A corporation can be dissolved either voluntarily or involuntarily. There is a voluntary dissolution of a corporation when its corporate existence ceases due to voluntary means or methods or as decided by the stockholders or members through the board of directors or through the board of trustees as the case may be. An example of a voluntary dissolution is when the persons composing the corporation allowed the corporate term to just expire or when they caused the shortening of the corporate existence to a lesser period than what has been stated in the articles of corporation. In these cases, it is clear that the stockholders or members intend to dissolve the corporation since they did not do anything for the continuation of the corporation.
On the other hand, an example of an involuntary dissolution is when, without any effort or decision coming from the members, stockholders, board of trustees, or board of directors, the corporation is dissolve by the law of the state where it was created. You may ask how these can happen. Well, we must remember that a corporation is merely a juridical person allowed by law to be created for a certain purpose. If and when that purpose ceased to exist, then, the law giving it the legal personality may take it back if so warranted. For example, if the corporation divested from the authority it was allowed to operate, the state may cause its dissolution for violation of the corporate purpose. Another example is when there has been a violation of state rules and regulations by the persons composing the corporation. In such a case, the state may again cause the dissolution of the corporation as may be provided for under the law.
The importance of knowing all of these is in order for stockholders, members, board of directors or board of trustees to always be on guard concerning the affairs of the corporation. By keeping the operations of the corporation within the limits and bounds set forth by state laws and regulations, you can avoid the untimely dissolution of your corporation.
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John Luke Matthews is a regular contributor of relevant articles about the jurisprudence of businesses. He is part of the Mesriani Law Group and is currently taking information technology studies as well.
