Virginia Dissolution of Stock Corporation Law

Corporations – Corporate Dissolution – Virginia

Related Virginia Legal Forms

STATUTORY REFERENCES

CODE OF VIRGINIA, §§ 13.1-742 through 13.1-755

A Virginia Stock Corporation may be terminated or dissolved either voluntarily or involuntarily. THIS SUMMARY PACKAGE ADDRESSES ONLY VOLUNTAY DISSOLUTION.

If a corporation has not issued shares or has not commenced business, a majority of the initial directors, or, if initial directors were not named in the articles of incorporation and have not been elected, then the incorporators of a corporation may dissolve the corporation and terminate its corporate existence by filing with the Commission articles of termination of corporate existence. Those articles must provide:

1. The name of the corporation;

2. Either (i) that none of the corporation’s shares have been issued or (ii) that the corporation has not commenced business;

3. That no debt of the corporation remains unpaid;

4. That the net assets of the corporation remaining after winding up have been distributed to the shareholders, if shares were issued; and

5. That a majority of the initial directors authorized the dissolution or that initial directors were not named in the articles of incorporation and have not been elected and a majority of the incorporators authorized the dissolution.

If a corporation has issued shares or has commenced business, then the corporation’s board of directors may propose dissolution for submission to the shareholders. For a proposal to dissolve to be adopted:

1. The board of directors must recommend dissolution to the shareholders unless the board of directors determines that because of conflict of interests or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders; and

2. The shareholders entitled to vote must approve the proposal to dissolve as provided in subsection E of this section.

The board of directors may condition its submission of the proposal for dissolution on any basis.

The corporation must notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with § 13.1-658. The notice must state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation.

Unless the board of directors, acting pursuant to statute, requires a greater vote, dissolution must be approved by the holders of more than two-thirds of all votes entitled to be cast on the proposal to dissolve. The articles of incorporation may provide for a greater or lesser vote than that provided for in this subsection or a vote by separate voting groups so long as the vote provided for is not less than a majority of all the votes cast on the proposed dissolution by each voting group entitled to vote on the transaction at a meeting at which a quorum of the voting group exists.

At any time after dissolution is authorized, the corporation may dissolve by filing with the Commission articles of dissolution that provide:

1. The name of the corporation;

2. The date dissolution was authorized;

3. Either (i) a statement that dissolution was authorized by unanimous consent of the shareholders, or (ii) a statement that the proposed dissolution was submitted to the shareholders by the board of directors in accordance with the statutory provisions, and a statement of:

a. The designation, number of outstanding shares, and number of votes entitled to be cast by each voting group entitled to vote separately on dissolution; and

b. Either the total number of votes cast for and against dissolution by each voting group entitled to vote separately on dissolution or the total number of undisputed votes cast for dissolution separately by each voting group and a statement that the number cast for dissolution by each voting group was sufficient for approval by that voting group.

If the State Corporation Commission finds that the articles of dissolution comply with the requirements of law and that the corporation has paid all fees and taxes, and delinquencies thereof, imposed by laws administered by the Commission, it will issue a certificate of dissolution.

A dissolved corporation continues its corporate existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs, including:

1. Collecting its assets;

2. Disposing of its properties that will not be distributed in kind to its shareholders;

3. Discharging or making provision for discharging its liabilities;

4. Distributing its remaining property among its shareholders according to their interests; and

5. Doing every other act necessary to wind up and liquidate its business and affairs.

Dissolution of a corporation does not:

1. Transfer title to the corporation’s property;

2. Prevent transfer of its shares or securities, although the authorization to dissolve may provide for closing the corporation’s share transfer records; or

3. Subject its directors to standards of conduct different from those prescribed in the CODE OF VIRGINIA, Article 9;

4. Change quorum or voting requirements for its board of directors or shareholders; change provisions for selection, resignation, or removal of its directors or officers; or change provisions for amending its bylaws;

5. Prevent commencement of a proceeding by or against the corporation in its corporate name;

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

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

A dissolved corporation may dispose of the known claims against it by following the statutorily prescribed procedures. The dissolved corporation must deliver to each of its known claimants written notice of the dissolution at any time after its effective date. The written notice must:

1. Provide a reasonable description of the claim that the claimant may be entitled to assert;

2. State whether the claim is admitted, or not admitted, and if admitted (i) the amount that is admitted, which may be as of a given date, and (ii) any interest obligation if fixed by an instrument of indebtedness;

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

4. State the deadline, which may not be fewer than 120 days from the effective date of the written notice, by which confirmation of the claim must be delivered to the dissolved corporation; and

5. State that, except to the extent that any claim is admitted, the claim will be barred if written confirmation of the claim is not delivered by the deadline.

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

1. If the dissolved corporation has delivered written notice to the claimant in accordance with the statutory provisions, and the claimant does not deliver written confirmation of the claim to the dissolved corporation by the deadline; or

2. If the dissolved corporation delivered written notice to the claimant that his claim is not admitted, in whole or in part, and the claimant does not commence a proceeding to enforce the claim within ninety days from the delivery of written confirmation of the claim to the dissolved corporation.

A “claim” does not include (i) a contingent liability or a claim based on an event occurring after the effective date of dissolution or (ii) a liability or claim the ultimate maturity of which is more than sixty days after the delivery of written notice to the claimant.

If a liability exists, but the full extent of any damages is or may not be ascertainable, and a proceeding to enforce the claim is commenced pursuant to statute, the claimant may amend the pleadings after filing to include any damages that occurred or are alleged to have occurred after filing. The court having jurisdiction of such a claim may continue the proceeding during its pendency if it appears that further damages are or may be still occurring.

When a corporation has distributed all of its assets to its creditors and shareholders and voluntary dissolution proceedings have not been revoked, it must file articles of termination of corporate existence with the Commission. The articles must set forth:

1. The name of the corporation;

2. That all the assets of the corporation have been distributed to its creditors and shareholders; and

3. That the dissolution of the corporation has not been revoked.

With the articles of termination of corporate existence, the corporation must file a statement certifying that the corporation has filed returns and has paid all state taxes to the time of the certificate. In contemplation of submitting the required statement, the corporation may file returns and pay taxes before such returns and taxes would otherwise be due.

If the Commission finds that the articles of termination of corporate existence comply with the requirements of law and that all required fees have been paid, it will issue a certificate of termination of corporate existence. Upon the issuance of that certificate the existence of the corporation ceases, except for the purpose of suits, other proceedings and appropriate corporate action by shareholders, directors and officers as provided by law.

The statement “that all the assets of the corporation have been distributed to its creditors and shareholders” means that the corporation has divested itself of all its assets by the payment of claims or liquidating dividends or by assignment to a trustee or trustees for the benefit of claimants or shareholders. If any person who is entitled to a share in the distribution of the assets cannot be found, the corporation may, without awaiting the one year mentioned in §55-210.7, pay his share to the State Treasurer as abandoned property on complying with all applicable requirements of § 55-210.12 except subdivision 4 of subsection B of that section.

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