The Vermont Statutes Online

Title 11: Corporations, Partnerships and Associations

Chapter 004: Professional Corporations

• Subchapter 001: GENERAL PROVISIONS

• § 815. Short title

  This chapter shall be known and may be cited as the Vermont Professional Corporation Act. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 816. Application of Vermont Business Corporation Act

  Title 11A applies to professional corporations, both domestic and foreign, to the extent not inconsistent with the provisions of this chapter. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 817. Definitions

  In this chapter:

  (1) “Disqualified person” means an individual or entity that for any reason is or becomes ineligible under this chapter to be issued shares by a professional corporation.

  (2) “Domestic professional corporation” means a professional corporation incorporated under the laws of this State.

  (3) “Foreign professional corporation” means a corporation or association for profit incorporated for the purpose of rendering professional services under a law other than the law of this State.

  (4) “Licensing authority” means the officer, board, agency, court, or other authority in this State empowered to license or otherwise authorize the rendition of a professional service.

  (5) “Professional corporation” means a corporation for profit, other than a foreign professional corporation, subject to the provisions of this chapter.

  (6) “Professional service” means a service that may be lawfully rendered only by a person licensed or otherwise authorized by a licensing authority in this State to render the service, and may not be lawfully rendered by a corporation under Title 11A.

  (7) “Qualified person” means an individual or general partnership that is eligible under this chapter to be issued shares by a professional corporation. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• Subchapter 002: CREATION

• § 820. Election of professional corporation status

  (a) One or more persons may incorporate a professional corporation by delivering to the Secretary of State for filing articles of incorporation that state:

  (1) it is a professional corporation; and

  (2) its purpose is to render the specified professional service.

  (b) A corporation incorporated under a general law of this State may elect professional corporation status by amending its articles of incorporation to comply with subsection (a) of this section and 11A V.S.A. chapter 10. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 821. Purposes

  (a) Except to the extent authorized by subsection (b) of this section, a corporation may elect professional corporation status under section 820 of this title, solely for the purpose of rendering professional services (including services ancillary to them) and solely within a single profession.

  (b) A corporation may elect professional corporation status under section 820 of this title for the purpose of rendering professional service within two or more professions, and for the purpose of engaging in any lawful business authorized by 11A V.S.A. § 3.01, to the extent the combination of professional purposes or of professional and business purposes is authorized by the licensing law of this State applicable to each profession in the combination. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 822. General powers

  (a) Except as provided in subsection (b) of this section, a professional corporation has the powers enumerated in 11A V.S.A. § 3.02.

  (b) A professional corporation may be a promoter, general partner, member, associate, or manager of a partnership, joint venture, trust, or other entity, only if the entity is engaged solely in rendering professional service or in carrying on business authorized by the professional corporation’s articles of incorporation. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 823. Rendering professional services

  (a) A domestic or foreign corporation may render professional services in this State through individuals licensed or otherwise authorized in this State to render the services.

  (b) Subsection (a) of this section does not:

  (1) require an individual employed by a professional corporation to be licensed to perform services for the corporation if a license is not otherwise required;

  (2) prohibit a licensed individual from rendering professional services in his or her individual capacity although the individual is a shareholder, director, officer, employee, or agent of a domestic or foreign professional corporation;

  (3) prohibit an individual licensed under a law other than the law of this State from rendering professional services for a domestic or foreign professional corporation in this State if not prohibited by the licensing authority. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 824. Prohibited activities

  (a) A professional corporation may not render any professional service or engage in any business other than the professional service and business authorized by its articles of incorporation.

  (b) 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. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 825. Corporate name

  (a) The name of a domestic professional corporation and of a foreign professional corporation authorized to transact business in this State, in addition to satisfying the requirements of 11A V.S.A. §§ 4.01 and 15.06:

  (1) must contain the words “professional corporation,” “professional association,” “limited,” or “service corporation” or the abbreviation “P.C.,” “P.A.,” “LTD.,” or “S.C.”;

  (2) may not contain language stating or implying that it is incorporated for a purpose other than that authorized by section 821 of this title and its articles of incorporation; and

  (3) must conform with any rule promulgated by the licensing authority having jurisdiction over a professional service described in the corporation’s articles of incorporation.

  (b) 11A V.S.A. §§ 4.01 and 15.06 do not prevent the use of a name otherwise prohibited by those sections, if it is the personal name of a shareholder or former shareholder of the domestic or foreign professional corporation or the name of an individual who was associated with a predecessor of the corporation.

  (c) A person intending to operate a postsecondary school, as defined in 16 V.S.A. §§ 176 and 176a, shall apply for a certificate of approval from the State Board of Education prior to registering a name under this section. (Added 2001, No. 77 (Adj. Sess.), § 1; amended 2003, No. 107 (Adj. Sess.), § 15.)

