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 Virginia Plan of Liquidation and Dissolution of a Corporation is a crucial set of guidelines that outlines the process by which a corporation in Virginia must undergo in order to wind up its affairs and cease operations. This plan serves as a blueprint for how a corporation should distribute its assets, pay off any outstanding debts, and ultimately dissolve itself in compliance with the state laws and regulations. In Virginia, there are generally two types of plans for liquidation and dissolution of a corporation: voluntary dissolution and involuntary dissolution. 1. Voluntary Dissolution: This type of dissolution occurs when the decision to wind up the corporation is made by its shareholders. The Virginia Plan of Liquidation and Dissolution provides detailed instructions on how the corporation should initiate the voluntary dissolution process, including obtaining approval from the majority of shareholders, notifying creditors, liquidating assets, settling liabilities, and distributing remaining funds to shareholders. 2. Involuntary Dissolution: This type of dissolution happens when external factors force the corporation to liquidate its assets and cease operations against the will of its shareholders. This may occur due to reasons such as failure to comply with regulatory requirements, non-payment of taxes, or violation of other legal obligations. The Virginia Plan of Liquidation and Dissolution outlines the specific steps that need to be followed in an involuntary dissolution scenario, including addressing legal issues, protecting the interests of stakeholders, and ensuring proper distribution of assets. Both types of dissolution plan require careful adherence to the Virginia Code and other relevant laws. These plans must address the payment of outstanding debts, the sale or transfer of assets, the resolution of ongoing contracts, the settlement of legal disputes, and the distribution of remaining funds to shareholders. The plan should also include provisions for the termination of any licenses or permits held by the corporation and the filing of final tax returns. It is important for a corporation in Virginia to consult with legal professionals to ensure compliance with all pertinent regulations and to draft a comprehensive Virginia Plan of Liquidation and Dissolution tailored to their specific circumstances. By following the prescribed guidelines and fulfilling the necessary legal requirements, a corporation can effectively wind up its affairs and terminate its existence in a lawful and orderly manner, safeguarding the rights of its stakeholders.
