SECTIONS 1800-1809 - California Statutes

CORPORATIONS CODE

SECTION 1800-1809

1800. (a) A verified complaint for involuntary dissolution of a
corporation on any one or more of the grounds specified in
subdivision (b) may be filed in the superior court of the proper
county by any of the following persons:
(1) One-half or more of the directors in office.
(2) A shareholder or shareholders who hold shares representing not
less than 33 1/3 percent of (i) the total number of outstanding
shares (assuming conversion of any preferred shares convertible into
common shares) or (ii) the outstanding common shares or (iii) the
equity of the corporation, exclusive in each case of shares owned by
persons who have personally participated in any of the transactions
enumerated in paragraph (4) of subdivision (b), or any shareholder or
shareholders of a close corporation.
(3) Any shareholder if the ground for dissolution is that the
period for which the corporation was formed has terminated without
extension thereof.
(4) Any other person expressly authorized to do so in the
articles.
(b) The grounds for involuntary dissolution are that:
(1) The corporation has abandoned its business for more than one
year.
(2) The corporation has an even number of directors who are
equally divided and cannot agree as to the management of its affairs,
so that its business can no longer be conducted to advantage or so
that there is danger that its property and business will be impaired
or lost, and the holders of the voting shares of the corporation are
so divided into factions that they cannot elect a board consisting of
an uneven number.
(3) There is internal dissension and two or more factions of
shareholders in the corporation are so deadlocked that its business
can no longer be conducted with advantage to its shareholders or the
shareholders have failed at two consecutive annual meetings at which
all voting power was exercised, to elect successors to directors
whose terms have expired or would have expired upon election of their
successors.
(4) Those in control of the corporation have been guilty of or
have knowingly countenanced persistent and pervasive fraud,
mismanagement or abuse of authority or persistent unfairness toward
any shareholders or its property is being misapplied or wasted by its
directors or officers.
(5) In the case of any corporation with 35 or fewer shareholders
(determined as provided in Section 605), liquidation is reasonably
necessary for the protection of the rights or interests of the
complaining shareholder or shareholders.
(6) The period for which the corporation was formed has terminated
without extension of such period.
(c) At any time prior to the trial of the action any shareholder
or creditor may intervene therein.
(d) This section does not apply to any corporation subject to the
Banking Law (Division 1 (commencing with Section 99) of the Financial
Code), the Public Utilities Act (Part 1 (commencing with 201) of
Division 1 of the Public Utilities Code), the Savings and Loan
Association Law (Division 2 (commencing with Section 5000) of the
Financial Code) or Article 14 (commencing with Section 1010) of
Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(e) For the purposes of this section, "shareholder" includes a
beneficial owner of shares who has entered into an agreement under
Section 300 or 706.

1801. (a) The Attorney General may bring an action against any
domestic corporation or purported domestic corporation in the name of
the people of this state, upon the Attorney General's own
information or upon complaint of a private party, to procure a
judgment dissolving the corporation and annulling, vacating or
forfeiting its corporate existence upon any of the following grounds:
(1) The corporation has seriously offended against any provision
of the statutes regulating corporations.
(2) The corporation has fraudulently abused or usurped corporate
privileges or powers.
(3) The corporation has violated any provision of law by any act
or default which under the law is a ground for forfeiture of
corporate existence.
(4) The corporation has failed to pay to the Franchise Tax Board
for a period of five years any tax imposed upon it by the Bank and
Corporation Tax Law.
(b) If the ground of the action is a matter or act which the
corporation has done or omitted to do that can be corrected by
amendment of its articles or by other corporate action, such suit
shall not be maintained unless (1) the Attorney General, at least 30
days prior to the institution of suit, has given the corporation
written notice of the matter or act done or omitted to be done and
(2) the corporation has failed to institute proceedings to correct it
within the 30-day period or thereafter fails to prosecute such
proceedings.
(c) In any such action the court may order dissolution or such
other or partial relief as it deems just and expedient. The court
also may appoint a receiver for winding up the affairs of the
corporation or may order that the corporation be wound up by its
board subject to the supervision of the court.
(d) Service of process on the corporation may be made pursuant to
Chapter 17 or by written notice to the president or secretary of the
corporation at the address indicated in the corporation's last tax
return filed pursuant to the Bank and Corporation Tax Law. The
Attorney General shall also publish one time in a newspaper of
general circulation in the proper county a notice to the shareholders
of the corporation.

