Sometimes keeping a corporation going serves no useful purpose. If you have such a corporation, here are some useful steps to consider.
Typical corporate terminations involve both a liquidation – the act of converting all corporate assets to cash, paying all outstanding bills, and distributing the remaining cash to the shareholders in exchange for their stock – and a dissolution – the legal steps necessary to end the corporation’s existence.
Five actions (and their associated paperwork) generally cover what needs to be done:
1) approving an intent to dissolve,
2) creating a plan of liquidation,
3) filing articles of dissolution,
4) completing the liquidation, and
5) limiting future liability.
The first step is accomplished either at a joint shareholder and director meeting with an appropriate action taken, or by unanimous execution of a joint shareholder and director Consent Resolution.
Thomas G. Schober, Marquette 1972, is an attorney with Schober Schober & Mitchell, S.C., Oconomowoc, where he focuses on business, taxation and real estate, with extensive transactional experience in mergers and acquisitions and complex real estate matters.
At that time, a Plan of Liquidation will be approved, generally setting the timeframe within which the corporation’s assets will be converted to cash and bills will be paid, and the shareholders will also sign over their stock certificates for a proportionate “liquidating distribution.” The Articles of Dissolution are then filed with the Department of Financial Institutions.
A Plan of Liquidation should reference that the corporation’s accountant will file Form 966, entitled “Corporate Dissolution or Liquidation,” a necessary action.
Once the initial resolution is passed, all future actions can be summarized as “winding up the affairs of the corporation.”1 After the Articles of Dissolution are filed, the directors and officers retain authority to act with respect to such wind up activities. This includes allowing an officer to sign the corporation’s final tax return, as well as checks to shareholders, which will complete the liquidation.
Finally, in order to shorten the time claims may be filed against the corporation, it is advisable to publish a Notice of Dissolution per Wis. Stat. section 180.1407. Specific creditor’s claims may be further barred by following a simple Notice procedure set forth in Wis. Stat. section 180.1406.
This article is originally posted in the Wisconsin Business Law Blog, published by Schober Schober and Mitchell, S.C.
1 See Wis. Stat. § 108.1405.