Under the Delaware General Corporation Law (the “DGCL”), 8 Del. C. § 273 provides the basis for the dissolution of a deadlocked “joint venture” corporation, meaning that there are two 50/50 shareholders who cannot agree on whether to continue the company. Click here for a prior post from September 2013 discussing these actions. Also, see the Directors’ and Shareholders’ Reference Guide to Summary Proceedings in the Delaware Court of Chancery (see page 9 – 10).
A recent decision by the Delaware Court of Chancery, In the Matter of Bermor, Inc., C.A. No. 8401-VCL (Feb. 9, 2015), demonstrates the standard utilized by the Court in determining whether to grant a petition to dissolve a “joint venture” corporation under Section 273.
In this opinion, Vice Chancellor Laster granted petitioner’s request to dissolve Bermor, Inc. (“Bermor” or “Company”) under Section 273 of the DGCL. The decision provides a helpful, concise analysis of these types of dissolution actions. Of note, in this decision, the Court rejected an argument that the dispute must last a particular period of time. “Section 273 does not require an extended period of extended suffering.” Slip op. at 7.
The Court employed a formulaic view of Section 273, explaining that because the parties could not agree on the desireability to discontinuing the joint venture, dissolution was warranted, and a trustee appointed to dissolve the Delaware corporations at issue.