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Taking actions to force the closure of an ongoing business is never easy. But in some cases, it may be your only recourse. For example, dissolution is the only recognized statutory remedy where the directors are deadlocked. (Even though courts have fashioned other remedies as well). Working with a Philadelphia business dissolution lawyer could help ease the process. The knowledgeable attorneys at the Jacobs Law Group can advise on your options and help determine a strategy that best fits your specific situation.

Involuntary Dissolution

The petitioning shareholder has the burden of proving that shareholders would benefit from dissolution because of one of the following circumstances:

  • The corporation’s board of directors is taking actions that are fraudulent, illegal, or oppressive
  • Corporate assets are being wasted or misappropriated
  • Deadlock among the board of directors is impeding the business’ operations, and the shareholders cannot break the deadlock

See generally 15 Pa.C.S.A. § 1981.  This is called an involuntary dissolution.

But there is even a methodology for a third party to seek dissolution of a corporation; a corporate creditor can petition for dissolution. The creditor must prove that it has attempted to execute a judgment on a debt, and it has gone unsatisfied. A creditor seeking corporate dissolution also must show that the business will not generate sufficient funds to satisfy the judgment through its regular operations and should cease operations to limit claims against it.

Deciding to Dissolve Voluntarily

Pennsylvania law offers two methods for a corporation to dissolve voluntarily. A business dissolution attorney at our Philadelphia office could advise on which method is most appropriate in a specific circumstance.

One method requires the business directors to adopt a resolution to dissolve the corporation voluntarily. The shareholders must get at least ten days’ notice of the meeting to consider the resolution, and a majority of each class of shareholders must vote to dissolve.

Under the alternate method, shareholders can agree unanimously that the corporation should dissolve by signing a consent form. In this case, there is no need for a special shareholders’ meeting to obtain consent. Businesses with few shareholders can manage a dissolution efficiently using this method if all shareholders agree.

At the Jacobs Law Group we have experience in seeking involuntarily dissolve Philadelphia Businesses as well as dealing with a consensual dissolution.

Winding Down Corporate Affairs

After dissolution is agreed the directors are charged with the collection and marshalling of the assets in preparation for a sale of the company’s assets, payment of its just debts and taxes due, and then after sale and payment of all debts, the remittance of any surplus to the equity holders.  See generally 15 Pa.C.S.A. § 1975.

Where the dissolution is involuntary, the court may appoint a Liquidating Receiver to take charge of collecting and marshalling the assets, selling the company’s assets, paying its just debts and taxes due, and then remitting any surplus to the equity holders. See generally 15 Pa.C.S.A. § 5985

In all cases of dissolution, the corporation must receive a tax clearance notice from the Department of Revenue and Department of Labor and Industry before finalizing its dissolution. Once the business receives its tax clearance statements, it may file Articles of Dissolution with the Department of State. According to 15 Pennsylvania Statute §1979, any entity that has a claim against the corporation has two years from filing the Articles of Dissolution to make their claim.

Deciding to Not Dissolve an Inactive Corporation

Sometimes, directors or shareholders might consider abandoning a corporation rather than formally winding it down. But this has its own risks. For example, when creditors are not fully paid, such creditors could file an action in court to dissolve and seek to clawback funds previously distributed to insiders.

Rely on a Philadelphia Attorney for Guidance in Your Business Dissolution

If your business is dissolving or you wish to bring a petition to force this outcome, consult an experienced Philadelphia business dissolution lawyer. The process for legally dissolving a business can be complicated and failing to observe all required procedures could lead to ongoing risk for shareholders and directors.

The Jacobs Law Group has the legal expertise and business knowledge to help you navigate the process of closing a company. Reach out to schedule a consultation today.

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