CHAPTER 18. Involuntary Dissolution [1800. - 1809.]

Cal. Corporations Code - CORP 18.

in effect

Cal. Corporations Code - CORP § 1800. Section 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 1.1 (commencing with Section 1000) of the Financial Code), the Public Utilities Act (Part 1 (commencing with 201) of Division 1 of the Public Utilities Code), the Savings 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.

Cal. Corporations Code - CORP § 1801. Section 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.

Cal. Corporations Code - CORP § 1802. Section 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.

Cal. Corporations Code - CORP § 1803. Section 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.

Cal. Corporations Code - CORP § 1804. Section 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.

Cal. Corporations Code - CORP § 1805. Section 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.

Cal. Corporations Code - CORP § 1806. Section 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.

Cal. Corporations Code - CORP § 1807. Section 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.

Cal. Corporations Code - CORP § 1808. Section 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.

Cal. Corporations Code - CORP § 1809. Section 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.

Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026