For some 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 Virginia corporation, you’ll need to take care of multiple tasks—including what is called dissolving and winding up your business.
Your corporation is registered with the Commonwealth of Virginia.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 automatically terminated for failing to file an annual report or pay a fee, this article covers voluntary dissolution by a corporation’s shareholders.Also, while there are streamlined procedures for terminating corporations that have not yet issued stock or not yet started doing business, those procedures are not covered in this article.
Virginia’s Stock Corporation Act (“SCA”) provides for voluntary dissolution through a shareholder vote at a shareholder meeting.Before the vote, your board of directors must submit a proposal to dissolve to the shareholders.You are required to give at least ten days advance notice to each shareholder, whether or not entitled to vote, of the meeting to consider dissolution.Then—unless your board of directors requires a greater vote—a two-thirds majority of all votes entitled to be cast must approve the dissolution.If you use this method, make sure to properly record both the board’s proposal and the shareholders’ votes.
The SCA also allows you to avoid a formal meeting and vote if shareholders entitled to vote on dissolution provide their written consent.By default, all shareholders entitled to vote must provide their consent in order to approve dissolution.However, if specifically authorized by your articles of incorporation, you may need the consent of only a lesser majority of shares to approve the dissolution.Regardless of whether all shareholders or only a majority must provide consent, the required number of shareholders must sign a document that states the corporation is dissolved.This document, known simply as a “consent,” then must be properly entered in the corporation’s records.There are also additional rules regarding giving notice of the action to dissolve to various shareholders; these rules vary depending on whether all voting shareholders are giving consent, or only a majority of voting shareholders.In some cases notice is required prior to the consent being recorded and becoming effective, in other cases notice is only required afterwards.(You should consider consulting with a lawyer for more details.) In cases of unanimous consent of the voting shareholders, no action by the board of directors is required.Dissolution based on written consent can be more efficient for small businesses where most or all of the shareholders are directors—and there is general agreement on dissolution.
Note that dissolution, alone, does not: