Business Dissolution FAQs
1. What types of dissolutions exist?
There are two types of business dissolution that exist within the North Carolina General Statutes. These are:
- Administrative Dissolution – Occurs after notice is sent by the Office of the North Carolina Secretary of State informing the registered agent of a deficiency in the submissions by the corporate entity. Most often, it is the failure to file requisite annual reports. Upon entry of the administrative dissolution, the officers of the corporate entity are no longer afforded the protections of the corporation.
- Voluntary Dissolution – This form of dissolution comes as the result of action taken by the shareholders, members or board of a corporate entity and serves to put the world on notice that the corporate entity no longer exists or is at least being shut down. The corporate entity may and actually must continue to wind down its business in order to maintain the protections the corporation provided to its officers and owners.
2. What is a revenue suspension?
If a corporate entity fails to fulfill its tax obligations, the North Carolina Department of Revenue can notify the Secretary of State and issue a revenue suspension that results in the loss of all corporate protections. The key distinction for a revenue suspension is that all corporate liabilities incurred after a revenue suspension become personal liabilities of the officers of the (now former) corporate entity and that personal liability is not remedied by resolving the suspension.
3. What is receivership?
Receivership is a state court remedy similar to bankruptcy. A receiver is appointed by a superior court judge and operates pursuant to an order issued by the court. Generally, a receivership occurs when there is a dispute between shareholders or principals, or when a creditor is trying to preserve the assets of a debtor. The receiver takes over operational control of the corporate entity. Depending upon the nature of the business dispute and the terms of the court order, the receiver either operates the entity or winds it down in an orderly fashion while seeking to maximize preservation of the assets of the corporate entity.
4. Who pays a receiver?
The receiver is paid by the entity he/she is operating, but only after the court reviews and approves the receiver’s bills.
5. Does a receiver have to be an attorney?
No. Receivers may be attorneys, accountants or others familiar with the operation of a business. However, because of the judicial interaction, it is often practical for the receiver to be a Raleigh business lawyer so that the entity does not have to incur additional expense in hiring an attorney.
If you are involved in a business dissolution matter that may require the assistance of an attorney, please contact the lawyers at Hannah Sheridan & Cochran, LLP, at 919-859-6840.