1802. If the ground for the complaint for involuntary dissolution
of the corporation is a deadlock in the board as set forth in
subdivision (b)(2) of Section 1800, the court may appoint a
provisional director. The provisions of subdivision (c) of Section
308 apply to any such provisional director so appointed.

1803. If, at the time of the filing of a complaint for involuntary
dissolution or at any time thereafter, the court has reasonable
grounds to believe that unless a receiver of the corporation is
appointed the interests of the corporation and its shareholders will
suffer pending the hearing and determination of the complaint, upon
the application of the plaintiff, and after a hearing upon such
notice to the corporation as the court may direct and upon the giving
of security pursuant to Sections 566 and 567 of the Code of Civil
Procedure, the court may appoint a receiver to take over and manage
the business and affairs of the corporation and to preserve its
property pending the hearing and determination of the complaint for
dissolution.

1804. After hearing the court may decree a winding up and
dissolution of the corporation if cause therefor is shown or, with or
without winding up and dissolution, may make such orders and decrees
and issue such injunctions in the case as justice and equity
require.

1805. (a) Involuntary proceedings for winding up a corporation
commence when the order for winding up is entered under Section 1804.
(b) When an involuntary proceeding for winding up has commenced,
the board shall conduct the winding up of the affairs of the
corporation, subject to the supervision of the court, unless other
persons are appointed by the court, on good cause shown, to conduct
the winding up. The directors or such other persons may, subject to
any restrictions imposed by the court, exercise all their powers
through the executive officers without any order of court.
(c) When an involuntary proceeding for winding up has commenced,
the corporation shall cease to carry on business except to the extent
necessary for the beneficial winding up thereof and except during
such period as the board may deem necessary to preserve the
corporation's goodwill or going-concern value pending a sale of its
business or assets, or both, in whole or in part. The directors shall
cause written notice of the commencement of the proceeding for
involuntary winding up to be given by mail to all shareholders and to
all known creditors and claimants whose addresses appear on the
records of the corporation, unless the order for winding up has been
stayed by appeal therefrom or otherwise or the proceeding or the
execution of the order has been enjoined.

1806. When an involuntary proceeding for winding up has been
commenced, the jurisdiction of the court includes:
(a) The requirement of the proof of all claims and demands against
the corporation, whether due or not yet due, contingent,
unliquidated or sounding only in damages, and the barring from
participation of creditors and claimants failing to make and present
claims and proof as required by any order.
(b) The determination or compromise of all claims of every nature
against the corporation or any of its property, and the determination
of the amount of money or assets required to be retained to pay or
provide for the payment of claims.
(c) The determination of the rights of shareholders and of all
classes of shareholders in and to the assets of the corporation.
(d) The presentation and filing of intermediate and final accounts
of the directors or other persons appointed to conduct the winding
up and hearing thereon, the allowance, disallowance or settlement
thereof and the discharge of the directors or such other persons from
their duties and liabilities.
(e) The appointment of a commissioner to hear and determine any or
all matters, with such power or authority as the court may deem
proper.
(f) The filling of any vacancies on the board which the directors
or shareholders are unable to fill.
(g) The removal of any director if it appears that the director
has been guilty of dishonesty, misconduct, neglect or abuse of trust
in conducting the winding up or if the director is unable to act. The
court may order an election to fill the vacancy so caused, and may
enjoin, for such time as it considers proper, the reelection of the
director so removed; or the court, in lieu of ordering an election,
may appoint a director to fill the vacancy caused by such removal.
Any director so appointed by the court shall serve until the next
annual meeting of shareholders or until a successor is elected or
appointed.
(h) Staying the prosecution of any suit, proceeding or action
against the corporation and requiring the parties to present and
prove their claims in the manner required of other creditors.
(i) The determination of whether adequate provision has been made
for payment or satisfaction of all debts and liabilities not actually
paid.
(j) The making of orders for the withdrawal or termination of
proceedings to wind up and dissolve, subject to conditions for the
protection of shareholders and creditors.
(k) The making of an order, upon the allowance or settlement of
the final accounts of the directors or such other persons, that the
corporation has been duly wound up and is dissolved. Upon the making
of such order, the corporate existence shall cease except for
purposes of further winding up if needed.
(l) The making of orders for the bringing in of new parties as the
court deems proper for the determination of all questions and
matters.

