Pennsylvania Consolidated & Unconsolidated Statutes
Chapter 25 - Registered Corporations
Section 2538 - Approval of transactions with interested shareholders

(a) General rule.--The following transactions shall require the affirmative vote of the shareholders entitled to cast at least a majority of the votes that all shareholders other than the interested shareholder are entitled to cast with respect to the transaction, without counting the vote of the interested shareholder:
(1) Any transaction authorized under Subchapter C of Chapter 19 (relating to merger liabilities and sale of assets) or Subchapter C (relating to merger) or D (relating to interest exchange) of Chapter 3 between a registered corporation or subsidiary thereof and a shareholder of the registered corporation.
(2) Any transaction authorized under Subchapter F of Chapter 3 (relating to division) in which the interested shareholder receives a disproportionate amount of any of the shares or other securities of any corporation surviving or resulting from the plan of division.
(3) Any transaction authorized under Subchapter F of Chapter 19 (relating to voluntary dissolution and winding up) in which a shareholder is treated differently from other shareholders of the same class (other than any dissenting shareholders under Subchapter D of Chapter 15 (relating to dissenters rights)).
(4) Any reclassification authorized under Subchapter B of Chapter 19 (relating to amendment of articles) in which the percentage of voting or economic share interest in the corporation of a shareholder is materially increased relative to substantially all other shareholders.
(b) Exceptions.--Subsection (a) shall not apply to a transaction:
(1) that has been approved by a majority vote of the board of directors without counting the vote of directors who:
(i) are directors or officers of, or have a material equity interest in, the interested shareholder; or
(ii) were nominated for election as a director by the interested shareholder, and first elected as a director, within 24 months of the date of the vote on the proposed transaction;
(2) in which the consideration to be received by the shareholders for shares of any class of which shares are owned by the interested shareholder is not less than the highest amount paid by the interested shareholder in acquiring shares of the same class; or
(3) effected pursuant to section 321(d)(1)(ii) (relating to approval by business corporation).
(c) Additional approvals.--The approvals required by this section shall be in addition to, and not in lieu of, any other approval required by this subpart, the articles of the corporation, the bylaws of the corporation or otherwise.
(d) Definition of "interested shareholder".--As used in this section, the term "interested shareholder" includes the shareholder who is a party to the transaction or who is treated differently from other shareholders and any person, or group of persons, that is acting jointly or in concert with the interested shareholder and any person who, directly or indirectly, controls, is controlled by or is under common control with the interested shareholder. An interested shareholder shall not include any person who, in good faith and not for the purpose of circumventing this section, is an agent, bank, broker, nominee or trustee for one or more other persons, to the extent that the other person or persons are not interested shareholders.
(Dec. 19, 1990, P.L.834, No.198, eff. imd.; Dec. 18, 1992, P.L.1333, No.169, eff. 60 days; Oct. 22, 2014, P.L.2640, No.172, eff. July 1, 2015)

2014 Amendment. Act 172 amended subsecs. (a)(1) and (2) and (b).
1990 Amendment. Act 198 added section 2538. See section 404(b)(1) of Act 198 of 1990 in the appendix to this title for special provisions relating to applicability.
Cross References. Section 2538 is referred to in sections 313, 1745, 1746 of this title.

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