Dissolving the Corporation
California’s General Corporation Law (“GCL”) provides for voluntary dissolution if shareholders holding shares with at least 50 percent of the voting power vote for dissolution. … The shareholders must sign a document, known simply as a “consent,” that states the corporation is dissolved.
In exchange for getting back their investment (in full or part), the shareholders return their shares to the company, which are then canceled. If a company returns any money to its shareholders while still having a debt outstanding, the creditor can sue, and the shareholders may have to return the received amounts.
Corporations can be dissolved by a simple majority of voting shareholders, presuming that the shareholders at the vote represent at least 50 percent of the voting rights.
Who can dissolve a company?
After dissolution, the company ceases to legally exist. The dissolving of a company is often a voluntary process; however Companies House can dissolve companies that have not kept up with their accounting responsibilities such as filing accounts and tax returns.
How can shareholders force liquidation? Shareholders and directors can force liquidation via a ‘just and equitable’ winding up petition. This is a liquidation that’s triggered via the court, and can be used to end a deadlock where shareholders block a liquidation process.
What is the difference between termination and dissolution?
These terms are often used interchangeably, but have distinct legal meanings. Dissolution is the winding up of the affairs of the entity in advance of the termination of the entity. Termination of the entity occurs when the entity ceases to legally exist.
Limited liability is a legal status that limits a person’s financial liability to a fixed sum. In the case of company debts, the shareholders are only personally liable for the debt to the value of the money they have invested in the company. … Therefore, the shareholders are legally liable for the debts of the business.
What can a dissolved company do?
When a company is dissolved, its liabilities are usually extinguished. If the debt was not secured, the creditor will need to apply to restore the company to the register and bring legal proceedings against the restored company to recover any monies owed to it by the company.
Do I still owe money to a dissolved company?
When you dissolve a limited company, whether through Members’ Voluntary Liquidation (MVL) or voluntary strike-off, any debts that are still owed must be repaid. … Company dissolution, however, is carried out by the directors of the company, who may be unaware that the company can be restored if debts still exist.
Can the shareholders overrule the board of directors? … Shareholders can take legal action if they feel the directors are acting improperly. Minority shareholders can take legal action if they feel their rights are being unfairly prejudiced.
Generally, a majority of shareholders can remove a director by passing an ordinary resolution after giving special notice. This is straightforward, but care should be taken to check the articles of association of the company and any shareholders’ agreement, which may include a contractual right to be on the board.
It’s possible for a 50% shareholder to liquidate a company by presenting a winding up petition at court on ‘just and equitable’ grounds. The court then comes to a decision on the best way forward for the company, which may or may not be liquidation.