Company Dissolution as a Form of Compulsory Liquidation of Legal Entities in Comparative Perspective

Abstract

This article examines the application, in foreign jurisdictions, of company dissolution as a specific form of compulsory liquidation of corporate legal entities. It is established that the grounds for company dissolution typically include: (a) a resolution of the shareholders (participants); (b) a petition filed by a shareholder seeking a court-ordered dissolution; and (c) the insolvency of the legal entity.
The study demonstrates that, in situations involving irreconcilable shareholder disputes, corporate deadlock, or abuse by majority shareholders, the case law of most foreign jurisdictions – including Germany, France, Poland, and the United Kingdom – widely recognises compulsory liquidation on the basis of the “just and equitable” doctrine. This approach stands in contrast to domestic law enforcement practice, where, in analogous circumstances, legal entities often remain in a prolonged state of dysfunction (deadlock), as courts refrain from intervening in corporate affairs and the shareholders are unable to resolve the dispute autonomously.
The article systematises a non-exhaustive list of grounds for company dissolution as a form of compulsory liquidation under foreign legal frameworks. These include: the impossibility of achieving the company’s objects or purpose; the existence of a serious and persistent conflict between shareholders rendering the continuation of the company impracticable, where such circumstances cannot be remedied through the exclusion of a shareholder or the compulsory buyout or forfeiture of their interest; a breakdown of mutual trust and confidence among shareholders; and violations of law or public policy, among others.
It is argued that company dissolution, as a mechanism of compulsory liquidation, constitutes an effective legal remedy enabling shareholders – particularly minority shareholders – to safeguard their rights and legitimate interests. The paper further substantiates the desirability of incorporating the institution of company dissolution into domestic legislation, whether on a voluntary basis or through compulsory procedures (including by court order or administrative action by a registrar).