• Subchapter 003: SHARES

• § 830. Issuance of shares

  (a) Except as provided in section 881 of this title, a professional corporation may issue shares, fractional shares, and rights or options to purchase shares only to:

  (1) individuals who are authorized by law to render a professional service described in the corporation’s articles of incorporation;

  (2) an employee stock ownership plan as defined in section 4975(e)(7) of the Internal Revenue Code, if a majority of the voting trustees of the plan are professionals licensed to furnish the pertinent professional services, and the professional corporation’s articles of incorporation or bylaws prohibit the direct issuance of ownership interests to anyone other than professionals licensed to furnish the pertinent professional services; or

  (3) general partnerships in which all the partners are qualified persons with respect to the professional corporation, and in which at least one partner is authorized by law in this State to render a professional service described in the corporation’s articles of incorporation.

  (b) If a licensing authority with jurisdiction over a professional corporation considers it necessary to prevent violation of the ethical standards of the profession, the authority may, by rule, restrict or condition, or revoke in part, the authority of a professional corporation, subject to its jurisdiction, to issue shares. A rule promulgated under this section does not, of itself, make a shareholder of a professional corporation, at the time the rule becomes effective, a disqualified person.

  (c) Shares issued in violation of this section or a rule promulgated under this section are void. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 831. Notice of professional corporation status on shares

  (a) The following statement must appear conspicuously on each share certificate issued by a professional corporation:

  “The transfer of shares of a professional corporation is restricted by the Vermont Professional Corporation Chapter, and is subject to further restriction imposed from time to time by the licensing authority. Shares of a professional corporation are also subject to a statutory compulsory repurchase obligation.”

  (b) Within a reasonable time after the issuance or transfer of uncertificated shares of a professional corporation, the corporation shall send the shareholders a written notice, containing the statement required by subsection (a) of this section. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 832. Share transfer restriction

  (a) A shareholder of a professional corporation may transfer or pledge shares, fractional shares, and rights or options for the purchase of shares of the corporation only to individuals, and general partnerships qualified under section 830 of this title to be issued shares.

  (b) A transfer of shares made in violation of subsection (a) of this section, except one made by operation of law or court judgment, is void. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 833. Compulsory acquisition of shares after death or disqualification of shareholder

  (a) A professional corporation must acquire (or cause to be acquired by a qualified person) the shares of its shareholder, at a price the corporation believes represents their fair value as of the date of death, disqualification, or transfer, if:

  (1) the shareholder dies;

  (2) the shareholder becomes a disqualified person, except as provided in subsection (c) of this section;

  (3) the shares are transferred by operation of law or court judgment to a disqualified person, except as provided in subsection (c) of this section.

  (b) If a price for the shares is fixed in accordance with the articles of incorporation or bylaws or by private agreement, that price controls. If the price is not so fixed, the corporation shall acquire the shares in accordance with section 834 of this title. If the disqualified person or the executor or administrator of the estate of a deceased shareholder rejects the corporation’s purchase offer, either the disqualified person, the executor or administrator of the estate of a deceased shareholder, or the corporation may commence a proceeding under section 835 of this title to determine the fair value of the shares.

  (c) This section does not require the acquisition of shares in the event of disqualification, if the disqualification lasts no more than five months from the date the disqualification or transfer occurs.

  (d) This section and section 834 of this title do not prevent or relieve a professional corporation from paying pension benefits or other deferred compensation for services rendered to a former shareholder if otherwise permitted by law.

  (e) A provision for the acquisition of shares contained in a professional corporation’s articles of incorporation or bylaws, or in a private agreement, is specifically enforceable. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 834. Acquisition procedure

  (a) If shares must be acquired under section 833 of this title, the professional corporation shall deliver a written notice to the executor or administrator of the estate of its deceased shareholder, or to the disqualified person or transferee, offering to purchase the shares at a price the corporation believes represents their fair value as of the date of death, disqualification, or transfer. The offer notice must be accompanied by the corporation’s balance sheet for a fiscal year ending not more than 16 months before the effective date of the offer notice, an income statement for that year, a statement of changes in shareholder equity for that year, and the latest available interim financial statement, if any.

  (b) The disqualified person or the executor or administrator of the estate of a deceased shareholder has 30 days from the effective date of the notice to accept the corporation’s offer or demand that the corporation commence a proceeding under section 835 of this title to determine the fair value of the disqualified person’s or the estate’s shares. If the disqualified person or the executor or administrator of the estate of a deceased shareholder accepts the offer, the corporation shall make payment of the shares within 60 days from the effective date of the offer notice (unless a later date is agreed on) upon the disqualified person’s or the executor or administrator of the estate of a deceased shareholder’s surrender of shares to the corporation.

