If a petitioner is able to satisfy the three requirements set forth in Section 273 of the DGCL—namely (i) two 50/50 stockholders, (ii) engaged in a joint venture, and (iii) are unable to agree as to whether to discontinue the company—will the Court automatically grant dissolution of the entity?
The statute provides that the Court "may" dissolve the corporation and wind up its affairs when the requirements of the statute are met. When a petitioner has satisfied each of these elements, the Court’s discretion to deny the petition is "sparingly exercised." In re McKinney-Ringham Corp., 1998 Del. Ch. LEXIS 34, at *16 (Del. Ch. Feb. 25, 1998).
Of note, the Court has interpreted the permissive nature of the statute to allow it to order equitable relief under Section 273 other than dissolution. For example, in Fulk v. Washington Service Assoc., Inc., C.A. No. 17747-VCJ (Del. Ch. June 21, 2002), the Court approved a custodian's plan to sell the joint venture at issue as a going concern to either of the 50/50 stockholders instead of dissolving the corporation, stating "the statute permits the Court flexibility in deciding how the joint venture should be discontinued...."
Therefore, a litigant to a Section 273 proceeding may be able to seek alternative relief from the Court other than solely the dissolution of the joint venture under the statute.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
