Can Your Business be Closed and Dissolved Against Your Will?

You would probably expect that if and when it is ever time to close up your business, that at the very least, it would be a voluntary decision. After all, it’s your business, and thus, your choice whether to close it up or not.
But there are cases and situations when your business can be closed up and dissolved, against your will. Although rare, involuntary dissolution of a business is a possible consequence in various situations.
Needless to say, closing up someone’s business against their will is a drastic remedy, so courts are hesitant to do it, and the situations where it can happen are limited. They can include any of the following situations.
Wrongdoing and Illegality
One of the biggest causes of involuntary dissolution of a business, is where the business is engaging in fraud, illegality, wrongdoing, or in such a way that the company’s assets are being wasted.
This usually comes as a remedy for someone filing a lawsuit against the company—an aggrieved co-owner, or shareholders, or some other interested stakeholder, who asks the court for dissolution as a remedy for the wrongdoing or illegal dealings.
Deadlocks and Infighting
In some cases, if the company is at a standstill because of infighting, causing a deadlock on a major corporate decision the court can order that the company simply dissolve. With equal stakeholders, and no way to resolve disputes, the court often has no choice but to just dissolve the company.
Dissolving the Business
Dissolving a business is almost always something that someone who feels wronged by the business, asks the court to do. When it is requested, the court first needs to decide whether dissolving the business is something that should be done at all.
Because the life of the business is at stake, it isn’t unusual for those who run the business, to start diverting funds, or wasting corporate assets, or to start engaging in self dealing, when they sense a court could dissolve the business in the near future.
To prevent this, the court may appoint a receiver, to run the business and protect corporate assets, while the involuntary dissolution case is being determined. The receiver will run the company, and be paid from the company.
Who Gets What?
Assuming that the court grants the request, the next step is for the court to determine, after the company is dissolved and creditors paid, who will get what from the liquidation of the company assets, or from the sale of the company.
Often, there will be managers, investors, directors, or shareholders, all of whom feel that they have a right to collect from the proceeds of the business’ liquidation. These parties, all of whom may have been unified in wanting the business dissolved, can quickly become adversaries, once the business is dissolved and it’s time to decide who gets what.
Call the West Palm Beach business lawyers at The Law Offices of Larry E. Bray today for help with your business litigation needs.
Sources:
casetext.com/statute/florida-statutes/title-xxxvi-business-organizations/chapter-605-florida-revised-limited-liability-company-act/section-6050702-grounds-for-judicial-dissolution
floridabar.org/the-florida-bar-journal/anatomy-of-a-business-divorce-florida-llcs/