Voluntary dissolutions occur when a required number of shares approve the recommendation of dissolution by the board of directors. Involuntary dissolutions occur when the state creating the corporation cancels its charter by suit or executive action, or when a court of equity orders dissolution at the request of shareholders or creditors.

Shareholders can bring a suit to request dissolution by an order from a court of equity1 when the directors are deadlocked in the management of corporate affairs or when the shareholders are unable to elect a board of directors.2 They can also request dissolution by proving that those in control are acting fraudulently, illegally or oppressively.

Oppressive conduct is difficult to define. In general it means a violation of fair play and fiduciary duty which the majority owes the minority. Many kinds of conduct that are not fraudulent or illegal have been held oppressive. They include freeze-out mergers，refusal to declare dividends because profits have been paid out to the majority shareholders in the form of salaries and bonuses, or the sale of additional stock for the sole purpose of diluting minority control.

A court may also order dissolution at the request of shareholders or creditors when a corporation is insolvent or has admitted its insolvency.

In dissolving and liquidating a corporation, the court may issue injunctions, appoint receivers» and take necessary steps to preserve the corporate assets for the protection of creditors and shareholders.

Since the assets of the insolvent corporation are a trust fund for the payment of creditors, transfer of corporate assets upon dissolution is in fraud of creditors. Most states have statutes allowing corporate creditors to reach the assets of the former corporation that are in the hands of shareholders. Besides, a shareholder who has not paid in full to the corporation for his original issue of stock is liable to the receiver or to a creditor for the unpaid balance.

A corporation may acquire another business by purchasing the latter^ plant • equipment and even the goodwill. In such cases the selling corporation retains its liabilities and Corporations can also consolidate and merge. A consolidation results in a new corporation into which all the constituent corporate entities disappear. A merger, on the other hand, is the process by which one of the corporations absorbs the others and continues its own existence.

For a merger or a consolidation, the board of directors has to pass a resolution and submit the plan to the shareholders for approval. Proxy solicitation should be done with a full disclosure of all material facts required for an intelligent decision by the shareholders.4 A merger or a consolidation in most states requires the approval by a two-thirds vote of all shares.

The corporation is different from a partnership in that a partner can veto major decisions with regard to the partnership while corporations are run on the consent of the majority. Minority shareholedrs do not have veto power. For this reason protection of minority interest is an ever present problem in corporate law. Statutes provide that a dissenting shareholder is entitled to be paid the fair value of his stock on the day preceding the vote on the corporate action, if he makes his dissent a matter record by serving a written demand that the corporation purchase his stock.5 This right is called the appraisal right.

By statute in most states, the surviving corporation after the merger or consolidation assumes all the debts and liabilities of the absorbed corporations or the former corporations. To avoid this the acquiring businesses often purchase the assets of other corporations without any change of organization. Should the selling corporation be allowed to shrug off its liability to third parties in such cases? The issue arises quite frequently in product liability cases, and courts in different states have answered the liability issue differently.

Answer the following questions :
1. Describe the usual procedure for a voluntary dissolution.
28 Who can cause the involuntary dissolution of a corporation?
3. What should the creditors do if they want to have the debtor corporation dissolved?
4. What are the usual circumstances under which shareholders bring a suit to request a court order for dissolution?
5. What kind of conduct can be called oppressive?
6. Name some of the exceptions to the rule of shareholder's limited liability in the case of an insolvent corporation.
7. Who assumes the liabilities and debts of the former corporations after the merger or consolidation?
8. What is the usual procedure for a merger or consolidation?
9. What is proxy solicitation? Who does proxy solicitation? Why should it be done with full disclosure of all material facts?
10. What is the appraisal right? What is its purpose?