When you establish a corporation, it will technically have an indefinite lifespan. A corporation will exist unless affirmative steps are taken to dissolve it. Instead of leaving your corporation in legal limbo, if you want to end it, then take the steps necessary to dissolve it. Here’s how this can be done in Pennsylvania.
How Do You Dissolve a Corporation?
For a variety of reasons, sometimes the people who own and manage a corporation will decide to close down business operations. If this is where your corporation is or is heading, then you will want to learn about what steps you need to take to dissolve and wind up your business. To be clear, we will discuss how to voluntarily dissolve a corporation. A corporation can, in some cases, be involuntarily dissolved due to a court order.
For corporations registered in Pennsylvania, you will need to end its status as a business entity registered with the state. This is dissolution and it will officially end your corporation’s existence. This will put it out of the reach of both creditors and other claimants. A corporation in Pennsylvania can be dissolved either by a board of directors action and a shareholder vote or through written consent of all corporate shareholders.
With a dissolution by board of directors action, the board of directors approves and adopts a resolution to voluntarily dissolve the corporation. This resolution must explicitly state if the corporate dissolution will proceed pursuant to the laws of Pennsylvania. Once the resolution by the board of directors has been adopted, then a shareholder vote must be held. Shareholders are entitled to a minimum of ten days of advance notice prior to the meeting of the shareholders to vote on the resolution to dissolve the corporation. The shareholders need to vote on the proposal to dissolve the corporation at the shareholder meeting.
At the shareholder meeting about the approval of the resolution to dissolve the corporation, a majority of votes must be cast in favor of the proposed resolution. Should there be different shareholder classes that need to vote separately, then there must be a majority in each class in support of approving the resolution. The board’s resolution and shareholder votes must be recorded.
If the alternative method, dissolution by written consent of all shareholders, is used, then all shareholders need to sign a consent form. This will be sufficient to dissolve the corporation and there will be no need for action to be taken by the board of directors. If there is unanimous agreement of the shareholders to dissolve a corporation, this method is the easiest to employ.
Regardless of what method of dissolution is used, notice to claimants must be issued. This means that notice of dissolving the corporation must be sent to anyone who may have a valid claim against it. The method of dissolution will, however, impact when you need to give notice and how you give notice.
Business Law Attorneys
Is it time to dissolve your corporation? We can help you dissolve it and wind things up. Reach out to the team at Jones, Gregg, Creehan & Gerace for assistance. Contact us today.