Corporations – Corporate Dissolution – Tennessee

TENNESSEE CORPORATE DISSOLUTION

Statutory Reference:

TENNESSEE CODE, §§48-24-101 through 48-24-108

General Discussion:

A Tennessee “for profit” corporation may be dissolved in three different ways: voluntarily, administratively (TENNESSEE CODE, §§48-24-201 through 48-24-25), of judicially (TENNESSEE CODE, §§48-24-301 through 48-24-304). This form packet deals ONLY with the voluntary dissolution of a Tennessee corporation.

If a corporation has not issued shares or has not commenced business, then it may dissolve by filing with the Secretary of State Articles of dissolution setting forth the mandatory statutory information. This action is the decision of a majority of the incorporators or initial directors.

If the Secretary of State finds that the statutory requirements have been met, AND THAT THE ARTICLES ARE ACCOMPANIED BY A CERTIFICATE FROM THE COMMISSIONER OF REVENUE VERIFYING THAT ALL TAXES HAVE BEEN PAID AND ALL REPORTS FILED, then the Secretary files the Articles of Dissolution and terminates the corporate existence.

Termination of corporate existence in this manner does not affect any pre-termination claim by or against the corporation or its directors, officers, or shareholders.

In the alternative, the corporation may be dissolved by the written consent of the shareholders entitled to vote (by a majority or such other number as the Articles of Incorporation or By-Laws might require) or upon the recommendation of dissolution to the shareholders by the Board of Directors.

The shareholders must be given written notification of the recommendation of the Board to dissolve and tat recommendation must be approved by a majority of the shareholders entitled to vote or such other number as the Articles of Incorporation, the By-Laws, or the Board might require.

A corporation may revoke its dissolution at any time prior to the filing of the articles of termination of corporate existence by the secretary of state. Any such revocation of the decision to dissolve must be authorized by shareholders in the same manner that the initial dissolution was approved. The initial decision to dissolve may include a provision that the board can revoke the decision to dissolve, in which case that action may be taken by the Board without further shareholder action.

A dissolved corporation continues to exist for the purposes for the sole purpose of “winding up’ its business affairs and it may not carry on any new business outside of the actions necessary to accomplish the winding up process. The winding up process includes:

1. Collecting corporate assets.

2. Disposing of property that will not be distributed to shareholders.

3. Paying or making provisions to pay corporate liabilities.

4. Distributing assets to shareholders.

5. Doing any other act necessary to wind up the affairs of the corporation.

The act of dissolving a corporation does not, in and of itself:

1. Transfer title to the corporation’s property.

2. Prevent transfer of its shares or securities.

3. Subject the directors or officers to standards of conduct different from those required of them in the normal course of business as set forth by statutes or the By-Laws of the corporation.

4. Change any quorum or voting requirements for its board of directors or shareholders, or change any other requirements of the Articles of Incorporation or By-Laws.

5. Prevent commencement of suits by or against the corporation.

6. Abate or suspend a proceeding pending by or against the corporation on the effective date of Dissolution.

7. Terminate the authority of the registered agent of the corporation.

A dissolved corporation may dispose of the known claims against it by following these statutory requirements:

The corporation must notify its known claimants in writing of the dissolution after the effective date of the dissolution. The written notice must:

1. Describe information that must be included in a claim;

2. State whether the claim is admitted, or not admitted, and if admitted:

3. The amount that is admitted, which may be as of a given date; and

4. Any interest obligation if fixed by an instrument of indebtedness;

5. Provide a mailing address where a claim may be sent;

6. State the deadline, which may not be fewer than four (4) months from the effective date of the written notice, by which the dissolved corporation must receive the claim; and

7. State that, except as admitted, the claim will be barred if written notice of the claim is not received by the deadline set out.

A claim against the dissolved corporation is barred to the extent that it is not admitted:

1. If the corporation delivers written notice to the claimant and the claimant does not deliver a written notice of its claim to the corporation by the deadline; or

2. If the corporation delivered written notice to the claimant that the claimant’s claim is rejected, in whole or in part, and the claimant does not commence a proceeding to enforce the claim within three (3) months from the effective date of the rejection notice.

A “claim” does not include a contingent liability or a claim based on an event occurring after the effective date of dissolution.

The corporation may also publish notice of dissolution and request that persons with claims against the corporation present them in accordance with the notice. The notice must:

1. Be published one (1) time in a newspaper of general circulation in the county where the corporation’s principal office (or, if none in this state, its registered office) is or was last located;

2. Describe the information that must be included in a claim and provide a mailing address where the claim may be sent; and

3. State that a claim against the corporation will be barred unless a proceeding to enforce the claim is commenced within two (2) years after the publication of the notice.

As to the following claimants, if the corporation publishes a newspaper notice as set out above, the claim of each is barred unless the claimant commences a proceeding to enforce the claim against the corporation within two (2) years after the publication date of the newspaper notice:

1. A claimant who did not receive written notice as set out above. under § 48-24-106;

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

3. A claimant whose claim is contingent or based on an event occurring after the effective date of dissolution.

A claim may be enforced against the dissolved corporation, to the extent of its undistributed assets, or, if the assets have been distributed in liquidation, against a shareholder of the dissolved corporation to the extent of the shareholder’s pro rata share of the claim or the corporate assets distributed to the shareholder in liquidation, whichever is less, but a shareholder’s total liability for all claims may not exceed the total amount of assets distributed to the shareholder.

When a corporation has distributed all its assets to its creditors and shareholders, Articles of Termination are filed with the Secretary of State. If the secretary of state finds that the articles of termination of corporate existence comply with the statutory requirements, and if the articles are accompanied by a certificate from the commissioner of revenue that the corporation has properly filed all reports and paid all taxes and penalties required by revenue laws of this state, the secretary of state shall file the articles of termination of corporate existence.

When the Secretary of State files the Articles of Termination, the existence of the corporation ceases, except that the termination of corporate existence shall not take away or impair any remedy to or against the corporation, its directors, officers or shareholders, for any right or claim existing or any liability incurred, prior to such termination. Any such action or proceeding by or against the corporation may be prosecuted or defended by the corporation in its corporate name. The shareholders, directors, and officers have the power to take such corporate or other action as may be appropriate to protect such remedy, right, or claim.

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