How to Dissolve a Corporation With a Court Judgment

A court can order a corporation dissolved for fraud or mismanagement.
A court can order a corporation dissolved for fraud or mismanagement. (Image: Hemera Technologies/ Images)

A court can order the judicial dissolution of any corporation registered in the state under special circumstances outlined by state law. Each state has its own corporations statute that details these circumstances. Generally, an action to dissolve a corporation by court order can be initiated by the state attorney general, a shareholder or a creditor. Grounds for judicial dissolution typically include fraud, abuse of authority, deadlock, illegal actions by directors, waste and insolvency. If the court finds in favor of the petitioner, it issues a decree of dissolution, supervises liquidation and winds up the corporation's affairs.

Establish grounds for court intervention. Check the involuntary dissolution provisions of the state corporations statute. Typically, a shareholder can pursue involuntary dissolution if the shareholders are deadlocked in management or voting or the directors are committing illegal acts or misusing corporate assets. A creditor can pursue dissolution if he has a judgment against the corporation and the company is effectively insolvent. The state attorney general's office can initiate court-ordered dissolution in the case of fraud or abuse of the grant of authority. Collect evidence to support acceptable grounds, such as shareholders' meeting minutes to prove deadlock.

Draft a petition for judicial dissolution of the corporation on grounds allowed by state law. Name the corporation as the defending party. Detail the facts of the case. Allege the harm suffered as a result of the corporation remaining in business under the current circumstances. Sign the petition. Hire an attorney to help with the process, if possible.

File the petition in state court. Use the civil court in the county where the corporation has its principal place of business. Submit the petition to the clerk of the court. Pay the appropriate filing fee. Wait for the case to be scheduled for a hearing on the court docket.

Make your case in court. Present the facts of the case that support judicial dissolution to the judge when the case is heard. If the judge finds your evidence persuasive, he will issue a decree of dissolution. At this point, the affairs of the corporation are in the hands of the court.

Monitor the progress of the judicial dissolution. The court records the decree of dissolution with the secretary of state's office. It supervises the liquidation of assets and winds up business affairs itself or appoints a receiver. Keep abreast of the dissolution process to make sure your interest in the corporation, whether as a shareholder or creditor, is processed and paid out from the proceeds.

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