Title 5. Special Types of Corporations — Subtitle 1. Professional Service Corporations

In this subtitle the following words have the meanings indicated.

“Disqualified person” means an individual or entity that for any reason is or becomes ineligible under this subtitle to be issued stock by a professional corporation.

“Foreign professional corporation” means a professional corporation organized under the laws of another state or a territory, possession, or district of the United States.

“License” means any license, certification, certificate, registration, or other legal authorization required by statute as a condition precedent to the performance of a professional service in the State.

“Licensing unit” means the board, agency, court, or other entity that licenses or otherwise legally authorizes the rendition of a professional service.

“Professional corporation” means a corporation organized under this subtitle for the purpose of rendering professional services.

“Qualified person” means an individual, professional corporation, or general partnership that is eligible under this Act to be issued stock by a professional corporation.

A corporation may be a professional corporation under § 5–112 of this subtitle for the purpose of rendering the same, similar, or related professional services within 2 or more professions.

Except as otherwise provided in this subtitle, a professional corporation has the powers enumerated in § 2-103 of this article.

A professional corporation may be a promoter, general partner, member, associate, or manager of a partnership, joint venture, trust, or other entity if the entity is engaged solely in rendering professional services.

A professional corporation may not render a professional service or engage in an activity other than the professional service authorized by its articles of incorporation.

Except as provided in subsection (c) of this section, subsection (a) of this section does not prohibit a professional corporation from investing its funds in real estate, mortgages, securities, or any other type of investment.

A professional corporation may not, through any investment, subsidiary, or other means, engage or participate in the active management of any entity, association, or venture whose business purpose is not reasonably related to the rendering of a professional service authorized by its articles of incorporation.

A domestic or foreign corporation may render professional services in the State only through individuals licensed or otherwise authorized in the State to render the professional services.

Subsection (a) of this section does not:

The name of a domestic professional corporation or a foreign professional corporation authorized to transact business in the State shall contain the surname of one or more stockholders of the corporation unless:

If required under § 5–107 of this subtitle to obtain a certificate of authorization for use of a corporate name, the professional corporation or its incorporator shall file an application with the appropriate licensing unit, using a form provided by the licensing unit that contains:

The application shall be accompanied by the fee, if any, set by the licensing unit.

If the licensing unit and, if required, the professional organization approve of the proposed corporate name, the licensing unit shall issue a certificate of authorization for use of a corporate name to the corporation or its incorporator.

Any licensing unit with jurisdiction over the professional service mentioned in the corporation’s articles of incorporation may approve the adoption and use of a corporate name under the provisions of §§ 5–106 through 5–108 of this subtitle.

A professional corporation may issue stock, rights, and options to purchase stock to:

Stock issued in violation of this section or of a regulation adopted under this section is void from the date issued.

A stockholder of a professional corporation may transfer or pledge stock, fractional stock, and rights or options to purchase stock of the corporation only to a qualified person.

A transfer of stock made in violation of subsection (a) of this section, except a transfer made by operation of law or by court judgment, is void.

A corporation may elect to be a professional corporation under this subtitle by including in the articles of incorporation a statement that:

A corporation incorporated in the State may elect professional corporation status by amending its articles of incorporation to comply with subsection (a) of this section and §§ 5-106 through 5-108 of this subtitle.

A corporation that, prior to the effective date of this subtitle, was a duly organized professional corporation in the State shall be deemed a duly organized professional corporation under this subtitle.

A professional corporation shall acquire, or cause to be acquired by a qualified person, the stock of a stockholder, at a price that represents the fair value of the stock as of the date of death or disqualification of the stockholder or transfer of the stock if:

This section does not require the acquisition of stock in the event of disqualification if the disqualification lasts less than 5 months from the date the disqualification or transfer occurs.

This section and § 5-114 of this subtitle do not prevent or relieve a professional corporation from paying pension benefits or other deferred compensation to a former stockholder if otherwise permitted by law, including amounts payable pursuant to an agreement between a judge and his former law firm as provided in § 1-203 of the Courts Article.

A provision for the acquisition of stock contained in a professional corporation’s articles of incorporation or bylaws, or in a private agreement, is specifically enforceable.

For purposes of this section the term “disqualified stockholder” shall include the personal representative of the estate of a deceased stockholder or a transferee as described in § 5-113 of this subtitle.

