Dissolve Corporation Voluntarily

A California corporation can be dissolved or terminated in various ways. If the Articles of Incorporation specify a date for the dissolution, the company will end then. Otherwise, a California corporation’s existence can end by the vote of its shareholders, or under certain circumstances, of its directors or incorporator(s). If the shareholders and/or directors cannot agree to dissolve the company voluntarily, court proceedings can be used to force an involuntary dissolution. This article will discuss voluntary dissolution.

Dissolve Corporation – Shareholders

Shareholders with at least a 50% stake in a California Corporation can vote to voluntarily wind up and dissolve the company. Unless there are preferred shares, the Articles of Incorporation cannot require a greater percentage than 50% of the shareholders for voluntary dissolution.

Dissolve Corporation – Directors

The board of directors can dissolve the company by a simple majority vote under the following circumstances:

  • If there are no shareholders, or
  • If the corporation has been inactive for 5 years and has dispose of all its assets, or
  • If the corporation has been adjudicated bankrupt.

Once the appropriate votes have been made and resolutions drafted and signed, the officers must file a Certificate of Dissolution (Form DISS STK – available on the Secretary of State’s website), a Certificate of Election to Wind Up and Dissolve (Form ELEC STK – not required if the dissolution was approved by all shareholders), notify all shareholders and creditors, and file the corporation’s final tax returns.

There is a more streamlined process to dissolve an inactive corporation that is less than one year old. This process will be discussed in a coming article.

Relevant Statutes for California Corporation Dissolution:

California Corporations Code Section 1900
(a) Any corporation may elect voluntarily to wind up and dissolve by the vote of shareholders holding shares representing 50 percent or more of the voting power.
(b) Any corporation which comes within one of the following descriptions may elect by approval by the board to wind up and dissolve:
(1) A corporation as to which an order for relief has been entered under Chapter 7 of the federal bankruptcy law.
(2) A corporation which has disposed of all of its assets and has not conducted any business for a period of five years immediately preceding the adoption of the resolution electing to dissolve the corporation.
(3) A corporation which has issued no shares.