Dissolving a company is a process that can vary widely from one country to another. In the US, there are two main systems; which system is used determines the order of events. In both systems, there are five main steps to the dissolution itself.
Creditors are normally informed of a company’s dissolution through print notices.
The rules that must be followed to dissolve a company depend on which law the state in question follows. Some follow the Model Business Corporation Act, also known as the Model Act. Others follow the Revised Model Business Corporation Act, known as the Revised Model Act.
Under the Revised Model Law, the corporation is dissolved immediately, but remains in existence during the liquidation process. During this process, he cannot take any more trades. With the Model Business Corporation Act, directors cannot dissolve a corporation until the liquidation process is complete. At this stage, the company no longer legally exists, except in the context of any legal actions brought against it.
The process for dissolving a company can vary widely from country to country.
The first step in a company’s dissolution process is for directors to propose dissolution to shareholders and for shareholders to vote in favour. The majority required for approval will depend on corporate rules. The second step is to submit the paperwork to the relevant state. With states following the Model Law, the corporation must file a declaration of intent before starting the liquidation process and then file the articles of dissolution when the process is complete. With states following the Revised Model Law, articles of dissolution are generally filed before proceedings begin.
The third step is to notify creditors of the dissolution or intention to dissolve the company. They must be given an address and deadline for filing complaints. In states that follow the Revised Model Act, the corporation generally must post an advertisement in a local newspaper to the attention of unknown creditors.
The fourth step is to process creditor claims. A claim can be accepted and paid or rejected. If the claim is rejected, the claimant must be notified in writing and given a deadline to pursue the claim legally.
The final step is to distribute the remaining assets to shareholders. The company must file IRS form 1099-DIV, which details these distributions. The corporation must also have filed IRS Form 996 within 30 days of shareholders approving the dissolution.