In In re Petition for Dissolution of M7 Energy Development Corporation and Convergent Innovation Technology Holdings, Inc., C.A. No. 2024-1135-MTZ (Del. Ch. Aug. 26, 2025), a claim for judicial dissolution of two joint venture corporations was rejected because the parties agreed on dissolution and therefore did not meet the requirements of Delaware General Corporation Law (DGCL) Section 273.
Background
M7 Energy Development Corporation and Convergent Innovation Technology Holdings, Inc. (the Corporations) are joint ventures between EOR Advanced Energy, LLC and EOR Technology, LLC (the Petitioners) and M7 Global Innovation Group Corporation (the Respondent), with each party owning 50 percent of the Corporations. The Petitioners filed an operative petition seeking (i) a judicial dissolution of the Corporations under Section 273 of the DGCL (Count 1), and (ii) a declaratory judgment relating to the use of certain intellectual property assets affiliated with the Corporations (Count 2). The Petitioners moved for default judgment on both claims, and the Delaware Court of Chancery issued a bench ruling denying an entry of default with respect to Count 1 and granting an entry of default with respect to Count 2.
Analysis
Section 273 states in pertinent part that the prerequisites for a judicial dissolution are that (i) the corporation have two stockholders, with each owning 50 percent of the stock; (ii) the stockholders be engaged in a joint venture; and (iii) the stockholders be unable to agree upon the desirability of discontinuing such joint venture and disposing of the assets used in such joint venture.[1] Having satisfied the first two requirements, the issue in this case was whether the third requirement, that the parties be in disagreement as to whether to dissolve the Corporations, had been met.
Remaining consistent with previous case law, the Court held that Section 273 is only available where there is a “genuine inability” of the parties to agree on whether dissolution should occur.[2] The Court’s analysis focused on the language of the statute and relevant case law to support its position that Section 273 is a “narrow statute that has a narrow purpose of dealing with deadlock” with respect to dissolution. Also in support of its positions, the Court stated that “where a voluntary corporate dissolution is sought to be effected pursuant to the terms of a statute, it is not to be interfered with by the Courts in the absence of illegality or actual fraud.”[3] Here, the petition specifically stated that the Respondent did not oppose dissolution of the joint venture and the Respondent did not file an answer indicating that it disagreed with dissolution, deeming the allegation admitted. The Court also stated that the statute is not satisfied where the petition says the respondent indicated that it does not oppose judicial dissolution.
The Court further reasoned that it is clear the parties wished to dissolve the Corporations and the true disagreement was regarding the disposition of assets, which was preventing the parties from agreeing on how to dissolve the Corporations. Therefore, granting default judgment with respect to Count 1 would “run afoul” of the requirements of Section 273.
Following the bench ruling, the Petitioners filed a motion to alter judgment or reargument under Court of Chancery Rules 59(e) and 59(f), asserting that the bench ruling misapprehended the statutory requirements of Section 273. The Petitioners’ motion claimed that “dissolution can be granted under Section 273 even if there is no disagreement as to dissolution, as long as there is disagreement regarding the disposition of the assets….” At the Petitioners’ request for “expedited assistance” the Court denied the Petitioners’ motion and held its position that the parties in fact agreed that the joint venture should be discontinued and hoped to provide an additional explanation shortly after. The Petitioners withdrew the motion before the Court could provide its complete explanation.
Takeaway
The plain reading of DGCL Section 273 and years of relevant case law show that the statute is available for the narrow purpose of assisting stockholders in a 50/50 joint venture to dissolve the joint venture when the stockholders are unable to agree on whether to continue the joint venture.
[1] 8 Del. C. § 273(a).
[2] In re Arthur Treacher’s Fish & Chips of Ft. Lauderdale, Inc., 386 A.2d 1162, 1163 (Del. Ch. 1978).
[3] Id.