Considerations to Voluntarily Dissolve a Corporation in California

A corporation can be dissolved by the shareholders or directors without any court proceedings. (California Civil Code Section 1900)

Either shareholders representing 50% or more of the voting shares can vote to dissolve it or through written consent. Or the Directors can vote to wind up and dissolve the corporation where: 1. If the corporation is subject to a Chapter 7 bankruptcy order, has disposed of its assets and has not conducted business for the preceding 5 years before the election to resolve; or 2. if the corporation issued no shares.

To do this a certificate has to be filed with the secretary of state. However, no certificate needs to be filed of the shareholders agree to the dissolution. Also, proper notice has to be given to the shareholders.

The corporation must cease business, except for business necessary to preserve good will or benefit the corporation's going-concern value.

The election to dissolve can be revoked by vote.

While the court does not have to be involved, certain interested parties can petition the court to take jurisdiction of the proceedings. For example, if a dispute arises concerning the value of the shares or the company.

The corporation or the other shareholders can elect to buy-out the shareholders seeking dissolution. The purchase has to be for cash at fair value. But watch out, if the dissolution proceedings is initiated in violation of a contractual arrangement, then any damages suffered by the remaining share holders is deducted from the cash paid to the moving party. This is just one example of a consideration that must be analyzed before initiating voluntary dissolution proceedings. Though it is relatively less complicated than pursuing an involuntary dissolution action (assuming one is appropriate) improper or incomplete analysis of the affect of the dissolution on the business or the value of the interests could lead to a less than favorable result.

Consult with an experienced attorney to analyze all your options.

Be Careful Using the Web and Social Media

A business that uses social media or websites to attract customers should be careful to use proper Disclaimers and state where appropriate Terms & Conditions for visiting its website. This will help control liability on the business' part.

Further, care should be taken in using social media, like Twitter, Facebook, Myspace or others. The benefit of having immediate connection with your potential or actual clients could backfire if you make unintended representations to your clients.

Please view the blog post linked here, for a more detailed informal discussion of this issue.