Read the case and develop a strategy to answer the accompanying questions. The h

Question

Read the case and develop a strategy to answer the accompanying questions. The hypothetical company, HPC Corporation, is having financial trouble. There is talk of dissolving the corporation because the last business venture they took part in turned out to be a huge flop and has left the company in financial ruin. Ultimately, the directors of HPC decide to initiate the proposal to dissolve and submit it to the shareholders for a vote. The shareholders were at first divided about whether they wanted to dissolve, but after a lot of lobbying, the shareholders unanimously voted to dissolve HPC. After the vote, the directors filed articles of dissolution with the secretary of state for the state of Delaware. The articles included the company name, the date of dissolution, and the method of authorization of dissolution. After the articles of dissolution were filed, the shareholders were again notified. Has HPC covered the steps necessary for a voluntary termination? Also, explain how the process would differ if the termination was involuntary because the shareholders petitioned for dissolution because they believed the directors were abusing their power. 1. The dissolution described in the case is Involuntary Neither voluntary nor involuntary Voluntary 2. Who begins the process of voluntary dissolution? The directors The shareholders Either the directors or the shareholders 3. How much of the shareholder's vote is required for dissolution to be successful? Unanimous The majority 2/3 of the shareholders 4. Regardless of whether the directors or shareholders initiate dissolution procedures, the corporation must follow specific procedures. What must the directors file with the secretary of state? Articles of dissolution Articles of incorporation A cease and desist letter 5. Suppose that the corporation does not wish to dissolve voluntarily. Suppose instead that the shareholders petition the state to dissolve the corporation. Which of the following would be valid grounds for involuntary dissolution? Two of the shareholders are upset with one of the directors. The corporation failed to pay taxes within 30 days of the due date. The directors have abused their power. 6. After dissolution has occurred, the ___________ stage of termination begins. Trustee Incorporation Liquidation 7. If the dissolution was involuntary, who would be in charge of the liquidation? A court-appointed receiver A trustee The shareholders

Explanation / Answer

a) HPC has not covered the steps necessary for a voluntary termination.

HPC are terminated voluntarily. Voluntary dissolution will occur when the directors and shareholders approve dissolution through a resolution or the time period for corporate existence expires, as stated in the charter. There are several necessary steps to a voluntary dissolution. State laws vary, but generally a HPC must follow the below mentioned steps:

1.First pass a resolution by the board of directors that formally approves a termination of the corporation.

2.Then obtain the shareholders' approval of the directors' resolution by a majority according to the corporation's by-laws and the laws of that state.

3.Correctly notify the IRS that the corporation will be dissolved using the proper IRS forms.

4.Properly cancel all corporation licenses and permits issued in all states and in all cities and counties.

5.Individually notify all corporation creditors and debtors that the corporation will be dissolved so that they can make any final claims.

6.Take time to notify anyone else involved with the corporation, such as clients and employees.

7.Fully pay all debts and tax obligations related to the corporation and file a final tax return in order to wrap up the corporation's financial obligations.

8.Then liquidate and divide any remaining assets between shareholders according to the number of shares each owns.

9.Finally, file Articles of Dissolution with the state.

1. The dissolution described in the case is voluntary.

2. Who begins the process of voluntary dissolution? The directors

3. How much of the shareholder's vote is required for dissolution to be successful?Unanimous

4. Regardless of whether the directors or shareholders initiate dissolution procedures, the corporation must follow specific procedures. What must the directors file with the secretary of state? Articles of dissolution

5. Suppose that the corporation does not wish to dissolve voluntarily. Suppose instead that the shareholders petition the state to dissolve the corporation. Which of the following would be valid grounds for involuntary dissolution? The directors have abused their power.

6. After dissolution has occurred, the ___________ stage of termination begins. Liquidation

7. If the dissolution was involuntary, who would be in charge of the liquidation? A court-appointed receiver

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