2009 California Corporations Code - Section 12620-12629 :: Chapter 15. Involuntary Dissolution

SECTION 12620-12629

12620.  (a) A 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 person or persons holding or authorized in writing by
persons holding not less than 33 1/3 percent of the voting power
exclusive of memberships held by persons who have personally
participated in any of the transactions enumerated in paragraph (5)
of subdivision (b).
   (3) Any member if the ground for dissolution is that the period
for which the corporation was formed has terminated without extension
   (4) Any other person expressly authorized to do so in the
   (b) The grounds for involuntary dissolution are that:
   (1) The corporation has abandoned its activity for more than one
   (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 activities can no longer be conducted to advantage or so
that there is danger that its property will be impaired or lost or
its activities impaired, and the members 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
members in the corporation are so deadlocked that its activities can
no longer be conducted with advantage.
   (4) When during any four-year period or when all voting power has
been exercised at two consecutive meetings or in two written ballots
for the election of directors, whichever period is shorter, the
members have failed to elect successors to directors whose terms have
expired or would have expired upon election of their successors.
   (5) 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 member or the corporation's property is being misapplied or
wasted by its directors or officers.
   (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 member or
creditor may intervene therein.
   (d) This section does not apply to any corporation subject to:
   (1) The Public Utilities Act (Part 1 (commencing with Section 201)
of Division 1 of the Public Utilities Code) unless an order is
obtained from the Public Utilities Commission authorizing the
corporation either (a) to dispose of its assets as provided in
Section 851 of the Public Utilities Code or (b) to dissolve.
   (2) The provisions of Article 14 (commencing with Section 1010) of
Chapter 1 of Part 2 of Division 1 of the Insurance Code when the
application authorized by Section 1011 of the Insurance Code has been
filed by the Insurance Commissioner unless the consent of the
Insurance Commissioner has been obtained.

12621.  (a) The Attorney General may bring an action against any
corporation or purported 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 duly and properly
make such amendment or take the corrective corporate action.
   (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 (commencing with Section 1700) of Division 1 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 members of the corporation.

12622.  If the ground for the complaint for involuntary dissolution
of the corporation is a deadlock in the board as set forth in
paragraph (2) of subdivision (b) of Section 12620 the court may
appoint a provisional director. The provisions of subdivision (d) of
Section 12365 apply to any such provisional director so appointed.

12623.  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 or its members 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 (except that the Attorney General shall not be required to
give security), the court may appoint a receiver to take over and
manage the affairs of the corporation and to preserve its property
pending the hearing and determination of the complaint for

12624.  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

12625.  (a) Involuntary proceedings for winding up a corporation
commence when the order for winding up is entered under Section
   (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 conduct its activities 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 or
other disposition of its 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
members 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.

12626.  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 members and of all classes
of members 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
   (f) The filing of any vacancies on the board which the directors
or the members are unable to fill.
   (g) The removal of any director if it appears that the director
has been guilty of dishonesty, misconduct, neglect, or breach 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 regular meeting of members or until a successor is elected or
   (h) The staying of 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
   (j) The making of orders for the withdrawal or termination of
proceedings, to wind up and dissolve, subject to conditions for the
protection of members 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
   (m) The disposition of assets held in charitable trust.

12627.  (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.

12628.  (a) Upon the final settlement of the accounts of the
directors or other persons appointed pursuant to Section 12625 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
   (2) That its known assets have been distributed to the persons
entitled thereto or that it acquired no known assets, as the case may
   (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 members.
   (4) That the corporation is dissolved.
   (b) The court may make such additional orders and grant such
further relief as it deems proper upon the evidence submitted.
   (c) 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.

12629.  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. The Secretary of State shall notify the Franchise
Tax Board of the dissolution.

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