. The court may order other appropriate terms and conditions of sale, including:

  (1) Payment of the purchase price in installments; and

  (2) The allocation of shares of stock among electing stockholders.

(d) The petitioner:

  (1) Is entitled to interest on the purchase price of his stock from the date the petition is filed; and

  (2) Ceases to have any other rights with respect to the stock, except the right to receive payment of its fair value.

(e) The costs of the proceeding, as determined by the court, shall be divided between the petitioner and the purchasing stockholder. The costs shall include the reasonable compensation and expenses of appraisers, but may not include fees and expenses of counsel or of other experts retained by a party.

(f) The petitioner shall transfer his shares of stock to the purchasing stockholder:

  (1) At a time set by the court; or

  (2) If the court sets no time, at the time the purchase price is paid in full.

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Md. Code Ann., Corps. & Ass'ns (as displayed at mgaleg.maryland.gov, October 16, 2026)