What A Business Dissolution Attorney Does
A business dissolution attorney represents privately held corporations, partnerships, and limited liability companies and the individuals who own and operate them in, among other types of corporate litigation, actions seeking to legally separate the owners of these business entities.
Proceedings to dissolve privately held businesses frequently involve the founders of the entities, the founders’ children after the death of the founders, or partnerships between family members or friends. As a result, litigants in actions to dissolve closely held businesses often personally identify with, and take pride in, the businesses to a greater extent than do parties in cases for dissolution of publicly held entities.
Further, because the litigants in disputes concerning privately held businesses frequently are not merely owners, but also are family members or longstanding friends, these litigants often have greater animosity and hostility toward one another than do parties in disputes relating to public companies. A business dissolution attorney, in prosecuting or defending actions to break up closely held businesses, must take into account these interpersonal dynamics. At the Law Offices of David S. Rich, LLC, we tenaciously advocate in court for both businesses and their individual owners, and we pay close attention to the interpersonal or familial tensions that abound in business dissolution litigation.
New York Causes Of Action for Business Dissolution
In business dissolution litigation in the New York state courts, the bases on which individual owners of privately held business entities may secure court orders legally separating the owners of the entities depend upon the type of corporate entity. That is, in New York, the grounds for judicial dissolution of closely held businesses depend upon whether the business is a corporation, a partnership, a limited liability partnership, or a limited liability company.
Specifically, some of the bases on which individual owners of privately held business entities may obtain, in court, dissolution of the business are as follows. At the Law Offices of David S. Rich, LLC, we have substantial experience prosecuting and defending, on behalf of entities and individuals, these claims and many others.
In New York, there are two types of dissolution of a corporation: voluntary dissolution, which is relatively simple, and involuntary dissolution, which requires a court proceeding. Bases for involuntary dissolution of a New York corporation include (i) deadlock among shareholders and (ii) special circumstances.
Deadlock Among Shareholders: In a proceeding brought by persons holding 50% of the voting shares of a New York corporation, the court may dissolve the corporation on a showing that:
- The directors are so divided about the management of the corporation’s affairs that the votes required for action by the board of directors cannot be obtained;
- The shareholders are so divided that the votes required for the election of directors cannot be obtained; or
- There is internal dissension and two or more factions of shareholders are so divided that dissolution would be beneficial to the shareholders.
Special Circumstances: On a petition filed by persons holding 20% of the shares of a New York corporation which is neither publicly traded nor registered under the Investment Company Act of 1940, the court may dissolve the corporation upon demonstration that:
- The directors or those in control of the corporation have been guilty of illegal, fraudulent or oppressive actions toward the complaining shareholders; or
- The property or assets of the corporation are being looted, wasted, or diverted for non-corporate purposes by its directors, officers or those in control of the corporation.
In any proceeding brought to dissolve a New York corporation under special circumstances, other shareholders may elect to purchase the petitioners’ shares at their fair value and upon such terms and conditions as may be approved by the court.
On application by or for a partner, a court will dissolve a New York partnership whenever:
- A partner has been declared incompetent in any court proceeding or is shown to be of unsound mind,
- A partner becomes in any other way incapable of performing his part of the partnership contract,
- A partner has been guilty of conduct which tends to affect prejudicially the carrying on of the business;
- A partner willfully or persistently breaches the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him;
- The business of the partnership can only be carried on at a loss; or
- Other circumstances make a dissolution equitable.
Limited Liability Companies
On application by or for a member, a court may dissolve a New York limited liability company where the petitioning member establishes, in the context of the terms of the operating agreement or articles of incorporation, that (1) the management of the entity is unable or unwilling to reasonably permit or promote the stated purpose of the entity to be realized or achieved, or (2) continuing the entity is financially unfeasible.
If you or your company wants to bring, or needs a law firm to defend it in, business dissolution litigation or other corporate litigation, contact the Law Offices of David S. Rich, LLC.
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