There are many reasons why a company may undergo a dissolution. It may result from a business decision (e.g., unprofitability, competition, economic conditions, lack of funding). A company may be dissolved involuntarily by the Secretary of State if it fails to pay required fees. Involuntary dissolution may be a shareholder remedy arising out of a lawsuit complaining of deadlock, fraud, management problems, or illegal conduct. Involuntary judicial dissolution may also result because of an action by creditors.
The Illinois Business Corporation Act and the Illinois Limited Liability Company Act detail the circumstances for dissolution and winding up the business in these circumstances. They also set forth the procedures for seeking dissolution.
Whether you are voluntarily dissolving your company or are being forced to dissolve by court order, here are some issues to take into consideration:
- Collecting corporate assets;
- Disposing of corporate assets that won’t be distributed to shareholders;
- Giving notice to creditors, employees, customers, and properly discharging liabilities against the corporation;
- Paying of taxes and other debts;
- Distribution of remaining corporate assets;
- Whether foreign corporations (those incorporated in other states) are tied to the domestic corporation and have yet to be dissolved;
- Costs, filing fees, and other expenses related to the dissolution; and
- Lawsuits or potential lawsuits.
A dissolution does not prevent a lawsuit by or against the company in its corporate name.
You may have the ability to revoke a dissolution if you have not yet begun to distribute assets or commenced proceedings for court supervision of the business’s winding up.