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Duties and Responsibilities Before Dissolution
- Before applying to dissolve your company, you have responsibilities.
Steps to Dissolve a Company
- Hold a Directors’ Meeting: to propose a termination resolution.
- File Articles of Dissolution: with the secretary of state.
Liquidation Process and Options
- Members’ Voluntary Liquidation
- Formal procedure for solvent companies.
- Most tax efficient way for shareholders to access assets.
- Creditors’ Voluntary Liquidation
- For insolvent companies needing to pay creditors before dissolution.
Timeframe and Final Steps of Dissolution
- How long does dissolution take? Six to 24 months depending on position and liquidation type.
- Articles of dissolution deadline is set by state law.
- The final act of a dissolved company is shareholder asset distribution. Shareholders have ownership interest.
Process of Dissolution
- Dissolution is the legal process of closing a company.
- Sole proprietors must notify but have no dissolution process.
- The final act distributes assets to shareholders who have ownership interest.
Company Dissolution and Liquidation
- Dissolution happens when a company ceases trading.
- Liabilities remain to be cleared before considering dissolution complete. Former shareholders may still be liable for outstanding debts or obligations.
Effects of Company Dissolution
- When a proprietor retires or dies, winding up may be best to ensure continued viability.
- There are two forms of dissolution: voluntary and court-ordered.
Consequences of Dissolution
- Dissolution ends the legal entity.
- A voluntarily dissolved company can decide it no longer wants to stay in business and properly shut down per laws.
Voluntary Dissolution
- Voluntary dissolution is a strategic decision to cease operations.
- Reasons include non-viable business or sustaining operations is no longer feasible.
External Implications
- Dissolved company files stay at Companies House twenty years before destroying or transferring to The National Archives.
- HMRC can investigate and apply to restore dissolved companies to pursue outstanding tax.
Legal Technicalities
- Section 332 provides tax-free treatment to shareholder gain/loss from receiving subsidiary property in liquidation.
- Dissociation does not necessarily cause dissolution. Dissolution and winding up happen only per RUPA Section 801: by partner act—some dissociations trigger dissolution; by operation of law; or by court order.
