Posted by Mary Budge on Mar 31, 2012
Dissolution isn’t easy, it can be a very difficult time as you wind up something you poured your lifeblood into. Of course, once the decision is made you want it behind you as fast as possible. As we mentioned in the previous post once notice of dissolution is filed, the board must pay all debts and either give notice to creditors that the company is being dissolved, or move forward with dissolution without notice.
Whether to give notice to your creditors or not depends on several factors, do you want to slip away quietly in the night, do you want the risk of creditors finding you well after your company has shut down, perhaps you don’t want to alarm your customers because someone is buying your assets (i.e., the customer list), etc. The board should determine what course of action is best for their circumstances.
The first option is to provide notice to creditors. This is done in two steps: first for your known creditors written notice by mail or personal delivery must be made. All other creditors are notified through publication of notice once a week for four consecutive weeks in a legal newspaper. While putting the world (your community) on notice that you are closing your doors may be hard, it does shorten the period in which a creditor may come after you. Except in a few limited circumstances, all claims must be received 90 days after the date of first publication in a legal newspaper (for unknown creditors) or 90 days after the mailing of delivery of notice to known creditors. After this period the creditor is barred from suing on that claim. After the 90 day notice period has passed and there are no legal, administrative or arbitration proceedings against the company pending, articles of dissolution must be filed with the secretary of state.
Alternatively, and depending on your business, dissolution may occur with no notice to creditors. Not providing notice allows a company to forgo the claims process and limit publicity which may be strategically advantageous, but it does leave open a much longer period of time for creditors to assert claims. If you decide not to provide notice, the timing on filing the articles of dissolution depends on whether your creditors have been fully paid or not. If payment of claims of all known creditors has been made or provided for, you may immediately file articles of dissolution. However, if claims of all known creditors have not been paid, the company must file the articles of dissolution after at least two years have elapsed from the date of filing the notice of intent to dissolve. If the company dissolves without giving notice, a creditor has two years from the filing of the notice of intent dissolve to pursue a claim, after which time the creditor is barred from enforcing a claim.
Again, each situation is unique. Consider which option works best for your company, consult with your attorney and move forward to the next chapter in your life!
Next month, part three of this three part series will discuss administrative dissolution.