lev-os Plan of Liquidation and Dissolution
Drafts a formal plan for winding down a U.S. corporation — satisfying creditors, distributing assets, and achieving legal dissolution under state statutes and federal tax rules.
Prerequisites
Gather before drafting:
- Corporate formation documents — articles, bylaws, amendments (especially liquidation preferences for multiple share classes)
- Board resolution — approving dissolution with vote count, quorum, date
- Shareholder approval — minutes or written consent showing requisite vote threshold met
- Creditor inventory — known creditors with addresses, amounts, secured/unsecured status
- Asset inventory — real property, equipment, IP, receivables, investments, cash
- Pending obligations — litigation, contracts, employee benefits, environmental liabilities
- State of incorporation — jurisdiction-specific dissolution statute requirements
Quick Start
- Confirm board and shareholder approvals are documented
- Identify state dissolution statute (e.g., DGCL § 275, RMBCA § 14.02) [VERIFY]
- Draft plan sections in order below
- Mark all jurisdiction-specific items with [VERIFY]
- Use bracketed placeholders for dates and amounts the client must confirm
Plan Sections
1. Preamble & Recitals
| Element | Content |
|---|---|
| Corporate identity | Full legal name, state/date of incorporation, principal office |
| Statutory authority | Cite state dissolution statute [VERIFY] |
| Board determination | Dissolution serves best interests of corporation and shareholders |
| Business rationale | Brief factual basis — avoid detail creating liability exposure |
2. Approval & Authorization
- Board vote: date, vote count, quorum confirmed
- Shareholder vote: date, shares for/against by class, statutory threshold met
- Written consent in lieu of meeting: document notice/consent compliance
- Separate class votes if preferred stock has special voting rights
3. Creditor & Stakeholder Notice
| Notice Type | Requirements |
|---|---|
| Known creditors | Certified mail or personal service; state claim deadline (typically 120+ days) |
| Unknown creditors | Publication in designated newspaper(s); frequency/duration per statute |
| Employees | Termination notices; WARN Act compliance if applicable |
| Government | Tax authorities, regulatory agencies, license holders |
| Other | Customers, vendors, material contract counterparties |
Timeline must comply with state statute for post-filing notice periods.
4. Liquidation Process
Priority waterfall:
- Liquidation costs and expenses
- Employee wages and benefits
- Tax obligations
- Secured creditor claims
- Unsecured creditor claims
- Shareholder distributions
Wind-down checklist:
- Complete or terminate existing contracts
- Collect accounts receivable
- Liquidate inventory and equipment
- Resolve pending litigation
- Address IP assets (assignment, abandonment, licensing)
- Establish reserves for contingent/disputed/unliquidated claims
- Identify liquidation oversight person or committee
- Engage professionals as needed (appraisers, auctioneers)
5. Asset Distribution
- Per-share calculation methodology for each share class
- Liquidation preferences and participation rights per articles
- Distribution timeline
- In-kind distributions: valuation method and allocation
- Tax treatment: corporate gain/loss recognition; shareholder exchange under IRC § 331 [VERIFY]
- Nonprofit entities: distribution to qualifying § 501(c)(3) organizations if applicable
6. Dissolution Filings
| Filing | Details |
|---|---|
| Articles/Certificate of Dissolution | Secretary of State; corporate name, incorporation date, authorization, creditor notice confirmation, tax compliance |
| Tax clearance certificate | Required in many states before dissolution accepted |
| Final reports | State-specific annual/final report requirements |
| Regulatory consents | Industry-specific agency approvals if required |
Obtain and retain certified copies of all filed documents.
7. Tax & Compliance
- IRS Form 966 — file within 30 days of adopting plan
- Final federal return — Form 1120 (or variant), mark as final
- Final state returns — income, franchise, sales, employment tax
- Cancel EIN, sales tax permits, business licenses
- Obtain tax clearances from all relevant jurisdictions
- Record retention — maintain records 3–7 years post-dissolution
8. Effective Date & Execution
- Plan effective date and anticipated dissolution date
- Dissolution effective upon filing (or later date if specified)
- Signature blocks: President and Secretary (or equivalent officers)
- Certification of authority and accuracy
Common Pitfalls
- Jurisdiction variance — dissolution procedures differ significantly by state; confirm all statutory citations, notice periods, and filing requirements against state of incorporation
- Fiduciary exposure — draft provisions demonstrating good faith, fair dealing, and compliance with duties to shareholders and creditors
- Minority shareholder challenges — ensure procedural fairness is documented to anticipate objections
- Special circumstances — flag pending litigation, environmental liabilities, ERISA plan terminations, or industry-specific regulatory issues
- Speculative timelines — never include concrete dates without client confirmation; use bracketed placeholders