For some Alaska corporations, a time comes when the people who own and run things voluntarily decide to close the business. If you’ve reached that point with your Alaska corporation, you’ll need to take care of multiple tasks—including what is called dissolving and winding up your business.
Dissolving the Corporation
Your corporation is registered with the State of Alaska. Officially ending its existence as a state-registered business entity, and putting it beyond the reach of creditors and other claimants, begins with a formal process called “dissolution.” While a corporation may be involuntarily dissolved through a court decree, or for administrative reasons such as failing to file biennial reports or pay biennial corporation taxes, this article covers voluntary dissolution by a corporation’s shareholders. Also, while there are special procedures for dissolving corporations that have not yet issued stock, have been adjudicated bankrupt, or have disposed of all assets and not conducted any business for the previous five years, those procedures are not covered in this article.
The Alaska Corporations Code (“ACC”) provides for voluntary dissolution through a shareholder vote at a shareholder meeting. You are required to give at least 20 days advance notice to each shareholder entitled to vote of the proposed meeting to consider dissolution. A two-thirds majority of all shares entitled to vote must approve the dissolution. (If any class of shares is entitled to vote as a class, two-thirds or more shares in that class entitled to vote must approve the dissolution.) If you use this method, make sure to properly record both the shareholders’ votes.
Also, unless your articles of incorporation or bylaws provide otherwise, the ACC allows you to avoid a formal meeting and vote if all shares provide written consent to dissolve. All shareholders must sign a document, known simply as a “consent,” that states the corporation is dissolved. The consent then must be properly entered in the corporation’s records. Dissolution based on written consent can be more efficient for small businesses where most or all of the shareholders are directors—and there is unanimous agreement on dissolution.
Note that dissolution and winding up, alone, do not stop legal actions or proceedings to which your corporation is a party.
Certificate of Election to Dissolve
After approving dissolution of your corporation, you must file a certificate of election to dissolve with the Corporations Section of the Division of Corporations, Business and Professional Licensing (DCBPL). Under the ACC, the certificate must contain:
- the name of the corporation, the names and addresses of its officers, the names and addresses of its directors, and the statement that the corporation has elected to wind up and dissolve;
- if the election was made by a shareholder vote (as opposed to written consent), the number of shares voting for the election and a statement that the election was made by shareholders representing at least two-thirds of the voting power; and
- if the election was made by the written consent, a copy of the written consent signed by all shareholders of the corporation.
The certificate must be signed by:
- a majority of the directors then in office
- one or more shareholders authorized to do so by the shareholders holding shares representing 50 percent or more of the voting power; or
- by the officer or shareholder designated in the written consent.
A blank form of the certificate of election to dissolve is available for download from the DCBPL website. When using the form, you will need to provide your state-issued entity number. The form also includes a contact information sheet so that you can provide information about who the DCBPL should contact with questions and where they should return processed documents.
There is a $10 fee to file the certificate. You must submit the original signed certificate along with one exact copy. Standard processing time is 10-15 business days.
Note: The DCBPL will reject your certificate if a biennial report is due or signatures of any officers, directors, or shareholders do not match the DCBPL records.
Following dissolution, your corporation continues to exist only for the purpose of taking care of certain final matters that, collectively, are known as “winding up” the company. It may be appropriate to designate one or more officers and/or directors to handle the winding up.
Under the ACC, key winding up tasks for voluntary dissolutions include:
- defending actions against the corporation
- disposing of and conveying corporation property
- collecting and discharging corporation obligations; and
- collecting and dividing corporation assets.
Regarding the last two listed items, be aware that your corporation’s first obligation is to discharge liabilities. This includes paying all business taxes and creditors. Only then may the corporation distribute remaining assets to shareholders.
