If you are the director or a corporate officer of a corporation in the process of dissolution you might want to evaluate whether you will be personally held liable. If corporate formalities are not followed and the corporation proceeds with distributions to the shareholders before satisfying outstanding corporate debts, the directors might be held personally liable.
Corporations provide the shareholder and directors with protection from personal liability for the acts resulting from the corporate activities. Generally, the directors of a corporation will be isolated from liability for any corporate act. However, once a company begins with the process of dissolution, its directors and officers might be held personally liable if they don’t observe specific procedures.
A validly formed corporation is created by filing its articles of incorporation with the Department of State’s Division of Corporations. Similarly, to validly dissolve a corporation it is required to file articles of dissolution with the Department of State. The dissolution process can be submitting a request online, by mail, or by hand delivery. And the Department of State has a downloadable form available here. Be aware that once the articles of dissolution are accepted, your business name would become available 120 days later.
Winding-up and notice to creditors
Once the corporation has filed the articles of dissolution, the winding up process begins. During this period, the corporation collects its assets and liquidates them in order to pay any corporate debt. Known creditors should be notified before proceeding with distributions to the shareholders. Nonetheless, if there are no corporate assets or capital to be distributed notice to the creditors will be not necessary.
After a corporation has been dissolved or has lost its active status, it can be reinstated upon a request to the department of state. If more than 120 days have elapsed since the company was dissolved the company’s name might not be available anymore. Also, the officers and directors of the corporation will be personally liable for the acts perform during the period between dissolution and reinstatement unless such actions are ratified and approved subsequently by the corporation once it is reinstated.
Due to the intricate complexities found in the process of dissolving a corporation, we strongly recommend seeking advice from an experienced corporate attorney. If you are considering beginning the process of corporate dissolution, please do not hesitate to contact one of our knowledgeable attorneys at EPGD Business Law, located in beautiful Coral Gables, and historic Washington, D.C. Call us at (786) 837-6787 or email us to schedule a consultation.
*Disclaimer: This blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*