  (c) After the corporation makes payment for the shares, the disqualified person or the estate of a deceased shareholder has no further interest in them. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 835. Court action to appraise shares

  (a) If the disqualified person or the executor or administrator of the estate of a deceased shareholder does not accept the professional corporation’s offer under subsection 834(b) of this title within the 30-day period, the disqualified person or the executor or administrator of the estate of a deceased shareholder, during the following 30-day period, may deliver a written notice to the corporation, demanding that it commence a proceeding to determine the fair value of the shares. The corporation may commence a proceeding at any time during the 60 days following the effective date of its offer notice. If it does not do so, the disqualified person or the executor or administrator of the estate of a deceased shareholder may commence a proceeding against the corporation to determine the fair value of his or her shares.

  (b) The corporation, the disqualified person, or the executor or administrator of the estate of a deceased shareholder shall commence the proceeding in the Superior Court of the county where the corporation’s principal office or, if none in this State, the corporation’s registered office is located. The corporation shall make the disqualified person or the executor or administrator of the estate of a deceased shareholder a party to the proceeding as in an action against the shareholder’s shares. The jurisdiction of the court in which the proceeding is commenced is plenary and exclusive.

  (c) The court may appoint one or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the power described in the order appointing them, or in any amendment to it.

  (d) The disqualified person or the estate of a deceased shareholder is entitled to judgment for the fair value of the shareholder’s shares 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.

  (e) The court may order the judgment paid in installments determined by the court. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 836. Court costs and fees of experts

  (a) The court, in an appraisal proceeding commenced under section 835 of this title, shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court, and shall assess the costs against the professional corporation. But the court may assess costs against the disqualified person or the estate of a deceased shareholder if the court finds the disqualified person or the executor or administrator of the estate of a deceased shareholder acted arbitrarily, vexatiously or not in good faith in refusing to accept the corporation’s offer.

  (b) The court may also assess the fees and expenses of counsel and experts for the disqualified person or the estate of a deceased shareholder against the corporation and in favor of the disqualified person or the estate of a deceased shareholder, if the court finds that the fair value of his or her shares substantially exceeded the amount offered by the corporation or that the corporation did not make an offer. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 837. Cancellation of disqualified shares

  If the shares of a disqualified person or the estate of a deceased shareholder are not acquired under section 834 or 835 of this title within 10 months after the death of the shareholder or within five months after the disqualification or transfer, the professional corporation shall immediately cancel the shares on its books, and the disqualified person or the estate of a deceased shareholder has no further interest as a shareholder in the corporation, other than the right to payment of the fair value of the shares under section 834 or 835 of this title. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• Subchapter 004: GOVERNANCE

• § 840. Directors and officers

  Not fewer than one-half of the directors of a professional corporation and all of its officers, except the secretary and treasurer (if any), must be qualified persons with respect to the corporation, except as provided in section 881 of this title. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 841. Voting of shares

  (a) Only a qualified person may be appointed a proxy to vote shares of a professional corporation.

  (b) A voting trust with respect to shares of a professional corporation is not valid unless all of its trustees and beneficiaries are qualified persons. But, if a beneficiary who is a qualified person dies or becomes disqualified, a voting trust valid under this subsection continues to be valid for ten months after the date of death or for five months after the disqualification occurred. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 842. Confidential relationship

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

  (b) The relationship between a domestic or foreign professional corporation and the client or patient for whom its employee is rendering professional services is the same as that between the client or patient and the employee. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 843. Privileged communications

  A privilege applicable to communications between an individual rendering professional services and the person receiving the services recognized under the statute or common law of the state is not affected by this chapter. The privilege 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. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 844. Responsibility for professional services

  (a) An obligation of a professional corporation, whether arising in contract, tort, or otherwise, is solely the obligation of the professional corporation.

  (b) Except as otherwise provided by statute, if a domestic or foreign professional corporation is liable under subsection (a) of this section, every shareholder of the corporation is liable to the same extent as if he or she were a partner in a limited liability partnership pursuant to subsection 3226(c) of this title. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• Subchapter 005: REORGANIZATION AND TERMINATION

• § 850. Merger

  (a) If all the shareholders of the disappearing and surviving corporations are qualified to be shareholders of the surviving corporation, a professional corporation may merge with another domestic or foreign professional corporation or with a domestic or foreign business corporation.

