What Happens to the Shareholders After Dissolving a Company?
When companies do not have enough funds to operate alone, they sometimes offer shares, or partial ownership in the company, for sale. The company uses the proceeds from the sale of shares to cover expenses and avoid taking out loans. When a company that offers sales must dissolve, however, shareholders can be in a precarious situation.
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Cessation of Business
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Once a business dissolves, the company is limited to wrapping up business, such as selling assets. Thus, shareholders cannot continue to conduct regular business similar to that prior to the dissolution. For example, they cannot continue to conduct sales or promote the company. Depending on how many shares the shareholder owns in the business, the cessation of normal business may mean the shareholder must reexamine his general financial situation and investment portfolio.
Sale of Shares
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Following dissolution of a company, shareholders may be entitled to sell their shares in the company. The company may buy the shares back from the shareholder, or other shareholders can purchase the shares available for sale.The amount that a shareholder gets as a result of share sales depends on the overall market.
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Receipt of Assets or Asset Sale Revenue
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Companies often have assets that can be distributed to the shareholders. Examples could include inventory, office furniture or even company vehicles. If all shareholders agree on the value of the asset, the asset is sold and the revenue is distributed among the shareholders. If shareholders do not agree, then an appraisal usually is necessary before sale. How much revenue a shareholder gets depends on the number of shareholders and the number of shares each shareholder owns.
Liability
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In some instances, shareholders can be held liable for losses, injuries or death that result because of the business. For example, shareholders of a medical company may be held responsible if a product manufactured by the company malfunctions. However, plaintiffs would have to show that the company -- that is, the shareholders -- was at fault or was somehow negligent.
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References
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