Keith Mack
A dissolved corporation can continue its corporate existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs. This includes disposing of its properties, satisfying or making provisions for its liabilities, and distributing its remaining property among its shareholders. A dissolved corporation's board of directors may also make a determination that reasonable provision has been made for the satisfaction of any liabilities. With regards to filing a lawsuit, a dissolved corporation can file an application with the superior court for a determination of the amount and form of reasonable provision to be made for the satisfaction of any claims or liabilities. This suggests that a dissolved corporation can indeed file a lawsuit, but it is important to note that specific procedures and requirements, such as those outlined in RCW 23B.14.050 and RCW 23B.14.060, must be followed.
| Characteristics | Values |
|---|---|
| Dissolution of a corporation | Does not prevent transfer of its shares or securities |
| Board of directors of a dissolved corporation | May disregard liabilities |
| Board of directors of a dissolved corporation | May petition to have the dissolution continued under court supervision |
| Board of directors of a dissolved corporation | May dedicate the corporation's assets to the repayment of its creditors |
| Corporate actions | May be approved by the corporation's board of directors and, if required, by its shareholders |
| Written notice of claim to a dissolved corporation | Must be delivered by the deadline |
| Known claim against a dissolved corporation | May be rejected by the dissolved corporation |
| Administrative dissolution | Does not prevent the corporation from being sued or from defending lawsuits |
| Administrative dissolution | Does not release the corporation from any of the duties or liabilities of a corporation under law |
| Administrative dissolution | Remedies available to or against the corporation survive |
| Directors of a corporation after administrative dissolution | Hold title to the property of the corporation as trustees for the benefit of its creditors and shareholders |
| Dissolved limited liability company without managers or members | The legal representative of the last person to have been a member may wind up the activities of the dissolved limited liability company |
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What You'll Learn
Known claims against a dissolved corporation
A dissolved corporation can file a lawsuit, and there are several known claims that can be made against a dissolved corporation.
A "known claim" is any claim or liability that has matured sufficiently, before or after the dissolution, to be legally capable of being asserted against the dissolved corporation, regardless of whether the amount is known or not. It can also be a claim that is unmatured, conditional, or contingent but may arise under an executory contract.
If a corporation has published notice of its dissolution, it may dispose of any known claims against it by giving written notice to the holders of those claims. This notice must include a general description of the known facts related to the claim or liability, an identification of the executory contract with respect to which unmatured, conditional, or contingent claims are being disposed of, a mailing address for the notice of claim, and a deadline for the delivery of the written notice of claim to the dissolved corporation. This deadline must be at least 120 days from the effective date of the written notice of dissolution.
Claimants who were not given written notice of the dissolution or whose claims were sent but not acted upon may commence a proceeding to enforce the claim prior to the expiration of any applicable statute of limitations or within three years of receiving the notice.
The board of directors of a dissolved corporation may petition to have the dissolution continued under court supervision or, if the corporation is unable to pay its liabilities or its assets are less than its total liabilities, it may dedicate the corporation's assets to the repayment of its creditors.
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The board of directors' responsibilities
The board of directors is the governing body ultimately responsible for a corporation, with specific legal and ethical duties. The board must oversee corporate objectives and operations and act in the best interest of shareholders and stakeholders.
The board's primary role is to perform strategic planning and oversight, keeping the organization financially secure and sustainable. This includes understanding the organization's purpose and mission and providing financial oversight. They must also be prepared to act quickly and responsibly to comply with fiduciary responsibilities and uphold good governance standards. This includes being prepared to thwart potential crises and manage developing ones.
The board chair must be willing to ask probing questions of the CEO and work together during times of crisis. The board chair should also develop solid relationships with the board directors, CEO, managers, corporate secretary, and committees to lead effectively. They should also help the corporate secretary write the agenda for board meetings and encourage all board members to be actively engaged.
In the case of a dissolved corporation, the board of directors may petition to have the dissolution continued under court supervision. They may also dedicate the corporation's assets to the repayment of its creditors. The board of directors of a dissolved corporation may also disregard any liabilities that are barred or that the board does not consider reasonably likely to arise prior to the expiration of the survival period.
