Connecticut Corporate Dissolution Law

Corporations – Corporate Dissolution – Connecticut

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Statutory Reference:

 

CONNECTICUT STATUTES, §§ 33-880 through 33-903

General Discussion:

There are two ways to dissolve a business corporation in the State of Connecticut: 1) by the incorporators or the initial directors if the corporation has not issued any shares or has not commenced business or 2) by board of directors and shareholders.

If the corporation that has not issued shares or has not commenced business, a majority of the incorporators or initial directors of the corporation may dissolve the corporation by filing a certificate of dissolution with the Secretary of State.

If the corporation has issued shares or commenced business, then the corporation may be dissolved if the board of directors recommends dissolution to the shareholders and the shareholders approve the dissolution. If the Board determines that special circumstances exist, or that there is some conflict with the board making a recommendation of dissolution, then the board will make no recommendation to the shareholders and advise the shareholders of why it is failing to make a recommendation. The board of directors may condition its submission of its proposal for dissolution on any basis.

The shareholders entitled to vote on whether or not the corporation should be dissolved must be approved by the shareholders. Prior to a vote on any recommendation of the board, all shareholders must be notified of the proposed shareholders meeting to address the issue of dissolution. Unless the certificate of incorporation or the board of directors requires a greater vote or a vote by voting groups, the proposal to dissolve to be adopted must be approved by a majority of all the votes entitled to be cast on that proposal. If the board’s recommendation is approved by the shareholders, then a certificate of dissolution is filed with the Secretary of Sate.

A corporation is dissolved upon the effective date of its certificate of dissolution.

However, as important as following the correct procedures for “dissolving” the corporation are the actions which must be taken, the “winding up” of the corporate affairs, by the “dissolved” corporation after dissolution.

A dissolved corporation continues its corporate existence, but it but may not carry on any business except that appropriate to wind up and liquidate its business and affairs. As part of the “winding up,” the corporation may collect its assets, dispose of property that will not be distributed to shareholders, satisfy or make provision to satisfy its liabilities, and distribute any assets remaining after creditors have been satisfied to its shareholders. Generally speaking, the “dissolved” corporation can do anything necessary to wind up and liquidate its business affairs.

Dissolution of a corporation does not transfer title to the corporation’s property, does not prevent the transfer of corporate shares, does not subject the directors and officers to a different standard of care than before the dissolution, does not change any voting requirements, does not prevent transfer of the corporation’s stock, does not stop any one from suing the corporation, does not stop any pending legal action, does not terminate the authority or obligations of the corporation’s registered agent, and does not automatically render the shareholders liable for the debts of the corporation.

Prior to the final act of dissolution, which is the distribution to the shareholders of assets left after the settlement of corporate obligations and debts, the corporation MUST obtain a current statements from the Connecticut Commissioner of Revenue Services and the Administrator of the unemployment compensation law showing either that the corporation has paid all its taxes and contributions or that it was not liable for any taxes or contributions, or that it has made adequate provisions, with such surety as shall be satisfactory to the Commissioner and/or the Administrator for the future payment of any unpaid taxes.

When the corporation is dissolved, it must satisfy all known claims against it and all unknown claims against it.

A corporation may satisfy and dispose of the known claims against it by following the procedure:

The corporation must notify its known claimants in writing of the dissolution after the effective date of dissolution. This written notice must describe the information that must be included in a claim, must provide a mailing address where a claim may be sent, must state the deadline by which the corporation must receive the claim (this cannot be less than 120 days from the date of the written notice), and must state that the claim will be barred if not received by the deadline.

A claim against the corporation is barred if a claimant who was given written notice under does not deliver the claim to the corporation by the deadline OR if a claimant whose claim was rejected by the corporation does not sue to enforce the claim within 90 days from the date of the rejection notice. Note: a “claim” does not include a contingent liability or a claim based on an event occurring after the effective date of dissolution.

A corporation may satisfy and dispose of the unknown claims against it by following the procedure:

The corporation may publish notice of its dissolution and request that persons with claims against the corporation present them in accordance with the notice. The notice must be published one time in a newspaper of general circulation in the county where the corporation’s principal office is/was located or, if the corporation had no office in Connecticut, then in a newspaper of general circulation in the county where the corporations registered office is/was located. The notice must describe the information that must be included in a claim and provide a mailing address where the claim may be sent. The notice must also state that claims against the corporation will be barred unless a proceeding to enforce the claim is commenced within three years after the publication of the notice.

If the corporation publishes a newspaper notice, claims against the corporation are unless the claimant commences a proceeding to enforce the claim against the corporation within three years after the publication date of the newspaper notice.

Any entity having a claim against the corporation may enforce its claim against undistributed assets of the corporation, or if the assets have been distributed to shareholders, then against the shareholders. Claims against a shareholder of the corporation are limited to the shareholder’s pro rata share of the claim or to the corporate assets distributed to the shareholder, whichever is less. A shareholder’s total liability for all claims cannot exceed the total amount of assets distributed to the shareholder.

CONNECTICUT STATUTES, § 33-903 PROVIDES “Assets of a dissolved corporation that should be transferred to a creditor, claimant or shareholder of the corporation who cannot be found or who is not competent to receive them shall be reduced to cash and deposited for safekeeping with the State Treasurer or other state official authorized to hold such assets. When the creditor, claimant or shareholder furnishes satisfactory proof of entitlement to the amount deposited, the State Treasurer or such other state official shall pay him or his representative that amount.”

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Inside Connecticut Corporate Dissolution Law