How to Dissolve a Corporation With Votes in California

By Elizabeth Rayne

Voting to dissolve a corporation is one step of many in closing a California business, although it is an important step. The voting process requires a corporation to review its organizing documents, determine who will make the decision, and file documents with the state to certify the vote to dissolve the company. Once the vote has been conducted and recorded, the corporation must address the next steps to move forward with dissolution.

Articles and Bylaws

The articles of incorporation and bylaws will often specify how and when the corporation may be dissolved and how remaining assets should be distributed. It's important that you consult the organizing documents before starting the dissolution process. California law sets minimum standards for dissolution, but the corporation's organizing documents may be more specific. For example, the bylaws may require a 60 percent vote to dissolve the business rather than a simple majority. If your organizing documents do not contain specific provisions for dissolution, you simply follow the procedures outlined in California law.

How to Determine Voters

Depending on the circumstances under which a corporation is dissolving, different people are responsible for making the decision to close the business. If you have issued shares of stock, the shareholders have the power to make this decision. If the corporation has no shareholders, the board of directors decide. The board will also decide whether the corporation should file for bankruptcy or if the company has sold all its assets and has not conducted any business for five years or more. If no board was ever created, the incorporators will vote on dissolution. In any case, at least a majority vote to is required to dissolve the company.

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Record and File

After the votes have been cast in favor of dissolution, you must make a record of the decision and file it with the state. The decision is recorded on a Certificate of Election to Wind Up and Dissolve, which must be filed with the Secretary of State. On the form, you will specify if the vote was made by the shareholders, board of directors or the incorporators. If the vote was by the shareholders, they will designate an authorized agent to sign the document affirming that the action was approved on a majority vote. In other cases, a board member or incorporator will sign the document. If the vote to dissolve was unanimous, you do not need to file the Certificate of Election. Either way, all closing corporations must file a Certificate of Dissolution with the California Secretary of State.

After Voting

Voting to close the business and filing dissolution documents are only the initial steps in the process of closing a California corporation. The company must address its debts, submit final paychecks to employees, pay final taxes to the state and Internal Revenue Service, and close all bank and credit card accounts. The corporation may need to sell all its assets to settle the company's debts or pay a final dividend of the remaining profits to the shareholders. Throughout the process and for years following dissolution, the corporation must maintain financial and employment records.

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