How To Dissolve A Delaware Corporation

If you are having thoughts about ‘how to dissolve a Delaware corporation?’, do not worry as for some businesses, the moment comes when the individuals who own and control the company willingly decide to shut it down. The most important thing is that in the context of dissolving your Delaware corporation, it should be thoroughly considered and made by all relevant members of the firm. 

WHAT IS A COMPANY DISSOLUTION?

• Dissolving a company implies officially and formally closing it down. While stopping operations is part of the process, there is more to closing a business than simply locking the front door.
• Assets and obligations must be handled correctly, just like an executor would settle all assets, debts, and affairs after someone dies.

WHY SHOULD I DISSOLVE MY DELAWARE CORPORATION?

The following are the primary reasons why you might want to dissolve your Delaware corporation:

1. Avoiding bankruptcy for private dissolution
2. Not needing bankruptcy protection
3. Avoiding late claims
4. Protecting directors from personal accountability to claimants
5. Relaunch the company under a new legal entity, such as a Delaware Limited Liability Company (LLC).

HOW CAN I DISSOLVE MY DELAWARE CORPORATION?

Essentially, there are two methods for dissolving a Delaware corporation, which are: –

1. You can make your corporation invalid by rejecting or failing to pay Delaware franchise taxes. The state will then cancel it and punish you.
2. voluntarily dissolve your corporation by having a shareholder vote and filing a dissolution certificate with the Secretary of Delaware.

The Court of Chancery has authority over the dissolution proceedings and any subsequent applications. These processes will also entail the filing of a petition for dissolution.

WHAT IS THE PROCEDURE TO DISSOLVE MY DELAWARE CORPORATION?

A typical Delaware company can be dissolved in three steps, which can be seen below – 

The table above is just a summary of the procedure to dissolve a Delaware corporation. If you would like an in-depth explanation or assistance, do drop us an inquiry at enquiry@relinconsultants.com, and Relin Consultant’s agents will do their best to assist you.

WHAT ARE THE TYPES OF FORMS FOR THE CERTIFICATE OF DISSOLUTION?

After your corporation’s stockholders approve the dissolution, you will need to file a certificate of dissolution with the Department of State (“DOS”). There are two types of certificates of dissolution available for corporations that are voluntarily dissolving after having issued shares and begun conducting business: 

1. The normal or ‘long-form’
2. The ‘short-form’

You may only use the short form if your corporation fits the three criteria below: – 

1. Your corporation has no assets and has ceased operations
2. Your corporation has paid just the minimal state franchise tax
3. Your corporation has paid all franchise taxes and fees due through the end of the year during which your certificate of dissolution will be submitted.

The following information is necessary for both the long-form and the short-form, according to Delaware Code section 275:

1. Name of the corporation
2. The date of formation stated on the certificate of incorporation
3. The names and addresses of all directors and officials
4. The approved date of dissolution;
5. A final outcome statement authorized by all shareholders with their written permission and the Board of Directors.

WHAT ARE THE FILING FEES FOR THE CERTIFICATE OF DISSOLUTION?

The filing fee will vary based on the type of dissolution certificate. The prices for the respective forms can be seen below –

Each form costs $50 to be certified. The filing procedure typically takes 2-3 weeks. The state, on the other hand, provides accelerated services for a variety of needs: –

1. Fees for the same day – $200
2. Fees for within 24 hours – $100
3. Fees within 1 hour – $1000
4. Fees within 2 hours – $500

WHAT SHOULD I DO AFTER THE DISSOLUTION CERTIFICATE HAS BEEN OBTAINED?

Under Delaware law, a company has three years of life after it is dissolved. During this time, the corporation can issue notifications to claimants, complete the winding up process, and obtain tax clearance.

Winding-up

• After the dissolution, your corporation continues to exist only to complete certain last tasks known as “winding-up” the firm. It may be necessary to appoint one or more officers and/or directors to conduct the winding down. The following are examples of major winding up tasks under Delaware’s General Corporation Law (GCL): – 

1. Pursuing and defending suits, either civil, criminal or administrative
2. Selling or transferring company property
3. Clearing the corporation’s liabilities
4. Distributing any leftover corporation assets to shareholders

• In terms of the last two items on the list, Delaware law is fairly clear: your corporation’s first responsibility is to discharge liabilities and obligations. This involves paying all business taxes and creditors, as well as settling or resolving all claims made against your organisation. The corporation may then distribute any residual assets to investors.

Tax clearance 

• All state taxes are not required to be remitted for dissolution filing, but they must be paid before franchise tax dues. If your corporation does business in Delaware, remember to check the “Out of Business” box and specify the final day of operation

Sending notices to claimants

• One critical step is to send notices to claimants, individuals, or organizations who have filed a claim against your corporation. Delaware law establishes the following precise standards for statements of such notices: –

1. The statement must be in writing, either as a document or as a public notice in a newspaper, and include all reasonable information directed to the claimant.
2. The postal address to which the claim must be submitted must be included in the statement.
3. The deadline for receiving the claim from the claimant must be specified in the notification and must be no earlier than 60 days from the day the notice is delivered.
4. The claim will be disallowed if it is not received by the deadline.
5. The notification must include the entire amount of all distributions made to shareholders during the previous three years, up to the date of corporate dissolution.

• In certain cases, delivering notices to claimants helps reduce your company’s responsibility and safeguard assets for shareholder pay-out.

HOW DO I DISSOLVE A CORPORATION THAT HAS NOT ISSUED ANY SHARES OR CONDUCTED BUSINESS?

• A corporation that has not issued any shares or begun operations will be dissolved by the state of Delaware using a certificate signed by a majority of significant members.
• The certificate was submitted to the Secretary of Delaware by a majority of the incorporators or directors specified on the certificate of incorporation.
• The following information is necessary for the certificate:

Statements that are of the following:

1. 1. A statement that the corporation has not issued any shares and has not engaged in any commercial activity.
   2. A statement indicating the firm has begun operations but has not yet issued any shares, and that all obligations have been paid.
   3. A statement stating that the firm has not done business but has issued stock with stock certificates.
2. The incorporation date as stated in the certificate of incorporation.
3. A statement regarding no capital has been paid.
4. A statement regarding all rights and franchises has been relinquished.