Grounds for judicial dissolution

1. Law
2. Arkansas Code
3. Business and Commercial Law
4. Corporations and Associations
5. The Arkansas Nonprofit Corporation Act of 1993
6. Dissolution
7. Judicial Dissolution
8. Grounds for judicial dissolution

1. (a) The circuit court may dissolve a corporation:

   1. (1) in a proceeding by the attorney general if it is established that:

      1. (i) the corporation obtained its articles of incorporation through fraud;

      2. (ii) the corporation has continued to exceed or abuse the authority conferred upon it by law; or

      3. (iii) the corporation is a public benefit corporation and the corporate assets are being fraudulently misapplied or wasted.

   2. (2) except as provided in the articles or bylaws of a religious corporation, in a proceeding by fifty (50) members or members holding five percent (5%) of the voting power, whichever is less, or by a director or any person specified in the articles, if it is established that:

      1. (i) the directors are deadlocked in the management of the corporate affairs, and the members, if any, are unable to breach the deadlock;

      2. (ii) the directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal or fraudulent;

      3. (iii) the members are deadlocked in voting power and have failed, for a period that includes at least two (2) consecutive annual meeting dates, to elect successors to directors whose terms have, or would otherwise have, expired; or

      4. (iv) the corporate assets are being fraudulently misapplied or wasted.

   3. (3) in a proceeding by a creditor if it is established that:

      1. (i) the creditor's claim has been reduced to judgment, the execution on the judgment returned unsatisfied and the corporation is insolvent; or

      2. (ii) the corporation has admitted in writing that the creditor's claim is due and owing and the corporation is insolvent.

   4. (4) in a proceeding by the corporation to have its voluntary dissolution continued under court supervision.

2. (b) Prior to dissolving a corporation, the court shall consider whether:

   1. (1) there are reasonable alternatives to dissolution;

   2. (2) dissolution is in the public interest, if the corporation is a public benefit corporation; and

   3. (3) dissolution is the best way of protecting the interests of members, if the corporation is a mutual benefit corporation.

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