This post will continue the discussion of the dissolution and winding-up procedure of a Delaware corporation.
Can the Court Judicially Supervise the Winding-Up Procedure?
Yes. Under Sections 280 and 281(a) of the DGCL, the Court may oversee the winding-up process of a corporation. This is a complex procedure, but it affords directors and stockholders with a greater overall level of protection by obtaining the Court of Chancery’s “stamp of approval.”
Can a Corporation Be Wound Up Without Court Supervision?
Yes, pursuant to Section 281(b) of the DGCL. While this non-courtsupervised procedure is less rigorous than the one posed under Sections 280 and 281(a) of the DGCL, it opens a director or stockholder up to potential liability if the distribution to the corporation’s creditors is not done properly, and a director may be deemed to have breached his or herfiduciary duty to creditors if he or she fails to cause the corporation to properly make distributions.
Does a Stockholder of a Dissolved Corporation Have Liability for Claims Against It?
If a dissolved corporation’s assets were wound up properly, a stockholderis not liable for any claim against the corporation in an amount in excess of such stockholder’s pro rata share of the claim or the amount so distributed to such stockholder, whichever is less.
Will Directors Be Liable for Claims Against a Dissolved Corporation?
The directors of a dissolved corporation will not be liable to the claimants of the dissolved corporation if the corporation’s assets were wound up properly under the DGCL.
How Are Creditors Notified of a Dissolved Corporation?
A corporation must notify all of its creditors by mail and by publication that the company is dissolving and must state the procedures by which a creditor can make a claim against the corporation.
How Long Can a Corporation Sue or Be Sued After It Has Dissolved?
Pursuant to Section 278 of the DGCL, once a corporation has dissolved, either voluntarily or by operation of court order, it may prosecute and defend suits for a period of three years (unless the period is extended by the Court). After this time period, the corporation can no longer sue or be sued in its corporate capacity.
Does a Corporation Have To Set Aside Funds for Contingent, Pending or Future Claims?
Yes. If the wind-up procedure is done judicially pursuant to Sections 280 and 281(a), then the Court will determine the adequacy of such security set aside by the corporation for certain types of contingent
or pending claims. In the event of an extra-judicial winding-up of the corporation, the directors shall make provision as will be reasonably likely to be sufficient to pay certain types of contingent or pending claims, with the exception that funds must be set aside forthe third category of claims that are likely to arise or become known within 10 years of the date of dissolution.