(It is worth noting that the ACC also lists powers and duties of directors, officers, or other persons appointed by a court in court-directed dissolutions, such as: carrying out contracts, collecting, paying, compromising, and settling debts and claims for or against the corporation, defending suits brought against the corporation, and suing in the name of the corporation for sums due or owing to the corporation or to recover property of the corporation. These tasks are very similar to the winding-up tasks mentioned in some other states’ statutes in relation to voluntary dissolution without court involvement.)
Notice to Creditors and Other Claimants
One other key task is giving notice of the winding-up proceedings to all known corporation creditors and all other known persons with claims against the corporation. The ACC requires you to give this notice. (The notice requirement also extends to all shareholders who did not vote in favor of winding up and dissolving the corporation.) The ACC does not, however, clearly provide details of how to give the required notice when a court is not involved. (For a court-directed winding up, a notice must be published at least once a week for three consecutive weeks in a newspaper of general circulation in the judicial district where the court proceeding is pending, or in another newspaper chosen by the court. In such cases, claimants have at least four months, but not more than six months, after first publication of the notice to present claims.) Therefore, you should strongly consider working with a business attorney to ensure you are properly fulfilling the notice requirements under the ACC.
Articles of Dissolution
After you have finished winding up your corporation, you must file articles of dissolution with the DCBPL. According to the ACC, the articles of dissolution must state that:
- the corporation has been completely wound up
- the corporation’s known debts and liabilities have been actually paid or adequately provided for under the appropriate section of the ACC (namely, AS 10.06.668), or paid or adequately provided for as far as the assets of the corporation permit, or that it has incurred no known debts or liabilities
- if there are known debts or liabilities for which adequate provision for payment has been made, what provision has been made, setting out the name and address of the corporation, person, or governmental agency that has assumed or guaranteed payment, or the name and address of the depositary with which deposit has been made, and such other information as may be necessary to enable the creditor or other person to whom payment is to be made to appear and claim payment of the debt or liability
- the corporation’s known assets have been distributed to shareholders, or, if there are no shareholders, to persons entitled to the assets, or wholly applied or deposited on account of its debts and liabilities or that it acquired no known assets; and
- the corporation is dissolved.
In addition, the ACC also requires the articles be signed by a majority of the directors then in office.
There is a blank form of the articles of dissolution available for download from the DCBPL website. When using the form, you will need to provide your state-issued entity number. The DCBPL form also includes, among other things, a space for you to provide “other information necessary for creditors to make claims.” The form wisely states that if you have specific questions or concerns about filing the articles, “you are strongly advised to consult an attorney or other professional to assist you.”
There is a $15 fee to file the articles. You must submit the original signed certificate along with one exact copy. Standard processing time is 10-15 business days.
Your business name will become available for use by others after dissolution.
An S corporation is a corporation that has filed an election with the IRS to have business income, losses, deductions, and credits pass through to individual shareholders for federal tax purposes. Only the shareholders, and not the corporation, pay federal taxes on income from the business. Potential tax issues aside, the process for dissolving and winding up an S corporation is generally the same as dissolving and winding up a traditional corporation.
Alaska does not require that you obtain tax clearance before dissolving your corporation.
For federal tax purposes, check the “final return” box on your IRS Form 1120 (for traditional corporations) or IRS Form 1120S (for S corporations).
Is your corporation registered or qualified to do business in other states? If so, you must file separate forms to terminate your right to conduct business in those states. Depending on the states involved, the form might be called a termination of registration, certificate of termination of existence, application of withdrawal, or certificate of surrender of right to transact business. Failure to file the additional termination forms means you’ll continue to be liable for annual report fees and minimum business taxes.
You can find additional information, such as forms, mailing addresses, and filing fees, on the DCBPL website.
For information on dissolving and winding up corporations formed in other states, check Nolo’s 50-state series on dissolving corporations.
Final Note: Dissolving and winding up your corporation is only one piece of the process of closing your business. For further, general guidance on many of the other steps involved, check Nolo’s 20-point checklist for closing a business and the Nolo article on what you need to know about closing a business.