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Corporate Litigation: Involuntary Dissolution and Liquidation

Generally, corporate “dissolution” refers to the termination of the corporation. It can happen voluntarily or involuntarily. In Missouri, certain corporations may be involuntary dissolved based upon a lawsuit by a shareholder.

Dissolution of a corporation is an equitable action granted by Missouri statutes. Struckhoff v. Echo Ridge Farm, Inc., 833 S.W.2d 463, 466 (Mo. Ct. App. 1992). Under Section 351.494, RSMo, a court may dissolve a corporation in a proceeding by a shareholder if it is established that the directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent. Courts do not entertain requests to dissolve a corporation lightly. Indeed, “[d]issolution of a corporation is a drastic remedy and courts should resort to this procedure only to prevent irreparable injury, imminent danger or loss or a miscarriage of justice.” Struckhoff, 833 S.W.2d at 466. In exercising its discretion, the Court should consider the effect on the public as well as on the shareholders.

When the request to dissolve is based on shareholder oppression, the Court considers a number of factors: (1) burdensome and wrongful conduct, (2) lack of fair dealing in the affairs of the company to the detriment of some of its shareholders, (3) and a visible departure from the standards of fair dealing and fair play. Whether shareholder oppression exists is a factual question that is a case-by-case inquiry. Claims of oppressive conduct are analyzed in terms of fiduciary duties owed by directors or controlling shareholders to minority shareholders. Fix v. Fix Material Co., Inc., 538 S.W.2d 351, 358 (Mo. Ct. App. 1976). 

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