Which condition constitutes grounds for involuntary dissolution due to insolvency?

Which condition constitutes grounds for involuntary dissolution due to insolvency?

• A. Board & SH approval for insolvency
• B. Majority of SH for deadlock management
• C. Any SH for no election of director for 2 years
• D. 20% SH oppression or management looting

Answer: (A)

The key idea is that insolvency becomes a basis for involuntary dissolution only when there is an actual decision to dissolve by those who govern and own the company. If the corporation is insolvent and both the board and the shareholders approve winding up, that creates a formal ground for involuntary dissolution. The other scenarios deal with governance or remedies that are not tied to insolvency: resolving a deadlock through shareholder action is about governance impasse; failing to elect a director for an extended period signals governance or operational issues; and oppression or looting by management relates to mistreatment of shareholders. None of these, by themselves, establish dissolution because the company is insolvent.

The key idea is that insolvency becomes a basis for involuntary dissolution only when there is an actual decision to dissolve by those who govern and own the company. If the corporation is insolvent and both the board and the shareholders approve winding up, that creates a formal ground for involuntary dissolution.

The other scenarios deal with governance or remedies that are not tied to insolvency: resolving a deadlock through shareholder action is about governance impasse; failing to elect a director for an extended period signals governance or operational issues; and oppression or looting by management relates to mistreatment of shareholders. None of these, by themselves, establish dissolution because the company is insolvent.