Corporate dissolution is a type of process wherein a corporation is completely terminated. Filing certain required papers usually marks the official dissolution the official termination of a corporation. Dissolving a corporation is a different process than other means of ending a corporation in which part of the corporation still lives on, such as a merger or consolidation.
Dissolution doesn’t always occur due to a failure of the business or due to loss of profits. For example, the corporation may be dissolved because it was formed for a specific purpose, and that business purpose has now been fulfilled or otherwise no longer exists.
Corporate dissolution can occur for various reasons. A corporation can be dissolved due to:
- Voluntary decision or resolution by key members of the corporation
- By resolution of the shareholders
- Suspension of the corporation’s activities by the state, often due to a failure to pay taxes to the state
- A business divorce
When a corporation is dissolved voluntarily, many steps need to be taken in order for the process to be completed. For example, the organization needs to:
- Pay off whatever debts they have incurred
- Distribute assets to members according to their corporate rights
- File dissolution papers with the secretary of state
Thus, dissolution often takes some time before it is fully completed. The exact details for dissolution and wrap-up may vary according to the type of corporation involved, as well as the business laws in that area.
Corporate dissolution can often be a time when various conflicts and disagreements surface. As a result, many legal disputes can arise in connection with the dissolution process.
A common type of legal dispute during corporate dissolution is when there is a disagreement as to the distribution of the profits and assets. Distributions are usually covered in the corporate bylaws, but interests within the company may have changed over time, leading to conflicts over distribution details.
Another common type of dispute is where the corporation is unable to pay off debts that are owed to creditors or to the government. In such cases, the company property may be subject to liens or repossession in order to satisfy debts. Major transactions such as these generally require intervention through the legal system.
Dissolving a corporation is a very involved and complicated process. It generally requires the assistance and oversight of a qualified lawyer. You may need to contact a business lawyer to help you with your corporate dissolution and wind-up. Your attorney will be able to guide you through the process and can address any legal questions that might arise at any point during the process. Also, your lawyer can provide you with representation in the event that a lawsuit becomes necessary.