The disqualified stockholder may send, by certified mail, postage prepaid, return receipt requested, a written notice to the corporation demanding that the corporation commence a proceeding to determine the fair value of the stock if:

If the corporation fails to commence a proceeding under subsection (c) of this section to determine the fair value of stock within 60 days of written notice of demand by a disqualified stockholder, the disqualified stockholder may commence a proceeding against the corporation to determine the fair value of the stock.

The corporation shall cancel on the books of the corporation the stock of a disqualified stockholder and the disqualified stockholder shall have no further interest as a stockholder in the corporation other than the right of payment of the fair value of the stock under § 5-113 of this subtitle if the corporation has not delivered an offer notice under subsection (b) of this section and the disqualified stockholder has not demanded that the corporation commence a proceeding to determine the fair value of the stock within 120 days of:

The disqualified stockholder is entitled to judgment for the fair value of his stock determined by the court as of the date of death, disqualification, or transfer, together with interest from that date at a rate found by the court to be fair and equitable.

The court may order the judgment to be paid in installments.

The court may assess the fees and expenses of counsel and experts for the disqualified stockholder against the corporation and in favor of the disqualified stockholder if the court finds that the fair value of the stock substantially exceeded the amount offered by the corporation or that the corporation did not make an offer.

A majority of the directors and all of the officers of a professional corporation, except the secretary and treasurer, must be qualified persons with respect to the corporation.

Whether or not organized as a close corporation under Title 4 of this article:

Only a qualified person may be appointed a proxy to vote stock of a professional corporation.

A voting trust with respect to stock of a professional corporation is not valid unless all of the trustees of the trust are stockholders of the professional corporation.

Stock in a professional corporation may not be transferred into a trust, unless:

The relationship between an individual rendering professional services as an employee of a domestic or foreign professional corporation and the client or patient of the individual is the same as if the individual were rendering the services as a sole practitioner.

The relationship between a domestic or foreign professional corporation and the client or patient for whom an employee of the corporation is rendering professional services is the same as that between the client or patient and the employee.

A privilege applicable to communications between an individual rendering professional services and the person receiving the services recognized under the law of this State is not affected by this subtitle.

The privilege under this section applies to a domestic or foreign professional corporation and to its employees in all situations in which it applies to communications between an individual rendering professional services on behalf of the corporation and the person receiving the services.

A domestic or foreign professional corporation whose employees perform professional services within the scope of their employment or within the scope of the employees’ apparent authority to act for the corporation is liable to the same extent as its employees.

The personal liability of a stockholder of a domestic or foreign professional corporation is no greater in any respect than the liability of a stockholder of a corporation incorporated under the Maryland General Corporation Law.

If all the stockholders of merging corporations are qualified to be stockholders of the surviving corporation, a professional corporation may merge with another domestic or foreign professional corporation or with a domestic or foreign business corporation.

If the surviving corporation is to render professional services in this State, it must comply with the provisions of this subtitle.

If a professional corporation ceases to render professional services, it shall amend its articles of incorporation to:

After the amendment under subsection (a) of this section becomes effective, the corporation may continue in existence as a business corporation under Title 2 of this article and is no longer subject to this subtitle.

An amendment under subsection (a) of this section does not affect the liability of the professional corporation, its employees, or stockholders for a transaction, occurrence, or act that occurred while the corporation was subject to this subtitle.

The Department or a licensing unit with jurisdiction over a professional service described in the corporation’s articles of incorporation serves written notice on the corporation that it has violated or is violating a provision of this subtitle;

The corporation does not, within 60 days after service of the notice, correct the alleged violation or demonstrate to the Department or licensing authority that the violation has not occurred; and

The Department or licensing unit certifies to the Attorney General:

Except as provided in subsection (c) of this section, a foreign professional corporation may not transact business in the State until it obtains a certificate of authority from the Department.

A foreign professional corporation may obtain a certificate of authority if:

Except as provided in subsection (b) of this section, the repeal of a statute by enactment of this subtitle does not affect:

If a penalty or punishment imposed for a violation of a statute repealed by this subtitle is reduced by this subtitle, the penalty or punishment, if not already imposed, shall be imposed in accordance with this subtitle.

All stockholders of the professional corporation have at any one time become disqualified persons;

The professional corporation knowingly employs or retains in its employment a licensed person who, for any reason, becomes legally disqualified to render the professional service that the professional corporation was organized to render;

The professional corporation violates any applicable rule or regulation adopted by the licensing unit regulating a profession named in the professional corporation’s articles of incorporation; or

The professional corporation violates any statute applicable to a professional corporation.

The context of the provisions clearly requires otherwise; or

Specific provisions of this subtitle or other subtitles governing specific classes of corporations provide otherwise.