3.4.4.1 Evolution in relief

In the beginring, courts were reluctant to grant dissolution because of their misconception that dissolution extinguished the corporation's business life.1 This standpoint was later changed to some extent by commentators' works.2

Earlier courts usually viewed dissolution as a drastic and extreme remedy on the ground that the death of the entity was the death of the business.3 The only scenario the court could see was dismembered assets, low selling price, unemployment and loss of going concern value, all of which aroused public concern.4 The court therefore believed that it was an undesirable social policy to break up a profitable business.5 Hetherington and Dooley, however, helped to correct this view in their study in 1977.6 They first argued that cessation of the legai life of a corporation does not necessarily mean cessation of its economic life.7 Their data illustrate that corporate dissolution and economic death are not the same thing. It seldom happens that the business dies if the corporation is ordered to be dissolved.8 Oftentimes, according to the data, if it is a profitable business, other shareholders or a third party would like to purchase the corporation after litigation and continue to conduct the business.9 The court's dissolution order therefore seldom extinguishes a promising business.10 Furthermore, Hetherington and Dooley point out that in a close corporation, dissolution could be an effective and satisfactory remedy for unsatisfied shareholders because most of the time the business itself is not discouraging, but the relations between the associates in the business have turned sour.11 Under these circumstances, it is unreasonable to bind parties together until this sour relationship also destroys the business.12

In conclusion, even though the court grants a dissolution order, a viable business can still continue and there is little loss to the interests of society at large. Regarding a decayed business, even if a dissolution order is not granted, the business may not be expected to survive.13 So the court's decision to liquidate a corporation usually has little to do with the corporation's economic life and public concerns. The court's previous fear is unfounded.

Despite the enlightening and convincing idea provided by the professors, courts are still cautious in granting a dissolution order. It is too strong a remedy, and "should be imposed only in the most egregious case."14 Under New Jersey statute s. 14A: 12(9), in determining whether to enter a judgment of dissolution in an action brought onder this section, the court must take into consideration whether the corporation is being operated profitably and in the best interests of its shareholders, but must not enter such a judgment solely on that ground. The New Jersey Supreme Court affirmed this idea:

S. 1104-a (b) of the NY Statute is also representative:

From the above examples, we can see that courts are not much in favour of dissolution. They characterize dissolution as a drastic remedy. For a long time, however, the oppression remedy did not provide any alternative forms of relief. During the 1970s and 1980s, there was a surge in providing buyout relief.16 Based on their empirical data, Professors Hetherington and Dooley proposed that disputes in close corporations, besides the relief of dissolution, could also be resolved by a buyout order.17 This finding contributed to the adoption of section 14.34 of the RMBCA in 1991, which is now the most popular disputes resolution device in a close corporation. Nowadays, if oppressive conduct is confirmed by the courts, various forms of relief are available, from a simple injunction against the action to a court-ordered dissolution. The emergence of alternative relief reflects a remarkable ideological change among legislators and the judiciary in thinking of solutions to problems in a close corporation.18 Besides court-ordered buyout, several commerce-friendly states also permit a corporation or its shareholders to opt for buying the shares of the petitioning shareholders at fair value to enjoin the litigation of involuntary dissolution.19 Section 14.34 (a) of the RMBCA, for example, lays down a model provision, in which no prior court finding of oppressive conduct is needed.20 In doing so, this provision directs the oppression claims from substantial judgement to the question of share purchase at a fair price.21 This procedure spares the corporation a lengthy and costly litigation.