Corporate Sale of Substantially All Assets Approval Requirements in South Dakota
At a glance
| Governing law, corporation, assets, and transaction scope | South Dakota Business Corporation Act ch. 47-1A, sections 1201 through 1202.6; ordinary domestic corporation. Covers sale, lease, exchange, or other non-exempt disposition; direct/indirect consolidated-subsidiary assets count as parent assets (§§ 47-1A-1201 to -1202.6) |
|---|---|
| Ordinary-course, significant-activity, and substantially-all trigger | Trigger is non-exempt disposition leaving corporation without significant continuing business activity, not express all/substantially-all formula. Usual/regular-course disposition of any/all assets exempt unless articles opt in (§§ 47-1A-1201(1), -1202) |
| Quantitative safe harbor, subsidiaries, and investment-holding tests | Conclusive retained-activity safe harbor: ≥25% prior-year total assets AND ≥25% of either continuing pretax income OR continuing revenue, corporation/subsidiaries consolidated. No reverse presumption, subsidiary- valuation, or investment-holding rule stated (§§ 47-1A-1202, -1202.6) |
| Board resolution, recommendation, conflict exception, and conditioning | Board initiates by authorizing resolution, submits, and recommends; conflict/special-circumstances nonrecommendation requires its basis. Board may condition submission on any basis (§ 47-1A-1202.1) |
| Shareholder meeting notice, nonvoting holders, terms, and consideration | Every voting/nonvoting holder gets 10-60-day meeting notice stating purpose and describing disposition, terms, conditions, consideration. Written action requires all entitled voters; no disposition-specific consent notice stated (§§ 47-1A-704 to -705, -1202.2) |
| Vote denominator, classes/groups, articles, and higher thresholds | Majority of votes entitled is required quorum; with quorum, votes cast for must exceed against. Articles or board condition may require greater vote/ presence; no disposition-specific class/group vote stated (§§ 47-1A-725, -1202.1, -1202.3) |
| Ordinary-course, encumbrance, subsidiary, distribution, and dissolution exclusions | Unless articles opt in: usual-course assets, any-course encumbrance, wholly owned entities, and pro rata class/series distribution exempt. Dissolution dispositions follow the separate dissolution statutes, not the disposition- approval sequence (§§ 47-1A-1201, -1202.5) |
| Agreement execution, closing, abandonment, and contract rights | Sections 1201-1202.6 state no statutory agreement execution, filing, amendment, or closing process. After holder approval and before consummation, corporation may abandon without holder action, subject to other parties' contract rights (§ 47-1A-1202.4) |
| Appraisal/dissent notice and transaction effect | Entitled voter gets appraisal on a consummated disposition under §§ 47-1A-1202 to -1202.6, subject to market, consideration, acquirer/insider, and preferred-share limits. Meeting notice says rights are, are not, or may be available and includes appraisal provisions when applicable (§§ 47-1A-1302 to -1302.2, -1320) |
| Fiduciary, successor-liability, creditor, tax, antitrust, securities, and fact boundaries | Completed-action challenge generally limited to authorization defect or fraud/material misrepresentation, with § 1302.1(3)-(4) exception. Approval does not decide trigger facts, fairness, fiduciary compliance, successor liability, creditors, tax, securities, or other law (§ 47-1A-1302.3) |
Requirements one by one
The 25% pair is conclusive only when both parts are met
S.D. Codified Laws § 47-1A-1202 applies to a non-exempt disposition that would leave the corporation without significant continuing business activity. The corporation conclusively retains such activity if it keeps a business representing at least 25% of prior-year total assets and at least 25% of either pretax continuing income or continuing revenue. Each measure consolidates the corporation and its subsidiaries.
S.D. Codified Laws § 47-1A-1202.6 deems direct and indirect consolidated- subsidiary assets parent assets. The statutes do not make missing either percentage conclusive in the opposite direction or state a subsidiary-valuation or investment-holding rule.
The board initiates, recommends, and may condition
S.D. Codified Laws § 47-1A-1202.1 requires an authorizing board resolution, submission, and an ordinary recommendation. A conflict or special circumstance can support no recommendation if the board transmits its basis. It may condition submission on any basis.