1807. (a) All creditors and claimants may be barred from
participation in any distribution of the general assets if they fail
to make and present claims and proofs within such time as the court
may direct, which shall not be less than four nor more than six
months after the first publication of notice to creditors unless it
appears by affidavit that there are no claims, in which case the time
limit may be three months. If it is shown that a claimant did not
receive notice because of absence from the state or other cause, the
court may allow a claim to be filed or presented at any time before
distribution is completed.
(b) Such notice to creditors shall be published not less than once
a week for three consecutive weeks in a newspaper of general
circulation published in the county in which the proceeding is
pending or, if there is no such newspaper published in that county,
in such newspaper as may be designated by the court, directing
creditors and claimants to make and present claims and proofs to the
person, at the place and within the time specified in the notice. A
copy of the notice shall be mailed to each person shown as a creditor
or claimant on the books of the corporation, at such person's last
known address.
(c) Holders of secured claims may prove for the whole debt in
order to realize any deficiency. If such creditors fail to present
their claims they shall be barred only as to any right to claim
against the general assets for any deficiency in the amount realized
on their security.
(d) Before any distribution is made the amount of any unmatured,
contingent or disputed claim against the corporation which has been
presented and has not been disallowed, or such part of any such claim
as the holder would be entitled to if the claim were due,
established or absolute, shall be paid into court and there remain to
be paid over to the party when the party becomes entitled thereto
or, if the party fails to establish a claim, to be paid over or
distributed with the other assets of the corporation to those
entitled thereto; or such other provision for the full payment of
such claim, if and when established, shall be made as the court may
deem adequate. A creditor whose claim has been allowed but is not yet
due shall be entitled to its present value upon distribution.
(e) Suits against the corporation on claims which have been
rejected shall be commenced within 30 days after written notice of
rejection thereof is given to the claimant.

1808. (a) Upon the final settlement of the accounts of the
directors or other persons appointed pursuant to Section 1805 and the
determination that the corporation's affairs are in condition for it
to be dissolved, the court may make an order declaring the
corporation duly wound up and dissolved. The order shall declare:
(1) That the corporation has been duly wound up, that a final
franchise tax return, as described by Section 23332 of the Revenue
and Taxation Code, has been filed with the Franchise Tax Board as
required under Part 10.2 (commencing with Section 18401) of Division
2 of the Revenue and Taxation Code, and that its known debts and
liabilities have been paid or adequately provided for, or that those
debts and liabilities have been paid as far as its assets permitted,
as the case may be. If there are known debts or liabilities for
payment of which adequate provision has been made, the order shall
state what provision has been made, setting forth the name and
address of the corporation, person or governmental agency that has
assumed or guaranteed the payment, or the name and address of the
depositary with which deposit has been made or such other information
as may be necessary to enable the creditor or other person to whom
payment is to be made to appear and claim payment of the debt or
liability.
(2) That its known assets have been distributed to the persons
entitled thereto or that it acquired no known assets, as the case may
be.
(3) That the accounts of directors or such other persons have been
settled and that they are discharged from their duties and
liabilities to creditors and shareholders.
(4) That the corporation is dissolved.
The court may make such additional orders and grant such further
relief as it deems proper upon the evidence submitted.
(b) Upon the making of the order declaring the corporation
dissolved, corporate existence shall cease except for the purposes of
further winding up if needed; and the directors or such other
persons shall be discharged from their duties and liabilities, except
in respect to completion of the winding up.

1809. Whenever a corporation is dissolved or its existence
forfeited by order, decree or judgment of a court, a copy of the
order, decree or judgment, certified by the clerk of court, shall
forthwith be filed in the office of the Secretary of State. The
Secretary of State shall notify the Franchise Tax Board of the
dissolution.