Not-for-Profit Corporation Law
Article 11, Judicial Dissolution
Section 1101. Attorney-general`s action for judicial dissolution.
1102. Judicial dissolution; petition by directors or members;
petition in case of deadlock among directors or members.
1103. Contents of petition for judicial dissolution.
1104. Order to show cause; issuance; publication, service,
filing.
1105. Amending papers.
1106. Referee.
1107. Hearing and decision.
1108. Application for final order.
1109. Judgment or final order of dissolution.
1110. Venue.
1111. Preservation of assets; appointment of receiver.
1112. Certain sales, transfers, security interests and judgments
void.
1113. Injunction.
1114. Discontinuance of action or special proceeding.
1115. Applicability of other provisions.
S 1101. Attorney-general`s action for judicial dissolution.
(a) The attorney-general may bring an action for the dissolution of a
corporation upon one or more of the following grounds:
(1) That the corporation procured its formation through fraudulent
misrepresentation or concealment of a material fact.
(2) That the corporation has exceeded the authority conferred upon it
by law, or has violated any provision of law whereby it has forfeited
its charter, or carried on, conducted or transacted its business in a
persistently fraudulent or illegal manner, or by the abuse of its powers
contrary to public policy of the state has become liable to be
dissolved.
(b) An action under this section is triable by jury as a matter or
right.
(c) The enumeration in paragraph (a) of grounds for dissolution shall
not exclude actions or special proceedings by the attorney-general or
other state officials for the annulment or dissolution of a corporation
for other causes as provided in this chapter or in any other statute of
this state.
S 1102. Judicial dissolution; petition by directors or members; petition
in case of deadlock among directors or members.
(a) A petition for the judicial dissolution of a corporation may be
presented:
(1) By a majority of the directors then in office, or by the members,
or such of them as are designated for such purpose, when authorized to
do so by a resolution adopted by majority vote as provided in paragraph
(c) of section 613 (Vote of members) (provided that, notwithstanding any
provision of the certificate of incorporation or the by-laws, a members`
meeting to consider such a resolution may be called, no more often than
once in any period of twelve consecutive months, by ten percent of the
members entitled to vote thereon or by such lesser percentage or number
of members as may be provided in the certificate of incorporation or
by-laws), in the following cases:
(A) The assets of the corporation are not sufficient to discharge its
liabilities.
(B) Dissolution will be beneficial to the members.
(2) By ten percent of the total number of members or by any director,
in the following cases:
(A) The directors are so divided respecting the management of the
corporation`s affairs that the votes required for action by the board
cannot be obtained.
(B) The members are so divided that the votes required for the
election of directors cannot be obtained.
(C) There is internal dissension and two or more factions of members
are so divided that dissolution would be beneficial to the members.
(D) The directors or members in control of the corporation have
looted or wasted the corporate assets, have perpetuated the corporation
solely for their personal benefit, or have otherwise acted in an
illegal, oppressive or fraudulent manner.
(E) The corporation is no longer able to carry out its purposes.
(b) In any proceeding for judicial dissolution the attorney-general
shall be a necessary party.
S 1103. Contents of petition for judicial dissolution.
A petition for dissolution shall specify the section, and the
subparagraph or subparagraphs thereof, under which it is authorized and
state the reasons why the corporation should be dissolved. It shall be
verified by the petitioner or by one of the petitioners.
S 1104. Order to show cause; issuance; publication, service, filing.
(a) Upon the presentation of such a petition, the court shall make an
order requiring the corporation and all persons interested in the
corporation to show cause before it, or before a referee designated in
the order, at a time and place therein specified, not less than four
weeks after the granting of the order, why the corporation should not be
dissolved. In connection therewith, the court may order the
corporation, its officers and directors, to furnish the court with a
schedule of all information, known or ascertainable with due diligence
by them, deemed pertinent by the court, including a statement of the
corporate assets and liabilities, and the name and address of each
member and of each creditor and claimant, including any with
unliquidated or contingent claims and any with whom the corporation has
unfulfilled contracts.
(b) A copy of the order to show cause shall be published as
prescribed therein, at least once in each of the three weeks before the
time appointed for the hearing thereon, in one or more newspapers,
specified in the order, of general circulation in the county in which
the office of the corporation is located at the date of the order.
(c) A copy of the order to show cause shall be served upon the state
tax commission and the corporation and upon each person named in the
petition, or in any schedule provided for in paragraph (a), as a member,
creditor or claimant, except upon a person whose address is stated to be
unknown and cannot with due diligence be ascertained by the corporation.
The service shall be made personally, at least ten days before the time
appointed for the hearing, or by mailing a copy of the order, postage
prepaid, at least twenty days before the time so appointed, addressed to
the person to be served at his last known address.
(d) A copy of the order to show cause and the petition shall be
filed, within ten days after the order is entered, with the clerk of the
county where the office of the corporation is located at the date of the
order. A copy of each schedule furnished to the court under this
section shall, within ten days thereafter, be filed with such clerk.
(e) Publication, service and filing provided for in this section
shall be effected by the corporation or such other persons as the court
may order.
S 1105. Amending papers.
