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:
- Avoiding bankruptcy for private dissolution
- Not needing bankruptcy protection
- Avoiding late claims
- Protecting directors from personal accountability to claimants
- 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: –
- You can make your corporation invalid by rejecting or failing to pay Delaware franchise taxes. The state will then cancel it and punish you.
- 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 –
|Holding a shareholder meeting
|To begin the dissolution process, you must convene a meeting to collect all shareholders for a vote. The outcome of the vote will determine whether or not the corporation will be dissolved. The ultimate conclusion is based on the written opinions of the majority of shareholders. The dissolution decision is authorised if a majority of shareholders agree to dissolve the corporation in writing.
|Paying all taxes and annual reports
|Following the calendar year, all companies are required by the Delaware Code to complete files and payment for the Delaware Franchise Tax and Annual Report. For the dissolution, you must submit the necessary fees and filing documents to the Secretary of State.
|Companies who owe Delaware state franchise taxes for one year will have their licences revoked and their good standing in Delaware will be revoked. A penalty will be imposed on the corporation based on the amount of tax owed by the corporation. As a result, the corporation may be automatically dissolved by the state.
|Filing the Certificate of Dissolution
|In Delaware, there are two types of dissolution certificates. Depending on your company's condition, you can file the long-form or short-form. Each type has its own set of characteristics and prerequisites.
|A cover letter containing your contact information, including name, address, and phone or fax number, must be included in the file.
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 email@example.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:
- The normal or ‘long-form’
- The ‘short-form’
You may only use the short form if your corporation fits the three criteria below: –
- Your corporation has no assets and has ceased operations
- Your corporation has paid just the minimal state franchise tax
- 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:
- Name of the corporation
- The date of formation stated on the certificate of incorporation
- The names and addresses of all directors and officials
- The approved date of dissolution;
- 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 –
|One extra page
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: –
- Fees for the same day – $200
- Fees for within 24 hours – $100
- Fees within 1 hour – $1000
- 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.
- 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): –
- Pursuing and defending suits, either civil, criminal or administrative
- Selling or transferring company property
- Clearing the corporation’s liabilities
- 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.
- 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: –
- 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.
- The postal address to which the claim must be submitted must be included in the statement.
- 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.
- The claim will be disallowed if it is not received by the deadline.
- 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:
- A statement that the corporation has not issued any shares and has not engaged in any commercial activity.
- A statement indicating the firm has begun operations but has not yet issued any shares, and that all obligations have been paid.
- A statement stating that the firm has not done business but has issued stock with stock certificates.
- The incorporation date as stated in the certificate of incorporation.
- A statement regarding no capital has been paid.
- A statement regarding all rights and franchises has been relinquished.
What is the time frame for dissolving a Delaware corporation?
Filings are typically handled in two to three weeks. For the costs, several levels of expedited processing—one hour, two hours, same day, and 24 hours—are available
What are the types of forms for the Certificate of Dissolution?
There are two types of forms for the Certificate of Dissolution, which are the short-form and the long-form. The usage of the forms will depend on a few factors, such as if your corporation has assets, have you paid the minimum amount of annual franchise taxes, and have you paid the franchise taxes and fees dues until the end of the year.
What steps should I take to reactivate my Delaware corporation?
To recover your Delaware corporation and restore it to good standing, you will need to file a certificate for renewal and revival of charter (renewal for a forfeited Delaware corporation)