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Involuntary Business Dissolutions in California

Involuntary Business Dissolutions.jpgA business may find itself facing a major internal strife. In some cases, controlling directors may be deadlocked, or involved in another seemingly irresolvable dispute. Eventually, these internal issues will cause tremendous damage to the value of the company. At this point, shareholders may need to take action in order to protect their interests. Forcing an involuntary business dissolution is sometimes the only way for a shareholder to protect their rights. If you are a shareholder in a company facing an internal dispute, and you believe that involuntary dissolution may be necessary, you need to contact an experienced San Jose business dissolution attorney as soon as possible.

The Grounds for Involuntary Business Dissolution

Often, it is possible to find a mutually agreeable resolution to a deadlock or a dispute without taking legal action. In this situation, an experienced business law attorney can help all parties by clarifying the affected interests and the options going forward. However, for some companies, an internal dispute simply cannot be resolved. This will quickly cause damage to the underlying business and will destroy shareholder value. Shareholders must take proactive steps to protect their rights and interests. Forcing an involuntary business dissolution may be the best option. Under California law, affected shareholders of a corporation can take action to bring dissolution when certain key conditions are met. Specifically, an involuntary business dissolution can be sought on any of the following grounds:

  • The business has been abandoned for at least one year;
  • The corporation has an even number of directors and they are unable to agree on management issues to the extent that the value of the business is likely to be impaired;
  • Two or more groups of shareholders are in a dispute to the point that shareholder value is damaged by the continued operation of the business; or
  • Those in control of the corporation are guilty of fraud, mismanagement or another form of abuse of their authority.

Ultimately, shareholders have a legal right to protect the value of their shares from likely destruction. An unresolvable dispute, a deadlock, clear mismanagement or fraud is enough to show good cause to bring action to force an involuntary dissolution. These type of cases are often complex, and it is important that affected parties act quickly to ensure that their legal rights are properly protected.

Contact an Experienced San Jose Business Law Attorney

If you believe that involuntary business dissolution may be necessary in your situation, an experienced attorney should comprehensively review your case immediately. The experienced San Jose business dissolution attorneys at Diemer, Whitman & Cardosi, LLP can help. Please do not hesitate to contact our office today to schedule your free initial legal consultation. Our firm is based in San Jose and represents businesses throughout the Bay Area, including in San Mateo County and Marin County.



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