In many states, corporations may be dissolved for certain offenses of commission or omission; and here again we may take the New York law as typical.
In either of the following cases, an action to procure a judgment dissolving a corporation, created by or under the imp of the state, and forfeiting its corporate rights, privi leges and franchises, may be maintained, as prescribed in the next section: 1. Where the corporation has remained insolvent for at least one y-ear.
2. Where it has neglected or refused, for at least one year, to pay and discharge its notes or other evidence of debt.
3. Where it has suspended its ordinary and lawful busi ness for at least one year.
4. If it has banking Dowers, or power to make loans on pledges or deposits, or to make insurances, where it becomes insolvent or unable to pay its debts, or has violated any provision of the act, by or under which it was incorporated, or of any other act binding upon it.
Under the Dominion Winding-up Act a wind ing-up order may be made by the court upon peti tion.
(a) Where the'period, if any, fixed for the duration of the company by the Act, charter or instrument of incor poration has expired; or where the event, if any, has oc curred, upon the occurrence of 'which it is provided by- the Act or charter or instrument of incorporation that the com pany' is to be dissolved; (b) Where the company at a special meeting of share holders called for the purpose, had passed a resolution re quiring the company to be wound up; (c) When the company is insolvent; (d) When the capital stock of the company is impaired to the extent of 25c/o thereof, and when it is shown to the satisfaction of the court that the lost capital will not likely be restored within one year ; or (e) When the court is of the opinion that for any other reason it is just and equitable that the company should be wound up.
A company will be deemed insolvent under (c) above, I. If it is unable to pay its debts as they become due; .2. If it calls a meeting of its creditors for the purpose of compounding with them: 3. If it exhibits a statement showing its inability to meet its liabilities; 4. If it has otherwise acknowledged its insolvency: 5. If it assigns, removes or disposes of, or attempts or is about to assign, remove or dispose of, any of its property, with intent to defraud, defeat or delay its creditors, or any of them ; G. If with such intent, it has procured its money, goods,
chattels, land or property to be seized, levied on or taken, under or by any process of execution ; 7. If it has made any general conveyance or assignment of its property for the benefit of its creditors, or if, being unable to meet its liabilities in full, it makes any sale or con veyance of the whole or the main part of its stock in trade or assets, without the consent of its creditors, or without satis fying their claims; 8. If it permits any execution issued against it, under which any of its goods, chattels, land or property are seized, levied upon or taken in execution, to remain unsatisfied till within four days of the time fixed by the sheriff or proper officer for the sale thereof, or for fifteen days after such seizure.
12. Eff ect of death of members and of bankruptcy of a all the stockholders of a corpo ration die, their heirs and legatees immediately take their place. If all the directors die, the stockholders may proceed immediately to elect new directors.
A corporation does not necessarily end its existence if it becomes insolvent ; indeed, corporations may be discharged in bankruptcy. There are several cases on record in which corporations have renewed their business after bankruptcy court proceedings have been concluded. This is not true of Canada, where there is no bankruptcy law. A company insolvent and wound up is a company no longer.
13. Corporate receiver is an impar tial person appointed by an equity court to hold and administer any property which is the subject of litiga tion. Thus, when a large corporation which has many classes of bonds outstanding becomes insolvent, there is danger that the value of the business as a going con cern will be lost thru the piecemeal seizure of the cor porate property by the creditors. To protect this valuable property of the company a receiver will be appointed to manage the property until the rights of all the parties can be determined.