DISSOLUTION

Question 1

Annual Report

Answer 1

If not filed, the corporation risks administrative dissolution

Question 2

Voluntary Dissolution

Answer 2

Takes place either with (a) approval of the board and an absolute majority of shares or (b) with written consent of an absolute majority of shares (board action is not needed under this option)

Question 3

Involuntary Dissolution (within the court’s discretion)

Answer 3

Two types: Shareholder Petition and Creditor’s Petition

Question 4

Involuntary Dissolution-Shareholder Petition

Answer 4

Alleging:

(1) Director Deadlock, and either (a) harm to the corporation or (b) the business can no longer be conducted to the advantage of the shareholders;
(2) Shareholder Deadlock;
(3) Waste of Corporate Assets; or
(4) Director fraud or illegal conduct

*These grounds are not available for shareholders in public companies.

**As an alternative remedy to dissolution, a court can appoint a receiver, appoint a provisional director, order a buyout of the petitioning shareholder’s shares, or grant any other appropriate equitable relief

Question 5

Involuntary Dissolution-Creditor’s Petition

Answer 5

If the corporation is insolvent and a creditor has an unsatisfied judgment against the corporation, or if the corporation admits the debt in writing

Question 6

Administrative (State) Dissolution

Answer 6

For failure to file annual report, etc.

Question 7

Winding Up

Answer 7

Convert assets to cash, pay creditors, and distribute the rest pro-rata share (unless there’s a dissolution preference)

Question 8

Filing

Answer 8

Must file articles of dissolution with the Department of State.

*File to begin a corporation

*File to end a corporation

Question 9

Resolution of Unknown Claims

Answer 9

1. File Notice of Dissolution with the Department of State
2. Publish Notice once a week for two consecutive weeks in a newspaper where its principal office is located or, if it has no principal office, where it owns real or personal property. The notice must state that a claim will be barred unless a proceeding to enforce it is commenced within four years.

*If a claimant does not commence a proceeding to enforce the claim within four years, he is barred from asserting the claim. “Use it or lose it.”

**If a claimant commences a timely proceeding but the assets have already been liquidated, then he can recover from shareholders whatever they got in liquidation.