## Facts

- A closely held Alabama corporation was formed with three initial shareholder-directors; two later resigned and surrendered shares, leaving Roach as sole shareholder-director.
- While sole shareholder, Roach adopted bylaws requiring a 70% quorum and 70% affirmative vote for shareholder and board action, a 70% vote to amend bylaws/articles, and assigning broad “general and active management” authority to the president.
- Roach later brought in two investors, Bynum and Forstman, each contributing $14,000 for 500 shares and becoming directors; together they held 1,000 of 1,510 shares (a majority), while Roach held 510.
- Governance disputes arose when Forstman refused to vote to re-elect Roach as president; Roach continued as holdover president and used the 70% voting requirements to block action by the majority shareholders/directors.
- Bynum and Forstman sued seeking dissolution and appointment of a receiver, alleging deadlock and oppressive use of the bylaws; Roach asserted a counterclaim.
- The trial court found the directors “hopelessly deadlocked,” ordered dissolution, appointed a receiver, and denied Roach’s counterclaim.

## Issues

1. Whether bylaw provisions vesting effective management authority in the president and imposing 70% quorum/voting thresholds were invalid because they conflicted with Alabama corporate law and the corporation’s articles.
2. Whether dissolution and receivership were proper remedies for the asserted deadlock in light of the governance rules that apply once invalid bylaws are disregarded.

## Decision

- The court affirmed in part, reversed in part, and remanded.
- It held the bylaws were void to the extent they conflicted with statutory and charter requirements, including provisions that effectively vested management in the president rather than the board and imposed unauthorized 70% voting requirements.
- It reversed the dissolution and receivership order, reasoning the asserted deadlock was largely a product of the invalid bylaws and could be addressed through ordinary statutory governance (majority vote of a quorum) rather than dissolution.
- It left undisturbed the denial of Roach’s counterclaim.

## Legal Principles

- Corporate bylaws are unenforceable to the extent they conflict with mandatory provisions of the state business corporation statute or with the corporation’s articles of incorporation.
- Unless a valid statute or charter provision requires otherwise, shareholder action is taken by a simple majority of a properly constituted quorum.
- Management authority is allocated by statute and the articles (generally to the board of directors) and cannot be reassigned by bylaw to entrench an officer’s control in conflict with that allocation.
- Judicial dissolution and receivership are extraordinary remedies and should not be ordered when enforcement of valid governance rules can permit corporate business to proceed.

## Conclusion

The court invalidated entrenching bylaw provisions that conflicted with statutory and charter governance and reversed dissolution and receivership because, once the invalid bylaws were disregarded, majority-rule procedures provided a workable means to resolve the conflict and operate the corporation.


Roach & The Legal Ctr., Inc. v. Bynum, 403 So. 2d 187 (Ala. 1981)