Dissolution

Question 1

What are the requirements of voluntary dissolution?

Answer 1

1. A majority of the board of directors to vote in favor of dissolution
2. A majority of the shareholders to vote in favor of dissolution, if stock was issued; and

3.The corporation to file articles of dissolution with the secretary of state that contain (a) the corporation’s name, (b) the date the dissolution was authorized, and (c) a statement that the proposal to dissolve was duly approved by the shareholders

Question 2

When does administrative dissolution happen?

Answer 2

The secretary of state may administratively dissolve a corporation if:

1. The corporation failed to pay fees, taxes, interest, or penalties imposed by the state;
2. The corporation failed to deliver its annual report to the secretary of state;
3. The corporation lacks a registered agent or registered office; or
4. The corporation’s period of duration stated in its articles of incorporation has expired

Question 3

When does judicial dissolution happen?

Answer 3

A judge may dissolve a corporation in an action brought by the state, the
shareholders, or the creditors

Question 4

Judicial dissolution: State action requirements

Answer 4

Dissolution may be ordered if the state attorney general establishes that:

1. The corporation obtained its articles of incorporation through fraud; or
2. The corporation has exceeded or abused the authority conferred upon it by law

Question 5

Judicial dissolution: Shareholder action

Answer 5

A dissolution may be ordered if a shareholder in a close corporation
establishes:

1. The directors are deadlocked and irreparable injury to the corporation is threatened, or the corporation’s business and affairs can no longer be conducted to the advantage of the
   shareholders generally because of the deadlock;
2. Two consecutive annual meetings have passed, the shareholders are deadlocked, and they have failed to elect successors to directors whose terms have expired;
3. The controlling shareholders or directors have exercised a significant abuse of power; or
4. Corporate assets are being misapplied or wasted

Question 6

What is the alternative to deadlock dissolution?

Answer 6

One or more shareholders may elect to purchase all the petitioning shareholder’s shares at their fair value

Question 7

Judicial dissolution: Creditor action

Answer 7

A dissolution may be ordered if a creditor establishes:

1. The creditor’s claim has been reduced to judgment, execution on the judgment has been returned unsatisfied, and the corporation is insolvent; or
2. The corporation has admitted in writing that the creditor’s claim is due and owing, and the corporation is insolvent

Question 8

Winding up

Answer 8

A corporation that has been dissolved continues its corporate existence for a limited period of time for the sole purpose of winding up and liquidating its company and affairs (e.g., paying
off its debts and collecting money owed to it before it ceases to exist)

Question 9

What must a corporation do for known claims when winding up?

Answer 9

The corporation must provide written notice of its plans to dissolve to
all persons to whom it currently owes money. The notice must:

1. Provide a mailing address where a creditor’s claim may be sent;
2. State the deadline for submitting a claim, not fewer than 120 days after the written notice is effective; and
3. State that the claim will be barred if not received by the deadline. If the corporation rejects a claim, then the claimant has 90 days after receipt of the rejection notice to file a legal
   action; failure to bring an action within 90 days will bar the claim

Question 10

What must a corporation do for unknown claims when winding up?

Answer 10

The corporation also must provide written notice to the public at large of
its plans to dissolve. The public notice must:

1. Be published in a newspaper of general circulation in the county where the dissolving corporation’s principal office is located, or be conspicuously posted on the dissolving corporation’s website for at least 30 days;
2. Describe the information that needs to be included in a claim and provide a mailing address for claim submission; and
3. State that a claim against the dissolving corporation will be barred unless a legal proceeding to enforce the claim is commenced within three years after publication of the notice

Question 11

Distributions to shareholders (winding up)

Answer 11

After the corporation’s creditors have been paid in full and the company has wound up, any remaining assets must be distributed to the shareholders in accordance with the liquidation rights set forth in the articles of incorporation