Also known as: dead corporations · defunct corporation · dissolved corporation
Written by attorneys — see sources below.
A corporation that has filed articles of dissolution and continues its existence only for purposes of winding up and liquidating its business and affairs. It may collect assets, dispose of property not distributed in kind, discharge liabilities, and perform other acts necessary to complete liquidation. It may not carry on new or ongoing business unrelated to those limited purposes.
Dakota Industries filed articles of dissolution after its board vote. The directors auctioned unused equipment and collected receivables from prior contracts. They also prepared a bid for an entirely new municipal project. A shareholder sued to stop the new bid. The court permitted the asset sales and collections but enjoined the new bid.
Delta Dynamics dissolved and began winding up. It continued to demand payment of management fees owed before dissolution from a client. The client refused payment, claiming dissolution barred collection. The court allowed the demand and any necessary suit because collecting assets is permitted during wind-up.
In 1955 or 1956, Isadore Bellis formed the law firm of Bellis, Kolsby & Wolf in Philadelphia with two other partners. The firm employed six additional staff members, including two attorneys, and maintained its financial records in Bellis’s office under the supervision of his secretary acting as bookkeeper and an independent accountant. Bellis served as the senior partner until late 1969, when he left to join another firm and the partnership dissolved, although winding up of its affairs continued. After leaving, Bellis left the former partnership’s financial records with Kolsby and Wolf at the original premises. More than three years later, in February or March 1973, Bellis’s secretary, acting on his or his attorney’s direction, removed the records and brought them to his new office. On May 1, 1973, Bellis received a subpoena directing him to appear before a federal grand jury and produce all partnership records for the years 1968 and 1969. Bellis appeared on May 9, 1973, but refused to produce the records, asserting his Fifth Amendment privilege against compulsory self-incrimination. Following a hearing in the District Court on May 9 and 10, the court ruled that the privilege did not apply to the partnership records and ordered their production by May 16. Upon his continued refusal before the grand jury, the District Court held Bellis in civil contempt. The Court of Appeals for the Third Circuit affirmed the contempt finding in a per curiam opinion on July 9, 1973. The Supreme Court granted certiorari on October 15, 1973, after staying the mandate, to address the Fifth Amendment issue presented by the subpoena for the partnership records.
View caseDecker Electronics dissolved but finished two pre-existing projects using only prior resources and subcontractors. It also bid on a new unrelated stadium contract. Creditors sued over the new bid. The court approved completing the old projects as winding up but barred the new bid.
George B. Page and H.B. Page formed an oral partnership in 1949 to operate a linen supply business in Santa Maria, California. Each partner contributed approximately $43,000 within the first two years to purchase land, machinery, and linen for the business. From 1949 to 1957 the partnership lost approximately $62,000. The partnership's primary creditor is a corporation owned entirely by plaintiff that holds a $47,000 demand note issued by the partnership. The business earned profits of $3,824.41 in 1958 and $2,282.30 in the first three months of 1959. Plaintiff then sought to end the partnership. Defendant testified that the partnership terms were intended to be similar to prior partnerships between the parties, under which the business would pay for itself. On cross-examination, however, defendant stated that there had been no discussion about continuing the business in the event of losses. The trial court determined that the partnership was for a term consisting of the reasonable time needed to repay the partnership's debts from profits. Plaintiff appealed from this judgment to the Supreme Court of California.
View caseA dead corporation may collect assets, dispose of property not distributed in kind, discharge liabilities, and perform other acts necessary to wind up its affairs. It may not carry on new business unrelated to liquidation.
Supporting sources
No. A dead corporation continues its existence for the limited purpose of winding up and liquidating its affairs. It retains the capacity to sue and be sued on pre-dissolution matters and to hold title to property during liquidation.
Supporting sources
No. Entering a new multi-year contract that creates ongoing performance obligations exceeds the authority of a dead corporation. Such conduct constitutes carrying on business rather than winding up.
Supporting sources
Yes. Collecting assets such as unpaid fees or receivables that arose before dissolution is a core winding-up activity. Limited steps to preserve the value of those assets during collection also fall within permitted conduct.
Supporting sources