“Dissolution” is the formal process by which a state-registered business entity, such as a corporation, may be officially ended. The Florida Business Corporation Act (FBCA), is a Florida general corporate statute that applies to all domestic, for-profit corporations incorporated under a statute of Florida; and is contained in the provisions of Chapter 607 of the Florida Statutes. This Act has modified the effects that corporate dissolutions have on the corporate entity, on its creditors and debtors, legal actions pending against the corporation at the time of dissolution, and legal actions other parties may try to bring against the dissolved corporation after the dissolution.
The Act also provides sets of procedures for dissolutions by different means. A corporation may be dissolved for several reasons and pursuant to several statutory provisions of the Act. A corporation may be voluntarily dissolved, either by its incorporators or directors, or by its board of directors and shareholders. But, it may also be involuntarily dissolved through proceedings commenced by the Department of State, or by the courts in proceedings brought by the department of legal affairs, a shareholder, or a creditor.
Although a “dissolved” corporation continues its corporate existence, it can only continue its affairs in order to “wind up” and liquidate its business, which involves: collecting its assets; disposing of its property not to be distributed in kind to its shareholders; discharging its liabilities; and distributing its remaining assets among its shareholders according to their interests. Fla. Stat. § 607.1405(1). This process is known as “winding up” a company.
§ 607.1401. Dissolution by incorporators or directors
When the corporation has not issued shares, or has not commenced business, a majority of the incorporators or directors may dissolve the corporation by filing articles of dissolution with the Department of State. The articles of dissolution must set forth:
- The name of the corporation;
- The date of filing of its articles of incorporation;
- That none of the corporation’s shares have been issued, or
- That the corporation has not commenced business;
- That no debt of the corporation remains unpaid;
- That the net assets of the corporation remaining after winding up have been distributed to the shareholders, if shares were issued; and
- That a majority of the incorporators or directors authorized the dissolution.
Fla. Stat. Ann. § 607.1401 (West).
§ 607.1402. Dissolution by board of directors and shareholders; dissolution by written consent of shareholders
The corporation’s shareholders may vote to dissolve the company at a shareholder meeting by first submitting a proposal of dissolution to the shareholders. The corporate board of directors is required to give ten (10) days of advance notice to each shareholder, regardless of their entitlement to vote, of the proposed meeting to consider dissolution. Unless the articles of incorporation or the board of directors require a greater vote or a vote by voting groups, a majority of all votes must approve the dissolution for it to take place.
Alternatively, without action of the board of directors, action to dissolve a corporation may be taken by the written consent of the shareholders. Fla. Stat. Ann. § 607.0704 (West). Here, unless the articles of incorporation provide otherwise, dissolution may be done only by the consent of the majority of voting shares. The shareholders sign a “consent” document, stating that the corporation is dissolved, and which is entered in the corporation’s records. No less than ten (10) days after obtaining the consent, notice of the action must also be given to any nonvoting shareholder and voting shareholders who did not consent. This method is probably more efficient when the case involves a small business whose voting shareholders are basically the directors.
607.1420. Administrative dissolution
The Department of State may commence a proceeding to administratively dissolve a corporation under certain conditions, such as:
- The corporation has failed to file its annual report and pay the annual report filing fee
- The corporation is without a registered agent or registered office in this state for 30 days or more;
- The corporation does not notify the Department of State within 30 days that its registered agent or registered office has been changed, that its registered agent has resigned, or that its registered office has been discontinued;
- The corporation has failed to answer truthfully and fully interrogatories of the Department of State by the time prescribed; or
- The corporation’s period of duration stated in its articles of incorporation has expired.
Fla. Stat. Ann. § 607.1420 (West).
Dissolution does not change everything
Among other things, dissolution does not transfer title to the corporate assets; prevent commencement of a proceeding (such as civil or criminal suits, administrative and investigatory actions) by or against the corporation in its corporate name; or abate or suspend a pending proceeding by or against the corporation on the date of dissolution.
Articles of Dissolution
After the approval of the dissolution, articles of dissolution should be filed with the Department of State’s Division of Corporations (“DOC”) in order to complete the voluntary dissolution. The articles of dissolution must contain:
- The name of the corporation
- The date dissolution was authorized; and
- A statement on the number of votes of the shareholders being sufficient for approval of the dissolution. (If dissolution was approved by shareholders voting in voting groups, a statement for each separate voting group should be included.)
A dissolved corporation’s first obligation is to discharge liabilities; so, all business taxes and creditors should be paid off before distributing the remaining assets to shareholders.
Giving notice of the dissolution to creditors and claimants is optional, but it allows for a safer final distribution to shareholders by helping to limit liability for unpaid debts. A proper written notice:
- Provides a description of the claim that the claimant may be entitled to assert;
- States whether the claim is admitted to or not; and, the amount, which could be whole or partial;
- Provides a mailing address where a claim may be sent;
- States the deadline, which must be of at least 120 days after the effective date of the written notice, by which a confirmation of the claim may be delivered to the dissolved corporation; and
- States that the corporation may make distributions thereafter to other claimants and the corporation’s shareholders or persons interested.
Notice to unknown, or potential, claimants may also be given by filing a notice of dissolution with the Department of State (“DOS”) or by publishing a notice in a newspaper.
Overall, this is an intricate process that is best done with the help of professionals. If you seek to dissolve your corporation or want information as to whether this actions would be appropriate, schedule a consultation with the experienced attorneys at EPGDLaw today, located in beautiful Coral Gables. Call us at (786) 837-6787 or e-mail us to schedule a consultation.