The Effectiveness of Involuntary Dissolution Suits as a Remedy for Close Corporation Dissension

Intra-corporate dissension between shareholders in a close corporation that can lead to serious deadlock, corporate paralysis and attempted squeeze-outs or other oppressive action is well documented. The purpose of this article is to discuss the available remedies for dealing with this dissension, placing particular emphasis on involuntary dissolution suits, since historically such suits have been the most common litigation remedy used by aggrieved shareholders. The basic conclusion reached is that for the most part judges have done a commendable job of balancing the expectation interests of minority shareholders against the inherent voting and management rights of majority shareholders, and of fashioning appropriate and innovative remedies to deal with oppression and other wrongful conduct. A second major conclusion is that statutory provisions which specifically authorize relief other than dissolution greatly enhance the probability that a judge will order an effective remedy in close corporation dissension litigation.