Grounds for Judicial Dissolution

1. Law
2. Georgia Code
3. Corporations, Partnerships, and Associations
4. Nonprofit Corporations
5. Dissolution
6. Judicial Dissolution
7. Grounds for Judicial Dissolution

The superior court may dissolve a corporation:

1. In a proceeding by the Attorney General if it is established that:
   1. The corporation obtained its articles of incorporation through fraud; or
   2. The corporation has continued to exceed or abuse the authority conferred upon it by law;
2. In a proceeding by a member if it is established that:
   1. The directors are deadlocked in the management of the corporate affairs, the members are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered or the business and affairs of the corporation can no longer be conducted to the advantage of the members generally, because of the deadlock;
   2. The directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal or fraudulent in connection with the operation or management of the business and affairs of the corporation;
   3. The members are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired or would have expired; or
   4. The corporate assets are being misapplied or wasted;
3. In a proceeding by a creditor if it is established that:
   1. The creditor's claim has been reduced to judgment, the execution on the judgment has been returned unsatisfied, and the corporation is insolvent; or
   2. The corporation has admitted in writing that the creditor's claim is due and owing and the corporation is insolvent; or
4. In a proceeding by the corporation to have its voluntary dissolution continued under court supervision;

   provided, however, that all of the actions described in paragraphs (1) through (3) of this Code section shall be stayed so long as the corporation is contesting, in good faith, in any appropriate proceeding, the alleged grounds for dissolution.

(Code 1981, §14-3-1430, enacted by Ga. L. 1991, p. 465, § 1.)

Law reviews.

- For note discussing problems with venue in Georgia, and proposing statutory revisions to improve the resolution of venue questions, see 9 Ga. St. B. J. 254 (1972).

COMMENT

This section is based on the Model Act and on its Business Code counterpart. It differs from the latter in subsection (2)(B), which omits the requirement that the proceeding be initiated by shareholders owning at least 20% of the outstanding shares.

JUDICIAL DECISIONS

Dissolution not warranted.

- Dissolution of a homeowner's association was not warranted when, contrary to the co-owner's contentions, the evidence did not establish that the association failed to file proper tax returns or follow proper procedures for notice of meetings; the association, though initially denied tax exempt status, was ultimately granted such status, and the evidence showed that the association stopped making all unauthorized expenditures except for two, one of which it claimed was authorized. Parker v. Clary Lakes Rec. Ass'n, 265 Ga. App. 93, 592 S.E.2d 880 (2004).

Attorney's fees disallowed.

- In an action by plaintiff-shareholder seeking judicial dissolution due to a shareholder deadlock, plaintiff was not entitled to attorney's fees under O.C.G.A. § 9-8-13 since the court did not appoint a receiver and bring a fund into court for distribution. Industrial Distrib. Group, Inc. v. Waite, 268 Ga. 115, 485 S.E.2d 792 (1997), rev'g Industrial Distrib. Group, Inc. v. Waite, 222 Ga. App. 233, 474 S.E.2d 28 (1996).

RESEARCH REFERENCES

Am. Jur. 2d.

- 19 Am. Jur. 2d, Corporations, §§ 2350 et seq.

C.J.S.

- 19 C.J.S., Corporations, §§ 914 et seq., 916, 938, 939, 941.

ALR.

- Conclusiveness, as regards venue, of designation of place of business in incorporation papers, 175 A.L.R. 1092.

Dissolving or winding up affairs of corporation domiciled in another state, 19 A.L.R.3d 1279.

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