What happens when a company is dissolved?
When a company is dissolved, it ceases to exist as a legal entity. Trade will stop, the company’s name will be removed from the Companies House register. Company directors may choose to voluntarily dissolve an unsuccessful or debt-ridden business. This involves winding up operations, liquidating assets, and repaying all debts before dissolving.
Companies are dissolved involuntarily if they fail to meet filing obligations. However, an indebted company cannot always be dissolved. When dissolved, a company’s remaining assets pass to the Crown.
Dissolving a company removes its name from the Companies House register. The company then legally ceases to exist. This differs from liquidation, which is used when a company has unpayable debts. Shareholders must first approve a board resolution to dissolve. Articles of dissolution are then filed in the state of incorporation.
Causes for Dissolution
Causes for dissolution include no debts, easily-paid debts, retirement, or closing an unsuccessful business. After dissolution, directors lose liability protection and can be investigated. Much can go wrong if debts and assets are improperly handled.
What happens when a corporation is dissolved?
If a dissolved company has debts, a creditor can apply to the court to restore it to the Register of Companies, so they can take recovery action.
Company directors may choose to voluntarily dissolve an unsuccessful or debt-ridden business by winding up operations, liquidating assets, and repaying all debts before dissolving. If debts remain when a company dissolves, directors can be accused of misconduct for claiming it was solvent.
Companies are dissolved involuntarily if they fail to meet filing obligations. However, an indebted company cannot always be dissolved. When dissolved, assets pass to the Crown.