Dissolving a Corporation in Michigan

by Joe Stone

A Michigan corporation can be dissolved in several ways. The requirements for dissolution differ depending on whether the corporation conducted any business. In general, the corporation's board of directors or shareholders must take action to dissolve the corporation. However, in some circumstances, the corporation can be automatically dissolved by the terms of its articles of incorporation or by failing to comply with annual state filings.

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Dissolution By Incorporators or Directors

Corporations that are created but do not engage in business can be dissolved by the persons who formed the corporation — the incorporators — or by the corporation's directors if any were appointed. The corporation is dissolved by filing a certificate of dissolution with the Michigan Department of Licensing and Regulatory Affairs (LARA). The certificate must state that the corporation meets these four requirements: no business was conducted; no shares were issued; it has no debts or liabilities; and any monies received for its shares have been returned. The certificate must be signed by a majority of the incorporators or directors. LARA provides an optional form certificate of dissolution for use.

Dissolution by Directors and Shareholders

A corporation engaged in business can be dissolved by agreement of the directors and shareholders. The directors begin the process by approving a proposal to dissolve the corporation that will be sent to the shareholders. The proposal must include the directors' recommendation for dissolution, unless the directors have a conflict of interest in making such a recommendation. The shareholders must hold a meeting to vote on approval of the dissolution. If a majority of the shareholders vote to approve the proposal, the corporation can be dissolved by filing a certificate of dissolution with LARA. The certificate must state the date and place of the shareholders' meeting and that dissolution was approved by the required vote of the board and shareholders. Within 60 days of filing the certificate of dissolution, the corporation must request a tax clearance certificate from the Michigan Department of Treasury.

Dissolution by Shareholders

Michigan law permits a corporation's shareholders to make a written agreement under Section 488 of the Business Corporation Act, known as a shareholders agreement. The purpose of the agreement is to eliminate or restrict the authority of the board of directors so that the corporation's business is run by the shareholders. As part of the shareholders agreement, a provision may be included that gives any one or more shareholders the right to request dissolution of the corporation. For example, if the provision permits any one shareholder the right to request dissolution, the shareholder can notify the remaining shareholders that he is exercising this right and thereafter file a certificate of dissolution with LARA. The provision could also be drafted to require a minimum of two or more shareholders to exercise this right. In either case, the corporation can be dissolved and a vote by the shareholders is not required. If this method of dissolution is used, the certificate of dissolution filed with LARA must state that the corporation is dissolved pursuant to an agreement under Business Corporation Act Section 488.

Dissolution According to Articles of Incorporation

The incorporators for any corporation can insert a provision that states the corporation will dissolve on a specific date. On the date specified in the articles, the corporation automatically dissolves and no certificate of dissolution needs to be filed.

Dissolution for Failing to File an Annual Report

Every Michigan corporation is required to file an annual report with LARA. If a corporation fails to file the report for two consecutive years, the corporation will automatically be dissolved 60 days after the two-year period expires.