What happens if a corporation is dissolved

You must file this document in the same state where your company was incorporated. You may also have to file some other forms, depending upon your state's requirements. A voluntary dissolution usually involves the following essential steps:. Involuntary Dissolution :. When any of the company shareholders files a lawsuit requesting its dissolution, the court may issue an order to dissolve the company.

This usually happens when the relationship between the shareholders is such that it prevents the company's operation. In some states like Arizona, a company is dissolved by a state agency if it fails to meet the state filing requirements.

Such dissolution is usually known as administrative dissolution. It often means the company ceases to exist without the knowledge of its shareholders. It may result in substantial adverse consequences. Steps to dissolve a corporation with property or liabilities A corporation can be dissolved only when its property has been distributed and its liabilities have been discharged. There are two ways to proceed. Liquidation before starting the dissolution process : The shareholders can pass a special resolution authorizing the directors to distribute any property and discharge any liabilities in accordance with the articles of the corporation and the requirements under the CBCA.

The directors must then dispose of any property and liabilities before applying for a certificate of dissolution. Starting the dissolution process before the liquidation process : If the corporation will cease carrying on business while it is in the process of liquidation, it can apply for a certificate of intent to dissolve.

Shareholders must authorize the liquidation and dissolution of the corporation by special resolution. The certificate of intent to dissolve serves as public notice that the corporation is no longer carrying on its activities, except to the extent necessary for the liquidation. When a certificate of intent to dissolve is issued, the corporation must cease to carry on its activities except to the extent needed for the liquidation. It must also: notify creditors of its intent to dissolve give notice of the intent to dissolve in each province in Canada where the corporation is carrying on activities at the time it sends the statement of intent to dissolve to Corporations Canada perform all the acts required for the dissolution; for example, collect the corporation's property, dispose of the property that is not to be distributed in kind to shareholders and discharge all the corporation's obligations distribute the corporation's remaining property among the shareholders according to their respective rights and the provisions of the CBCA.

Once the liquidation process is completed, you can apply for a certificate of dissolution. Although dissolution terminates the legal status of a company, the company must still wind down, liquidate its assets and take care of other matters related to ending its existence.

The liquidation of assets is one of the first activities that must occur after a small business dissolves. Liquidation refers to the sale or auction of the physical and intangible assets of the business. For example, the small business must sell all of its office furniture, equipment and supplies.

Intangible assets might include patents or stock. These assets will be used to pay off any outstanding debts of the company and, if any amount is remaining, to pay shareholders. A small business must pay all of its debts before completely winding down. Corporations may either dissolve voluntarily or involuntarily.

A voluntary dissolution is done under the authorization of shareholders, or if there are no shareholders, under the authorization of the director s. Involuntary reasons for dissolution may include when the corporation has not followed the rules for corporate entities, such as not maintaining the percentage of Canadian directors as per its provincial requirements or failing to file an annual return.

How to Dissolve a Corporation Depending on your situation, the process for dissolution may vary. Like mentioned above, a corporation can only dissolve once it has zero property or liabilities. If you intend to dissolve and you have property, you may wish to start liquidating assets before applying for dissolution. In this case, after a resolution to dissolve has been passed by shareholders, or each class of shareholders, the corporation distributes the property and discharges liabilities according to the Articles and Canada Business Corporation Act.

It may then apply for a Certificate of Dissolution by first submitting a signed copy of Articles of Dissolution to the government. Under this course of action, the corporation must apply for a Certificate of Intent to Dissolve by first submitting a Statement of Intent to Dissolve to the government.