1

Recent events have reminded us that companies and organizations can indeed be charged and convicted in criminal courts.

Since it isn’t really possible to put a company in prison, the penalty is often a monetary fine. But many companies are so wealthy that they treat these fines as part of the cost of doing business.

Is there a “corporate death penalty”? Could a criminal court order a convicted corporation to shut down, as a punishment, even if the company’s core business model is legal and it could have otherwise continued operations? What would happen to the company’s assets? Are there other punishments that are normally levied against companies?

Improve this question

1 Answer 1

Reset to default
1

It would be more common for a corporation to be judicially dissolved in a separate civil proceeding that may use facts established in a criminal proceeding as evidence, than for judicial dissolution of a corporation to actually be a punishment imposed as a penalty for a criminal conviction.

For example, in Colorado, the relevant statute is Colorado Revised Statutes § 7-114-301. The sections of that statute pertaining to an involuntary dissolution of the corporation state that:

(1) A corporation may be dissolved in a proceeding by the attorney general if it is established that:

(a) The corporation obtained its articles of incorporation through fraud; or

(b) The corporation has continued to exceed or abuse the authority conferred upon it by law.

(2) A corporation may be dissolved in a proceeding by a shareholder if it is established that:

(a) The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered, or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally, because of the deadlock;

(b) The directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;

(c) The shareholders are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired or would have expired upon the election of their successors;

(d) The corporate assets are being misapplied or wasted; or

(e) The corporation has abandoned its business and has failed within a reasonable time to liquidate and distribute its assets and dissolve.

(3) A corporation may be dissolved in a proceeding by a creditor if it is established that:

(a) The creditor's claim has been reduced to judgment, the execution on the judgment has been returned unsatisfied, and the corporation is insolvent; or

(b) The corporation is insolvent and the corporation has admitted in writing that the creditor's claim is due and owing.

Improve this answer
3
  • 1
    I would emphasis on section 1 (and especially section 1b) as that actually answers the question, and/or remove the whole of section 2, as that is irrelevant, and makes the answer harder to parse quickly. Case in point, I missed section 2b, which is arguably also relevant, although that's less of a "punishment" imposed by outside force and more "I don't want to be part of this anymore".
    – sharur
    Dec 9, 2022 at 1:55
  • 1
    @sharur If a fine levied on a corporation is unpaid then the state is also a creditor of the corporation on a claim that has been reduced to judgment. Ultimately, however, the law is not really designed to put corporations out of business, so much as it is to make them bear the consequences of their actions through judgments in criminal cases for restitution and fines and costs. Separate legislation may also disqualify a corporation from involvement in regulated industries where good character is required (e.g. gambling, liquor stores, etc.).
    – ohwilleke
    Dec 9, 2022 at 2:26
  • You are kind of making my point (though it seems my point might of been unclear). Your quote, while accurate, is a bit unwieldy (so much so that I didn't even see section 3, on which your response is based). So I was trying to recommend an edit to your answer, to either omit non-relevant sections of the law quote or to add emphasis (I'd recommend via bolding) the relevant sections, so that they are more noticeable.
    – sharur
    Dec 10, 2022 at 4:14

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.