## Facts

- Lanzit Corrugated Box Co. was a family-owned Illinois close corporation split into two factions: Victor Gidwitz’s side and Joseph Gidwitz’s side, each holding roughly 50% of the shares and 2 of 4 director positions.
- After a falling out in 1950, relations deteriorated and the factions ceased cooperating in corporate governance.
- The corporation’s directors were found to have been deadlocked in managing corporate affairs since 1950.
- Shareholders were unable to elect successor directors even though directors’ terms had long expired, and regular shareholder voting on directors did not occur for years.
- Plaintiffs alleged that Joseph, acting as president and practical manager, conducted major corporate actions without meaningful board participation, including salary changes affecting Victor, borrowing substantial funds, and using corporate funds in connection with another entity.
- Shareholders aligned with Victor sought judicial dissolution under the Illinois Business Corporation Act, alleging director/shareholder deadlock and “illegal, oppressive or fraudulent” conduct.
- After extensive proceedings before a master in chancery (who recommended dismissal), plaintiffs filed a supplemental complaint seeking appointment of a liquidating receiver and dissolution.
- Without taking additional evidence after the supplemental complaint, the trial court found prolonged deadlock, inability to elect directors, and irreconcilable shareholder differences making cooperative operation impossible, and ordered liquidation and appointment of a liquidating receiver.

## Issues

1. Whether persistent director and shareholder deadlock in a 50–50 close corporation, combined with exclusion of an equal owner from meaningful participation, justified dissolution and liquidation under § 86(a)(1)–(3) of the Illinois Business Corporation Act.
2. Whether the trial court erred by ordering liquidation and appointing a liquidating receiver without receiving additional evidence after the supplemental complaint.
3. Whether the record supported findings of “oppressive” conduct or other statutory grounds for involuntary dissolution.

## Decision

- The Illinois Supreme Court affirmed the decree ordering liquidation and appointing a liquidating receiver.
- The court upheld findings that directors had been deadlocked since 1950 and that shareholders were unable to elect directors whose terms had expired.
- The court concluded that the record supported statutory grounds for dissolution in the close-corporation setting, including conduct treated as oppressive through denial of meaningful participation in management.
- The court held the trial court could enter the final decree on the existing evidentiary record without taking new evidence after the supplemental complaint.

## Legal Principles

- Under § 86 of the Illinois Business Corporation Act, dissolution may be ordered where directors are deadlocked, shareholders are deadlocked and cannot elect successor directors, or those in control commit illegal, oppressive, or fraudulent acts.
- In a close corporation, prolonged 50–50 deadlock that prevents normal corporate governance and defeats the owners’ ability to function through elections may warrant judicial dissolution and liquidation.
- In the close-corporation context, effective exclusion of an equal shareholder from expected participation in management can qualify as “oppressive” conduct supporting dissolution.
- A trial court may order dissolution and appoint a liquidating receiver based on an adequate existing record developed in the proceedings, without reopening proof after a supplemental pleading, where the record supports the statutory grounds and remedy.

## Conclusion

The Illinois Supreme Court sustained liquidation of a family close corporation where a long-running 50–50 governance stalemate and practical exclusion of one co-owner from corporate decisionmaking made continued operation impracticable and satisfied statutory grounds for dissolution.


Gidwitz v. Lanzit Corrugated Box Co., 20 Ill. 2d 208, 170 N.E.2d 131 (Ill. 1960)