Involuntary Dissolution of a Corporation


Involuntary Dissolution of a Corporation

In an earlier post we discussed voluntary dissolution of a corporation. In this article, we’ll explain some basic facts about involuntary dissolution and highlight some steps involved in the process.

An involuntary dissolution may occur when shareholders in a corporation disagree about whether to dissolve the corporation.  The minority shareholders may seek an involuntary dissolution.  (If a majority of the shareholders agree to dissolve a corporation, then the corporation may be dissolved via voluntary dissolution.)  

The Court of Common Pleas may order a corporate dissolution under the following conditions.

  1. The acts of the directors, or those in control of the corporation are illegal, oppressive or fraudulent and it is beneficial to the interests of the shareholders that the corporation be wound up and dissolved;
  2. The corporate assets are being misapplied or wasted, and it is beneficial to the interests of the shareholders that the corporation be wound up and dissolved; or
  3. The directors are deadlocked in the direction of the management of the business and affairs of the corporation, and the shareholders are unable to break the deadlock, such that irreparable injury to the corporation is being suffered or is threatened as a result.

If one of these conditions does not apply, the unhappy shareholders may have no other option than to sell their stock.  

Creditors of a corporation may also seek the involuntary dissolution of a corporation. 

If you need assistance regarding an involuntary corporate dissolution, or other matters related to managing your business, the attorneys at the Scolieri Law Group, P.C. can help.  Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can take care of the details for you, including the formation of a legal business entity if needed.  Contact us today at (412)765-0546 or info@scolierilaw.com.