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Corporate actions and approval
Corporate actions are activities that bring material changes to an organization and impact its stakeholders, including shareholders, both common and preferred, as well as bondholders. These events are generally approved by the company's board of directors, and in some cases, shareholders may be permitted to vote on them as well.
Corporate actions can be either mandatory or voluntary. Mandatory corporate actions are automatically applied to the investments involved, while voluntary corporate actions require an investor's response to be applied. Stock splits, acquisitions, and company name changes are examples of mandatory corporate actions, while tender offers, optional dividends, and rights issues are examples of voluntary corporate actions.
The board of directors of a dissolved corporation may at any time petition to have the dissolution continued under court supervision. They may also disregard and make no provision for the satisfaction of any liabilities that are barred or that may exceed any provision for their satisfaction ordered by a superior court. In the case of a dissolved corporation, corporate actions that are within the scope of activities permitted may be approved by the corporation's board of directors and, if required, by its shareholders, with membership in both groups determined as of the effective date of dissolution.
Some common corporate actions that require approval include the following:
- Approval of certain transactions between directors/officers and the corporation, including loans or guarantees of debts.
- Adoption of stock option plans and employee benefit plans involving directors and officers.
- Establishing a subsidiary or entering into any merger, acquisition, or other reorganization, recapitalization, or change in stockholders' rights.
- Dividend payments, buybacks, and other activities seeking to boost shareholder value.
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Administrative dissolution and reinstatement
Administrative dissolution is an action taken by the Secretary of State that results in the loss of a business entity's rights, powers, and authority. This occurs when a business fails to comply with the obligations of the domestic corporation, LLC, or other statutory business entity. It is one of the worst things that can happen to a business entity and should be avoided at all costs. In many cases, those running the business have no idea that the administrative dissolution has taken place and continue to operate as usual. Eventually, they will learn about the involuntary dissolution when they try to file documents, bring a lawsuit, enter into a merger, or another event that requires proof that the business entity validly exists.
Reinstatement is the action taken to restore a business entity's rights, powers, and authority. In most reinstatements, personal liability is removed, and the ability to sue is restored. However, this is not always the case, and reinstatement does not solve all the problems caused by administrative dissolution. Once an entity is administratively dissolved, it may apply to the Secretary of State for reinstatement. The entity must submit an application and correct all reasons that led to the dissolution or prove that the grounds for dissolution did not exist. There is typically a time frame for which reinstatement is available, usually between two and five years after dissolution. If the business fails to complete the application within this time, reinstatement won't be possible, and those involved will be personally responsible for any company debts incurred during the dissolution.
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Winding up a dissolved corporation
Secondly, the corporation should settle its accounts, including returning debts to creditors and distributing any remaining assets to shareholders. This may involve selling off or liquidating assets to pay off debts and liabilities, including taxes and creditor claims. The board of directors of the dissolved corporation may also choose to disregard certain liabilities that are barred or that they do not consider reasonably likely to arise before the end of the survival period.
Thirdly, the corporation should address any pending litigation or claims against it. This includes addressing any known claims, which the corporation may choose to reject, in which case the claimant has a limited period, often 90 days, to commence legal proceedings. The corporation may also need to address any executory contracts, which are contracts that have not yet been fully performed or completed.
Finally, the corporation should close its accounts, licenses, registrations, and permits, and ensure that all necessary filings are completed to comply with state requirements. The corporation should also check the rules in its state regarding tax clearance and file its final state and federal tax returns, indicating that the corporation has been dissolved.
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Frequently asked questions
RCW 23B.14.050 outlines the effect of dissolution on a corporation.
Yes, a dissolved corporation can file a lawsuit and defend itself against lawsuits.
Yes, the board of directors of a dissolved corporation may disregard liabilities that are barred in accordance with RCW 23B.14.060(2).
Yes, the board of directors can petition to have the dissolution continued under court supervision in accordance with RCW 23B.14.300.
In the event of a failure to wind up the company's activities, a person may be appointed by the consent of a majority of the transferees to do so.
