There are many reasons corporate dissolution may be the best choice. Perhaps the corporation’s purpose has been completed, there are cash flow problems, or there are insurmountable disagreements between directors. Whatever the reason, there is a statutory process in Colorado for business dissolution.
If shares have not yet been issued, a majority of the corporation’s directors (or a majority of the incorporators if no directors have been elected) may authorize the dissolution.
However, if shares have been issued, the board of directors will need to adopt a proposal to dissolve. After the board of directors adopts the dissolution proposal, they shall recommend the proposal to the shareholders. The shareholders entitled to vote on the proposal will then need to approve the dissolution approval. Unless a greater vote is required by the corporation’s articles of incorporation or bylaws, the proposal has to be approved by a majority of votes in each voting group entitled to vote separately. For example, a majority of class A share votes, a majority of class B share votes, and a majority of class C share votes would accomplish the approval of the dissolution proposal. In addition to the requirements listed above, there are important notice provisions related to the shareholder vote pursuant to C.R.S. § 7-114-102(5), which must be followed.
After the dissolution is authorized, the corporation may dissolve by filing Articles of Dissolution with the Colorado Secretary of State and will be deemed dissolved as of the effective date of its Articles of Dissolution.
Post-dissolution, the corporation will continue its existence to wind up existing affairs, but no new business may be carried out. State, federal, and local tax returns will need to be filed and customers, creditors, and employees will need to be notified of the dissolution. Assuming the corporation has assets, those assets will need to collected and distributed. Keep in mind that dissolution does not transfer title to the corporation’s property.
Navigating the statutory requirements of dissolution and winding up a corporation alone can be inefficient and challenging. If you need to dissolve your corporation, we have a team of business law attorneys ready to help you.