Corporations – Corporate Dissolution – Illinois
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805 ILLINOIS COMPILED STATUTES, §§ 5/12.05-5/12.85.
In Illinois, a corporation can be voluntarily dissolved by 1) a majority of the initial directors or a majority of the incorporators if there are no directors or 2) by the shareholders either by majority vote or by unanimous written consent. A corporation may also be involuntarily dissolved either administratively or judicially.
In order for a corporation to be dissolved by a majority of the initial directors or a majority of the incorporators:
1. Shares of the corporation must not be issued.
2. Any funds which have been paid for shares must be refunded (less any expenses)
3. All debts of the corporation must be paid.
4. Written notice of the election to dissolve the corporation must be given to all incorporators and/or all directors not less than three days before the execution of articles of dissolution.
The shareholders to dissolve a corporation, they may do so with their unanimous written consent. In the alternative, the Board may, by resolution, propose or recommend dissolution to the shareholders. The resolution must be voted on by the shareholders at a special or annual meeting and ALL shareholders MUST be given actual notice of the meeting. The resolution must be approved by at least 2/3 of those shareholders entitled to vote – unless the Articles of Incorporation provide that a lesser or greater percentage of the shareholders is required for approval of the resolution.
Once the dissolution is approved by the shareholders, the corporation ceases to exist EXCEPT that it continues its corporate existence for the limited purpose of “winding up” its affairs. Included in the winding up process are:
1. Collecting corporate assets;
2. Disposing of corporate assets that will not be distributed in kind to its shareholders;
3. Giving statutory notice to the corporation’s know creditors and discharging or making provision for discharging the corporation’s liabilities;
4. Distributing the corporation’s remaining assets among the shareholders according to their interests; and
5. Doing any other acts that are necessary to wind up and liquidate the corporation’s business and affairs.
Dissolution of a corporation DOES NOT:
1. Transfer title to the corporation’s assets;
2. Prevent transfer of its shares or securities;
3. Effect any change in the by-laws of the corporation or otherwise affect the regulation of the affairs of the corporation except that all action shall be directed to winding up the business and affairs of the corporation;
4. Prevent suit by or against the corporation in its corporate name;
5. Abate or suspend a criminal, civil or any other proceeding pending by or against the corporation on the effective date of dissolution. When the corporation is dissolved, and there are funds or other assets which are due to a shareholder who cannot be found or who is under a legal disability, then those funds or assets (which must be reduced to cash) are reported and delivered to the Illinois State Treasurer.
A dissolved corporation can bar any known claims against it, its directors and its officers, agents, employees, and its shareholders by following these statutory procedures:
Within 60 days from the effective date of dissolution, the dissolved corporation must send a written notification to each claimant setting forth the following information:
1. That the corporation has been dissolved and the effective date of the dissolution.
2. The mailing address to which the claimant must send its claim and the essential information to be submitted with the claim.
3. The deadline, which must be not less than 120 days from the effective date of dissolution, by which the dissolved corporation must receive the claim.
4. A statement that the claim will be barred if not received by the deadline.
If, after providing the above notice, the dissolved corporation rejects the claim in whole or in part, the dissolved corporation must notify the claimant of the rejection and must also notify the claimant that the claim will be barred unless the claimant files suit to enforce the claim within a deadline not less than 90 days from the date of the rejection notice.
A claimant that does not deliver its claim by the deadline established pursuant to the written notice or that does not file suit by the deadline established pursuant to the rejection of a claim, shall have no further rights against the dissolved corporation, its directors, officers, employees or agents, or its shareholders or their transferees.
“Claim” does not include any contingent liability or a claim arising after the effective date of dissolution or a claim arising from the failure of the corporation to pay any tax, penalty, or interest related to any tax or penalty.
The statutory procedure for barring claims DOES NOT APPLY to claims arising out of violations of the criminal law.
805 ILLINOIS COMPILED STATUTES 5/12.85:
“The dissolution of a corporation either (1) by the issuance of a certificate of dissolution by the Secretary of State, or (2) by a judgment of dissolution by a circuit court of this State, or (3) by expiration of its period of duration, shall not: (a) Prohibit the State from prosecuting said corporation criminally by indictment, information or complaint filed subsequent to its dissolution for any offenses committed prior to dissolution; or (b) Abate or suspend a criminal proceeding which is pending against the corporation on the effective date of dissolution.”
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