Dissolution is the act of bringing to an end. It is the act of rendering a legal proceeding null, or changing its character. Under corporate law, it is the last stage of liquidation. Dissolution is the process by which a company is brought to an end.
Liquidation is the selling of the assets of a business, paying bills and dividing the remainder among shareholders, partners or other investors. A business need not be insolvent to liquidate. Upon liquidation of certain business, such as a bank, a bond may be required to be posted to assure the proper distribution of assets to creditors.
The California Plan of Liquidation and Dissolution of a Corporation is a legal process that outlines the step-by-step procedure for winding up a corporation's affairs and distributing its assets among its shareholders. This plan is governed by the California Corporations Code, specifically Sections 1900 to 1916. The purpose of a California Plan of Liquidation and Dissolution is to facilitate the orderly termination of a corporation's existence, ensuring all outstanding obligations are settled and assets are fairly distributed. The plan typically involves several key stages and considerations, including: 1. Adoption of the Plan: The board of directors initiates the dissolution process by adopting a Plan of Liquidation and Dissolution. This plan outlines the intended steps, timing, and distribution of assets. 2. Shareholder Approval: The shareholders must then vote and approve the proposed plan. Depending on the circumstances, majority or unanimous consent may be required. 3. Notice to Creditors: Once approved, the corporation must publish a notice of intent to dissolve in a newspaper in the county where its principal office is located. The notice provides creditors with an opportunity to submit claims against the corporation before a specified deadline. 4. Settling Debts: The corporation must satisfy any outstanding debts or obligations, either by payment or through negotiation with creditors. It is crucial to consider tax liabilities, contractual obligations, and potential legal claims during this stage. 5. Asset Distribution: After settling debts, the remaining assets are distributed among the shareholders based on their respective ownership interests. This can be in the form of cash, property, or other assets. 6. Filing Documents: Various legal documents must be filed with the California Secretary of State to officially dissolve the corporation. These documents generally include a Certificate of Dissolution and Articles of Dissolution. It is worth noting that the California Plan of Liquidation and Dissolution of a Corporation may vary in application depending on the specific circumstances and goals of the corporation. There can be different types of plans, such as voluntary dissolution and involuntary dissolution, each with its own requirements and procedures. Moreover, corporations may opt for a short form dissolution if they meet specific criteria, such as having no liabilities, no ongoing business operations, and obtaining shareholder approval. This expedited process simplifies the dissolution process by waiving certain steps. In summary, the California Plan of Liquidation and Dissolution of a Corporation is a legal framework that enables the orderly winding up and dissolution of a corporation. It involves various steps, including adoption of the plan, shareholder approval, settling debts, asset distribution, and filing legal documents with the Secretary of State. Different types of dissolution plans exist, such as voluntary and involuntary dissolution, with potential variations like short form dissolution for eligible corporations.