  (b) If the surviving corporation is to render professional services in this State, it must comply with this chapter. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 851. Termination of professional activities

  If a professional corporation ceases to render professional services, it must amend its articles of incorporation to delete references to rendering professional services and to conform its corporate name to the requirements of 11A V.S.A. § 4.01. After the amendment becomes effective, the corporation may continue in existence as a business corporation under Title 11A, and it is no longer subject to this chapter. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 852. Judicial dissolution

  The Attorney General may commence a proceeding under 11A V.S.A. §§ 14.30-14.33 to dissolve a professional corporation, if:

  (1) the Secretary of State or a licensing authority with jurisdiction over a professional service described in the corporation’s articles of incorporation serves written notice on the corporation under 11A V.S.A. § 5.04 that it has violated or is violating a provision of this chapter;

  (2) the corporation does not correct each alleged violation, or demonstrate to the reasonable satisfaction of the Secretary of State or licensing authority that it did not occur, within 60 days after service of the notice is perfected under 11A V.S.A. § 5.04; and

  (3) the Secretary of State or licensing authority certifies to the Attorney General a description of the violation, that it notified the corporation of the violation, and that the corporation did not correct it, or demonstrate that it did not occur, within 60 days after perfection of service of the notice. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• Subchapter 006: FOREIGN PROFESSIONAL CORPORATIONS

• § 860. Authority to transact business

  (a) A foreign professional corporation may not transact business in this State until it obtains a certificate of authority from the Secretary of State.

  (b) A foreign professional corporation may not obtain a certificate of authority, unless:

  (1) its corporate name satisfies the requirements of section 825 of this title;

  (2) it is incorporated for one or more of the purposes described in section 821 of this title; and

  (3) all of its shareholders, not less than one-half of its directors, and all of its officers, other than its secretary and treasurer (if any), are licensed in one or more states to render a professional service described in its articles of incorporation, except as provided in section 881 of this title. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 861. Application for certificate of authority

  The application of a foreign professional corporation for a certificate of authority to render professional services in this State must contain the information called for by 11A V.S.A. § 15.03, and, in addition, include a statement that all of its shareholders, not less than one-half of its directors, and all of its officers, other than its secretary and treasurer (if any), are licensed in one or more states to render a professional service described in its articles of incorporation, except as provided in section 881 of this title. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 862. Revocation of certificate of authority

  The Secretary of State may administratively revoke, under 11A V.S.A. §§ 15.30-15.32, the certificate of authority of a foreign professional corporation authorized to transact business in this State if a licensing authority with jurisdiction over a professional service described in the corporation’s articles of incorporation certifies to the Secretary of State that the corporation has violated or is violating a provision of this chapter, and describes the violation in the certificate. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• Subchapter 007: MISCELLANEOUS REGULATORY PROVISIONS

• § 870. Articles of incorporation for licensing authority

  A domestic or foreign professional corporation authorized to transact business in this State may not render professional services in this State until it delivers a certified copy of its articles of incorporation for filing to each licensing authority with jurisdiction over a professional service described in the articles. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 871. Annual report for Secretary of State

  The annual report required by 11A V.S.A. § 16.22 for each domestic professional corporation, and for each foreign professional corporation authorized to transact business in this State, must include a statement that all of its shareholders, not less than one-half of its directors, and all of its officers, other than its secretary and treasurer (if any), are qualified persons with respect to the corporation, except as provided in section 881 of this title. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 872. Licensing authority’s regulatory jurisdiction

  This chapter does not restrict the jurisdiction of a licensing authority over individuals rendering a professional service within the jurisdiction of the licensing authority, nor does it affect the interpretation or application of any law pertaining to standards of professional conduct. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 873. Penalty for signing false document

  (a) A person commits an offense if he or she signs a document he or she knows is false in any material respect with intent that the document be delivered to the licensing authority for filing.

  (b) An offense under this section is a misdemeanor punishable by a fine not to exceed $1,000.00.

  (c) The offense created by this section is in addition to any other offense created by law for the same conduct. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• Subchapter 008: TRANSITION PROVISIONS

• § 880. Application to existing corporations

  (a) This chapter does not apply to a corporation now existing unless the corporation elects professional corporation status under section 820 of this title.

  (b) This chapter does not affect an existing or future right or privilege to render professional services through the use of any other form of business entity. (Added 2001, No. 77 (Adj. Sess.), § 1.)

• § 881. Compliance with ownership provisions

  Notwithstanding the ownership limitations imposed by this chapter, persons who are authorized pursuant to 26 V.S.A chapter to own shares of an organization rendering licensed accounting services may own shares of a professional corporation pursuant to section 830 of this title, and such organizations with nonlicensee owners shall be deemed to comply with sections 840, 860, 861, and 871 of this title by complying with the ownership and governance requirements 26 V.S.A. chapter 1. (Added 2001, No. 77 (Adj. Sess.), § 1.)