How do I dissolve a Delaware corporation?

Takeaway: The process of dissolving a Delaware corporation involves a number of steps including approval by the company’s board of directors, stockholder approval, filing the Certificate of Dissolution, notifying creditors, settling claims, disposing of assets, filing final tax returns, and completing a closeout with the Delaware Division of Corporations.

Running a startup can be a thrilling ride, filled with ups and downs. However, not all startups will make it to a successful exit. In some cases, the best decision might be to dissolve the corporation. Here is a simple guide on how to go about dissolving a Delaware corporation.

Before we proceed, it's important to note that dissolution is a legal process, and it's advisable to seek legal counsel to ensure all steps are correctly followed.

Board of Directors Approval

The dissolution process starts with approval by the company’s board of directors. The directors must vote to adopt a resolution to dissolve the corporation. It is crucial that minutes of this meeting or the written consent are accurately kept and retained for records.

Stockholder Approval

The next step is obtaining stockholder approval. A majority of the outstanding shares entitled to vote must approve the decision to dissolve the corporation. This requires providing written notice of the meeting where the dissolution vote will be held. It is possible to handle this process via written consent in lieu of a meeting.

Filing Certificate of Dissolution

If the board of directors and stockholders approve the dissolution, a Certificate of Dissolution must be filed with the Delaware Secretary of State. The certificate must include the name of the corporation, the date of incorporation, and the declaration that the corporation is dissolved.

Notice to Creditors

Following the Certificate of Dissolution filing, the corporation should provide notice to its creditors. The notice should include information about where to send claims and the deadline for sending them (which must be at least 60 days from the date of the notice).

Settle Claims and Dispose Assets

After sending the notice to creditors, the corporation must settle all claims made by creditors. Any remaining assets are to be distributed amongst the stockholders in accordance with the priority rules set out in the corporation’s charter and Delaware law.

Final Tax Returns

Finally, the corporation should file final federal and state tax returns. The Internal Revenue Service and state tax agency should be informed that these are the final returns.

Closeout with Delaware Division of Corporations

Upon completion of all dissolution-related tasks, the corporation must inform the Delaware Division of Corporations that all necessary tasks have been completed. The corporation should provide evidence of settled claims, final tax returns, and asset distributions.

Conclusion

Dissolving a corporation is a complex process that requires diligent attention to both legal and financial obligations. It's crucial to have all steps properly documented to avoid potential legal disputes or issues with creditors or stockholders. Always consult with a legal professional before proceeding with corporate dissolution to ensure you comply with all legal requirements.