Every holder receives terms, conditions, and consideration
S.D. Codified Laws § 47-1A-1202.2 requires meeting notice to every voting and nonvoting holder. It states the purpose and describes the disposition, terms, conditions, and consideration. S.D. Codified Laws § 47-1A-705 supplies the 10-to-60-day interval.
S.D. Codified Laws § 47-1A-704 permits no-meeting action only when every holder entitled to vote signs written consent. The disposition sections state no separate consent notice to nonvoters.
A majority quorum uses a votes-cast decision rule
S.D. Codified Laws § 47-1A-1202.3 requires a quorum of at least a majority of votes entitled on the disposition. Under § 47-1A-725, votes cast for then must exceed votes cast against. The articles or a board condition may require a greater vote or more votes present. The disposition sequence adds no separate class or group vote.
Four exclusions and dissolution use different routes
S.D. Codified Laws § 47-1A-1201 removes four actions from holder approval unless the articles provide otherwise: a usual-and-regular-course disposition of any or all assets, an encumbrance in or outside that course, a transfer to wholly owned entities, and a pro rata asset distribution to one or more classes or series.
S.D. Codified Laws § 47-1A-1202.5 places a disposition during dissolution under the separate dissolution sequence rather than §§ 47-1A-1202 to -1202.6.
Approval may be abandoned before consummation
After shareholder approval and before consummation, S.D. Codified Laws § 47-1A-1202.4 allows the corporation to abandon without another holder action, subject to other parties' contractual rights. The disposition sequence states no statutory agreement execution, filing, amendment, or closing process.
Appraisal and completed-action challenges have separate filters
S.D. Codified Laws § 47-1A-1302 grants appraisal to an entitled voter on consummation of a disposition under §§ 47-1A-1202 to -1202.6. Section 47-1A-1302.1 applies market, consideration, acquirer, and insider filters, while § 47-1A-1302.2 permits specified preferred-share limitations. Each requires the complete class, market, transaction, ownership, benefit, and articles record.
S.D. Codified Laws § 47-1A-1320 requires meeting notice to say whether appraisal rights are, are not, or may be available and to include the appraisal provisions when applicable. S.D. Codified Laws § 47-1A-1302.3 generally limits a completed- action challenge to authorization defects or fraud/material misrepresentation, while preserving its stated exception for rights under § 47-1A-1302.1(3)-(4).
What trips people up
- The safe harbor does not run backward. The 25%-plus-25% pair is conclusive when met, but missing either measure is not declared conclusive.
- South Dakota splits one Model Act provision into seven sections. The trigger, board action, notice, vote, abandonment, dissolution, and subsidiary rules must be read together.
- Written action remains unanimous. Unlike several modern-act states, South Dakota supplies no articles-based meeting-equivalent consent route.
Common questions
Are subsidiary assets included with the parent?
Yes, for direct and indirect consolidated subsidiaries. Section 47-1A-1202.6 treats their assets as parent assets for this analysis.
Must nonvoting holders receive disposition materials?
Yes for a meeting. Section 47-1A-1202.2 sends every holder the description of the transaction, terms, conditions, and consideration.
Does the disposition sequence require a state filing?
No filing step appears in §§ 47-1A-1201 to -1202.6. Other transaction, property, regulatory, or dissolution law may independently require one.
Statutes and sources
- S.D. Codified Laws §§ 47-1A-1201 to -1202.6 — exclusions, significant- activity trigger, conclusive 25% safe harbor, board action, notice, vote, abandonment, dissolution, and subsidiaries. Official chapter catalog and current official per-section API pages, accessed September 5, 2026.
- S.D. Codified Laws §§ 47-1A-704 to -705 and -725 — unanimous consent, meeting notice, and votes-cast approval. Official section 704 text, section 705 text, and section 725 text, accessed September 5, 2026.
- S.D. Codified Laws §§ 47-1A-1302 to -1302.3 and -1320 — appraisal eligibility, limits, completed-action challenges, and notice. Official appraisal-right text, limitations, preferred-share limits, challenge limits, and notice, accessed September 5, 2026.
Source links
Every statute quoted above, linked, with the date we checked it.
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