Corporate Death Penalty [Revise for Fall]

As noted in Massey, Delaware does not charter law breakers. This isn't just rhetoric. Corporations that violate the law can be involuntarily disolved by the courts. The requirements vary by state, but all states treat this as an extreme remedy that is seldom used.

Nebraska has revoked the charter of a corporation established to serve as an anticompetitive trust over distilleries. See, e.g., State v. Nebraska Distilling Co., 29 Neb. 700, 46 N.W. 155, 161 (1890) (dissolving a distillery trust for "abuse of the corporate franchise").

Delaware used a similar provision in its LLC statutes to revoke the franchise of Backpages.com, which repeatedly advertised prostitution and child exploitation. Denn v. Backpage.com, 2018 WL 6136132 (Del.Ch.) (Nov. 2018) ("Having abandoned the responsibilities that come with status as Delaware limited liability companies, Defendants must be forever denied the rights and privileges that also come with that status, and their certificates of formation must therefore be canceled.").

The attorney general of New York petitioned the courts to revoke the charter of Former President  Donald Trump's businesses within the state of New York based on a court finding of fraud. Even though the court found the fraud included an overestimate in property values of up to a billion dollars, the court held that involuntary dissolution was inappropriate because there was little risk of future fraud. James v. Trump, at *89 (NY Feb. 16, 2024).