Judicial dissolution is a remedy that allows the court to order the company's dissolution.
Grounds The grounds for judicial dissolution are usually stated in the state laws. They depend on the entity type (partnership, LLC, or corporation). Generally, a company may be judicially dissolved if it is not reasonably practicable to carry out the business in conformity with its operating documents. Other grounds may include:
- deadlock
- illegal conduct
- oppression of minority owners' rights
- waste of the company's assets
- insolvency
- tax delinquency
Who can ask for judicial dissolution?A business owner may ask to dissolve the company, but his/ her/ its rights may be limited in the operating documents and applicable state laws. The state may also request dissolution if the company is delinquent on taxes.
ProceduresThe operating documents and the state laws may require certain pre-litigation procedures before the petitioner may ask for judicial dissolution. This may include the demand or attempt to remedy the underlying dissolution issues. If the pre-litigation procedures did not help, the petitioner may file a lawsuit requesting the court to dissolve the company.
Alternative buyoutIn some situations, the company may have an option to buy the petitioning owner out of the business. Please consult with an attorney to determine the grounds, procedures, and alternative remedies for judicial dissolution.