A question that is often posed to Delaware corporate practitioners is whether a non-Delaware court can dissolve a Delaware entity.  Certain jurisdictions, such as Texas, will generally decline to dissolve a foreign entity, while others will do so if the entity’s principle place of business is in that state.

The recent transcript decision of Zebala v. Aminopterin LLC, C.A. No. 12186-VCS (Del. Ch. Sept. 28, 2016) involved this issue.  Prior to the filing of the Chancery action, litigation in California had been pending and that court had already issued an injunction restricting the LLC’s assets. The LLC agreement contained a California forum selection clause as well.  A motion was filed to dismiss the case in favor of the prior filed action.

Relying upon the McWane doctrine, Vice Chancellor Slights dismissed the dissolution proceeding in favor of the California action.  Notably, the Court of Chancery declined to decide whether a Delaware court has the sole and exclusive power to dissolve a Delaware entity.  The opinion can be construed to imply that the Delaware courts will allow sister courts to determine whether they have jurisdiction to dissolve a Delaware entity.

If you would like to speak to a litigator in Fox Rothschild’s Delaware office, please reach out to Sid Liebesman (302) 622-4237 or Seth Niederman (302) 622-4238.