Judicial Dissolution

Posted by William J. Piercy on

Judicial dissolution is the process through which the courts will wind up and liquidate a business entity such that its liabilities its assets are distributed to its owners, to the extent that there are assets with which to do so.  Judicial dissolution is often sought by one faction of a business entity’s ownership where there exists a deadlock in the management of the business or where there is fraud and a waste of corporate assets by one owner to the detriment of another.  In some instances, a minority owner may also petition for judicial dissolution of a business entity by alleging that there has been a freeze-out of a minority by the majority owner(s).  In many ways, a judicial dissolution is the “nuclear option” in a business divorce in that it virtually guarantees an outcome that none of the parties want:  a fire sale of the business (or its individual assets) for far less than it could bring if sold under more favorable circumstances.