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Michigan Corporate Dissolution Law

Corporations – Corporate Dissolution – Michigan

Statutory Reference:

MICHIGAN COMPILED STATUTES §§450.1801-450.1846 and §450.1488.

General Discussion:

A Michigan corporation may be dissolved:

1. By the automatic expiration of its period of duration as set forth in the Articles of Incorporation;

2. By the incorporators or directors;

3. By the board and the shareholders;

4. Pursuant to a shareholder agreement;

5. By a judgment of the circuit court;

6. Automatically for failure to file an annual report or pay the filing fee; OR

7. By court order in receivership or bankruptcy proceedings.


For a corporation to voluntarily dissolve by its incorporators or directors, the corporation must:

(1) have not commenced business;

(2) have not issued any shares;

(3) have not debts or liabilities; and,

(4) have not received payment for any of its shares (or, if it has received payment for shares, it has returned those payments)

A majority of the incorporators or directors may file a Certificate of Dissolution affirming the above requirements and stating that a majority of the incorporators or directors have elected that the corporation be dissolved.

A corporation may also be dissolved by its board and shareholders.

The Board must propose and recommend dissolution to the shareholders. In the alternative, the Board may determine that it has a conflict of interest or that special circumstances exist which dictate that no recommendation can be made. In this case, the Board must tell the shareholders the basis for its determination. The Board may condition its proposal for dissolution on any basis.

The Board’s proposed dissolution is then submitted to the shareholders at a duly noticed shareholder meeting. All shareholders, whether entitled to vote on the Board’s recommendation or not, shall be notified of the meeting. Notice shall be timely given and the Notice shall state that one purpose of the meeting to vote on the dissolution of the corporation.

The shareholders vote on the proposed dissolution at the meeting. The proposal must be approved by the holders of a majority of the outstanding shares of the corporation entitled to vote.

If the dissolution is approved, a Certificate of Dissolution is filed.

Finally, if there is a shareholder agreement regarding dissolution that complies with §450.1488 of the Michigan Business Corporation Act, then the Shareholders can dissolve the corporation.

The corporation is dissolved when the Certificate of Dissolution is filed with the Michigan Department of Consumer and Industry Services. However, the corporation’s existence is continued for the purpose of “winding up” the affairs of the corporation.

During the winding up period, the corporation may only:

1. Collect its assets.

2. Sell or otherwise transfer assets which are not to be distributed in kind to its shareholders.

3. Pay its debts and other liabilities.

4. And do all other acts incident to liquidation of the corporations business and affairs.

During the winding up process of a dissolved corporation, its officers, directors and shareholders continue to function in the same manner as if dissolution had not occurred and title to the corporation’s assets remains in the corporation’s name until they are transferred. Shares may be transferred and the corporation may sue and be sued in its corporate name. Dissolution does not abate actions brought against the corporation prior to dissolution.

Corporate dissolution does not change quorum or voting requirements for the board or shareholders, and does not alter provisions regarding election, appointment, resignation or removal of, or filling vacancies among, directors or officers, or provisions regarding amendment or repeal of bylaws or adoption of new bylaws.

A dissolved corporation should notify its claimants/creditors in writing of the dissolution of the corporation. This may be done at any time after the effective date of the dissolution. The written notice MUST include:

1. A description of the information that must be included in a claim;

2. A mailing address where a claim may be sent;

3. The deadline [not be less than 6 months from the effective date of the written notice which is the earliest of the following: (a) the date it is received, five days after its deposit in the United States mail, as evidenced by the postmark, if it is mailed postpaid and correctly addressed, or the date shown on the return receipt, if the notice is sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee] by which claims must be received; AND

4. A statement that the claim will be barred if not received by the deadline.

Giving of notice to claimants/creditors does not constitute and admission that a person to whom the notice is directed has a valid claim against the corporation.

A claim against the dissolved corporation is barred:

1. If a claimant who was given written notice does not deliver the claim to the dissolved corporation by the deadline, OR

2. If a claimant whose claim was rejected by a written notice of rejection by the dissolved corporation does not commence a proceeding to enforce the claim within 90 days from the effective date of the written notice of rejection.

A dissolved corporation should also publish notice of dissolution. This may be done at any time after the effective date of dissolution. The published notice MUST:

1. Be published 1 time in a newspaper of general circulation in the county where the dissolved corporation’s principal office, or if there is no principal office in this state, its registered office, is or was last located.

2. State that a claim against the corporation will be barred unless a proceeding to enforce the claim is commenced within 1 year after the publication date of the newspaper notice.

If the dissolved corporation publishes a newspaper notice, the following claimants are barred from pursuing claims UNLESS the claimant commences a proceeding to enforce the claim against the dissolved corporation within 1 year after the publication date of the newspaper notice:

1. A claimant who did not receive written notice from the corporation;

2. A claimant whose claim was timely sent to the dissolved corporation but not acted on.

3. A claimant whose claim is contingent or based on an event occurring after the effective date of dissolution. PROVIDED, HOWEVER, a claimant having an existing claim known to the corporation at the time of publication of the notice, and who did not receive a written is not barred from commencing a proceeding until 6 months after the claimant has actual notice of the dissolution.

“Before making a distribution of assets to shareholders in dissolution, a corporation shall pay or make provision for its debts, obligations, and liabilities. Compliance with this section requires that, to the extent that a reasonable estimate is possible, provision be made for those debts, obligations, and liabilities anticipated to arise after the effective date of dissolution. Provision need not be made for any debt, obligation, or liability that is or is reasonably anticipated to be barred under section 841a or 842a. The fact that corporate assets are insufficient to satisfy claims arising after a dissolution does not create a presumption that the corporation has failed to comply with this section. Adequate provision is deemed to have been made for any debt, obligation, or liability of the corporation if payment has been assumed or guaranteed in good faith by 1 or more financially responsible corporations, persons, or the United States government or agency of the United States government, and the provision, including the financial responsibility of the corporations or other persons, was determined in good faith and with reasonable care by the board to be adequate. After payment or adequate provision has been made for the corporation’s debts, obligations, or liabilities, the remaining assets shall be distributed, except as otherwise provided in this section, in cash, in kind, or both in cash and in kind, to shareholders according to their respective rights and interests. A shareholder beneficially owning less than 5% of the outstanding shares may be paid in cash only, even if a shareholder beneficially owning 5% or more of the outstanding shares receives a distribution in kind, if the ownership of all shareholders receiving cash instead of distributions in kind without their written consent does not exceed 10% of all outstanding shares.” Michigan Compiled Laws, §450.1855a.

A corporation must obtain a tax clearance from the Michigan Department of Treasury. The Certificate of Dissolution cannot be filed unless it is accompanied by the tax clearance.

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Inside Michigan Corporate Dissolution Law