At any stage, before final order, the court may grant an order
amending the petition or any other paper filed in the action or special
proceeding, with like effect as though originally filed as amended, or
otherwise as the court may direct.
Article 11 Continued . . .
S 1106. Referee.
If a referee was not designated in the order to show cause, the court,
in its discretion, may appoint a referee when or after the order is
returnable. The court may at any time appoint a successor referee.
S 1107. Hearing and decision.
At the time and place specified in the order to show cause, or at any
other time and place to which the hearing is adjourned, the court or the
referee shall hear the allegations and proofs of the parties and
determine the facts. The decision of the court or the report of the
referee shall be made and filed with the clerk of the court with all
convenient speed.
S 1108. Application for final order.
When the hearing is before a referee, a motion for a final order must
be made to the court upon notice to each party to the action or special
proceeding who has appeared therein. The notice of motion may be served
as prescribed for the service of papers upon an attorney in an action in
such court. When the hearing is before the court, a motion for a final
order may be made at the hearing or at such time and upon such notice as
the court prescribes.
S 1109. Judgment or final order of dissolution.
(a) In an action or special proceeding under this article if, in the
court`s discretion, it shall appear that the corporation should be
dissolved, it shall make a judgment or final order dissolving the
corporation.
(b) In making its decision, the court shall take into consideration
the following criteria:
(1) In an action brought by the attorney-general, the interest of the
public is of paramount importance.
(2) In a special proceeding brought by directors or members, the
benefit to the members of a dissolution is of paramount importance.
(c) If the judgment or final order shall provide for a dissolution of
the corporation, the court may, in its discretion, provide therein for
the distribution of the property of the corporation to those entitled
thereto according to their respective rights.
(d) The clerk of the court or such other person as the court may
direct shall transmit certified copies of the judgment or final order of
dissolution to the department of state and to the clerk of the county in
which the office of the corporation was located at the date of the
judgment or order. Upon filing by the department of state, the
corporation shall be dissolved.
(e) The corporation shall promptly thereafter transmit a certified
copy of the judgment or final order to the clerk of each other county in
which its certificate of incorporation was filed.
S 1110. Venue.
An action or special proceeding under this article shall be brought in
the supreme court in the judicial district in which the office of the
corporation is located at the time of the service on the corporation of
a summons in such action or of the presentation to the court of the
petition in such special proceeding.
S 1111. Preservation of assets; appointment of receiver.
At any stage of an action or special proceeding under this article,
the court may, in its discretion, make all such orders as it may deem
proper in connection with preserving the property and carrying on the
business of the corporation, including the appointment and removal of a
receiver under article 12 (Receivership), who may be a director, officer
or member of the corporation.
S 1112. Certain sales, transfers, security interests and judgments void.
A sale, mortgage, conveyance or other transfer of, or the creation of
a security interest in any property of a corporation made, without prior
approval of the court, after service upon the corporation of a summons
in an action, or of an order to show cause in a special proceeding,
under this article in payment of or as security for an existing or prior
debt or for any other or for no consideration, or a judgment thereafter
rendered against the corporation by confession or upon the acceptance of
any offer, shall be void as against such persons and, to such extent, if
any, as the court shall determine.
S 1113. Injunction.
(a) At any stage of an action or special proceeding under this
article, the court may, in its discretion, grant an injunction,
effective during the pendency of the action or special proceeding or
such shorter period as it may specify in the injunction, for one or more
of the following purposes:
(1) Restraining the corporation and its directors and officers from
conducting any unauthorized activities and from exercising any corporate
powers, except by permission of the court.
(2) Restraining the corporation and its directors and officers from
collecting or receiving any debt or other property of the corporation,
and from paying out or otherwise transferring or delivering any property
of the corporation, except by permission of the court.
(3) Restraining the creditors of the corporation from beginning any
action against the corporation, or from taking any proceedings in an
action theretofore commenced, except by permission of the court. Such
injunction shall have the same effect and be subject to the same
provisions of law as if each creditor upon whom it is served was named
therein.
S 1114. Discontinuance of action or special proceeding.
An action or special proceeding for the dissolution of a corporation
may be discontinued at any stage when it is established that the cause
for dissolution did not exist or no longer exists. In such event, the
court shall dismiss the action or special proceeding and direct any
receiver to redeliver to the corporation all its remaining property.
S 1115. Applicability of other provisions.
(a) Subject to the provisions of this article, the provisions of
section 1005 (Procedure after dissolution), 1006 (Corporate action and
survival of remedies after dissolution), 1007 (Notice to creditors;
filing or barring claims) and 1008 (Jurisdiction of supreme court to
supervise dissolution and liquidation) shall apply to a corporation
dissolved under this article.
(b) Any orders provided for in section 1008, may be made at any stage
of an action or special proceeding for dissolution of a corporation
under this article, and if the corporation is dissolved under this
article, the court may retain jurisdiction for the purpose of making
such orders, after the dissolution, in such action or special
proceeding. The court may also make such orders in separate special
proceedings, as provided in section 1008.
(c) Notice to creditors and claimants, provided for in section 1007,
may also be given, by order of the court, at any stage of an action or
special proceeding for dissolution of a corporation under this article.