Massachusetts Business Dissolution: What Is It?
Massachusetts corporations must follow specific rules when the owners decide to break up or dissolve the company. Dissolution can happen voluntarily or involuntarily. This article explains how a Massachusetts business dissolves, which is useful information if you are a shareholder in a small, medium, or large corporation and you are wondering how to step away from the business. Closing a business in Massachusetts the right way protects you, and a Massachusetts business attorney can guide you through each step.
Involuntary Dissolution of a Massachusetts Business
When a corporation in Massachusetts fails to make its annual filings with the Secretary of the Commonwealth, fails to pay its taxes, or is ordered by a court to dissolve, the corporation may be involuntarily dissolved. When this happens, shareholders are sometimes surprised to learn that the corporation has been dissolved, meaning it is no longer recognized by the Commonwealth. If you are a shareholder of a Massachusetts corporation and find yourself in this position, contact our offices to speak with a business lawyer about your options.
Voluntary Dissolution of a Massachusetts Business
At other times, a shareholder or group of shareholders decides that it is necessary to break up or dissolve the corporation. A common question is, “How is this actually done?”
If you are incorporated in Massachusetts, you will have filed articles of organization with the Secretary of the Commonwealth. Those articles may have been drafted to address dissolution by the shareholders. Where the articles of organization provide clear procedures for dissolution and the shareholders wish to close the business, those procedures will generally control. If the shareholders used an online business formation service when the corporation was created, the articles often do not address what happens upon dissolution. This is exactly the kind of gap a business attorney is accustomed to anticipating and customizing for.
The Massachusetts Business Corporation Act
When the articles of organization lack clear direction, the shareholders may rely on the default rules of the Massachusetts Business Corporation Act (the “BCA”). In general, the BCA dissolution procedure is available when:
- the articles of organization do not contain rules for the voluntary dissolution of the corporation; or
- the articles do provide rules for voluntary dissolution but do not state that those rules must be used exclusively.
Under the BCA procedure, the board of directors first takes action to propose dissolution of the corporation, and the shareholders then vote on that proposal. Proper notice of the vote must be given to all shareholders, including shareholders who do not otherwise have voting rights. Unless your articles of organization, corporate bylaws, or shareholders’ agreement require a different threshold, the proposal must be approved by at least two-thirds of the shares entitled to vote. Keep in mind that if the corporation has multiple voting groups, a different voting rule may apply under the BCA.
In addition to its notice requirements, the BCA allows a corporation to avoid a formal meeting if written consent is provided by all shareholders entitled to vote on the dissolution. Be aware, however, that the bylaws or shareholders’ agreement may contain overriding or conflicting rules on voting rights, majority thresholds, notice, and consent. Our firm has experience interpreting these documents and can assist a shareholder or a corporation where conflicts among them exist.
What Dissolution Does Not Do
- Dissolution does not stop a lawsuit brought against the corporation or by the corporation.
- Dissolution does not change the duties that directors and officers owe to the corporation or to one another.
- Dissolution does not generally affect title to property held by the corporation.
Filing Articles of Dissolution
One of the key practical steps in closing a Massachusetts business is filing articles of dissolution with the Secretary of the Commonwealth. A business lawyer can make sure the filing meets all statutory requirements before it is submitted. Generally, articles of dissolution must state the corporation’s name and the date the dissolution was authorized (according to the bylaws, shareholders’ agreement, or articles of organization, as discussed above).
What’s in a Name
Be aware that the corporation’s name becomes available once the business is dissolved. After the articles of dissolution take effect, and assuming all other requirements for closing the business have been met, the company name returns to the public arena and is open for any interested party to claim.
What’s Next for a Company That Has Dissolved: Winding Up
The next article in this series addresses the winding up process, the period during which the corporation completes the tasks that remain after dissolution.
Understand that closing, breaking up, or dissolving a corporation in Massachusetts is not a simple process. To do it correctly, and to preserve the liability protection the corporate form provides, the corporation must follow specific steps that vary from one corporation to the next. Contact our offices to learn more and to get help from a Massachusetts business attorney with dissolving your corporation.
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The information provided in the pages and posts of this website is for general informational purposes only. The information presented on this site is not legal advice, and no attorney-client relationship is formed by use of this site.e information presented on this site is not legal advice, and no attorney-client relationship is formed by the use of this site.
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