Question

When can a shareholder successfully maintain an action to involuntarily dissolve a corporation?

		When the directors are deadlocked in the management of corporate affairs and the shareholders are unable to break the deadlock and very serious harm is occurring
		When the shareholders are deadlocked on any matter
		When the corporate assets are not being used wisely in the opinion of the shareholders
		When the business is not as profitable as the shareholders originally thought it would be.

Answer 1

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.

Therefore , correct answer in this case is “ When the directors are deadlocked in the management of the corporate affairs and the shareholders are unable to break the deadlock and very serious harm is occurring: