Plan of Liquidation
About this form
The Plan of Liquidation is a legal document used by corporations to outline the process of completely dissolving the business and liquidating its assets. This form is essential for companies like Sunstar Foods, Inc. A well-drafted liquidation plan ensures that all debts are settled and that the remaining assets are distributed to shareholders in accordance with the law, distinguishing it from simpler forms of asset transfer or dissolution. This plan must comply with state legal requirements, which vary depending on the jurisdiction.
Main sections of this form
- Approval and adoption procedure by shareholders.
- Details on the sale of company assets and the associated liabilities.
- Step-by-step liquidation process following the adoption of the plan.
- Establishment of escrow or liquidating trust for pending claims.
- Indemnification clauses protecting company executives and officers.
- Provisions for employee compensation and retirement plans during liquidation.
When to use this form
This form should be used when a corporation decides to dissolve and liquidate its assets completely. Common scenarios include a company facing financial difficulties, a decision to cease operations, or restructuring due to changes in business strategy. This plan ensures that the company follows proper legal protocols for dissolution and asset distribution.
Who needs this form
- Corporate officers and directors planning a liquidation.
- Shareholders seeking a formal process to dissolve the business.
- Legal teams responsible for ensuring compliance with corporate laws.
Instructions for completing this form
- Identify and record the company name and state of incorporation.
- Secure approval from the Board of Directors for the liquidation plan.
- Call a special meeting of shareholders to vote on the plan.
- Detail the steps for asset sale and payment of liabilities.
- Include the establishment of any escrow accounts or liquidating trusts for pending claims.
- File the necessary documents with state authorities to formalize the dissolution.
Notarization requirements for this form
In most cases, this form does not require notarization. However, some jurisdictions or signing circumstances might. US Legal Forms offers online notarization powered by Notarize, accessible 24/7 for a quick, remote process.
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Make edits, fill in missing information, and update formatting in US Legal Forms—just like you would in MS Word.
Download a copy, print it, send it by email, or mail it via USPS—whatever works best for your next step.
Sign and collect signatures with our SignNow integration. Send to multiple recipients, set reminders, and more. Go Premium to unlock E-Sign.
If this form requires notarization, complete it online through a secure video call—no need to meet a notary in person or wait for an appointment.
We protect your documents and personal data by following strict security and privacy standards.
Common mistakes to avoid
- Failing to obtain proper shareholder approval before proceeding.
- Not addressing all outstanding debts before asset distribution.
- Neglecting to follow state-specific filing requirements, leading to delays.
- Overlooking the need for an escrow account or liquidating trust for future claims.
Benefits of completing this form online
- Convenient access to a legally vetted template, ensuring compliance with state laws.
- Editability allows for customization to fit specific corporate needs.
- Instant download facilitates quick implementation of the liquidation process.
Key takeaways
- The Plan of Liquidation outlines the complete dissolution of a corporation.
- Approval from both the Board of Directors and shareholders is required for execution.
- Proper legal steps ensure the protection of all parties involved during liquidation.
- State-specific regulations must be observed for effective compliance.
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FAQ
332 provides tax-free treatment to the corporate shareholder's gain or loss from the receipt of the subsidiary's property in liquidation, and Sec.1504(a)(2) (generally 80% by voting power and value) and the distribution was made in complete cancellation or redemption of all the stock of the liquidating corporation.
Under Sec. 331, a liquidating distribution is considered to be full payment in exchange for the shareholder's stock, rather than a dividend distribution, to the extent of the corporation's earnings and profits (E&P).331 when they receive the liquidation proceeds in exchange for their stock.
After the costs of liquidation, secured creditors and preferential creditors are paid first, and then unsecured creditors. Creditors with valid specific security over stock and equipment (such as retention of title clauses or leases) generally have priority to recover those items where they can be clearly identified.
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due.
Liquidate means converting property or assets into cash or cash equivalents by selling them on the open market. Liquidation similarly refers to the process of bringing a business to an end and distributing its assets to claimants.
Liquidation is important if a business fails due to anything from a lack of visionary management to increasing debts; from almost-zero revenue inflow to rising costs of unnecessary assets. Absence of profit planning and control on the continuity of losses for extended periods also call for liquidation.
Plan of Liquidation means a plan (including by operation of law) that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously) (i) the sale, lease, conveyance or other disposition of all or substantially all of the assets of the referent
In that process, the corporation notifies creditors of the impending cessation of business and does all acts appropriate to liquidate its business, such as collecting and selling assets, discharging liabilities, and distributing any remaining assets to shareholders.6 The corporation may, but is rarely required to,
