Delaware – General Corporation Law – Sale of Assets, Dissolution and Winding Up

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§ 271. | § 272. | § 273. | § 274. | § 275. | § 276. | § 277. | § 278. | § 279. | § 280. | § 281. | § 282. | § 283. | § 284. | § 285.

CHAPTER 1. GENERAL CORPORATION LAW

Subchapter X. Sale of Assets, Dissolution and Winding Up

§ 271. Sale, lease or exchange of assets; consideration; procedure.

(a) Every corporation may at any meeting
of its board of directors or governing body sell, lease or exchange all
or substantially all of its property and assets, including its goodwill
and its corporate franchises, upon such terms and conditions and for
such consideration, which may consist in whole or in part of money or
other property, including shares of stock in, and/or other securities
of, any other corporation or corporations, as its board of directors or
governing body deems expedient and for the best interests of the
corporation, when and as authorized by a resolution adopted by the
holders of a majority of the outstanding stock of the corporation
entitled to vote thereon or, if the corporation is a nonstock
corporation, by a majority of the members having the right to vote for
the election of the members of the governing body, at a meeting duly
called upon at least 20 days’ notice. The notice of the meeting shall
state that such a resolution will be considered.

(b) Notwithstanding authorization or
consent to a proposed sale, lease or exchange of a corporation’s
property and assets by the stockholders or members, the board of
directors or governing body may abandon such proposed sale, lease or
exchange without further action by the stockholders or members, subject
to the rights, if any, of third parties under any contract relating
thereto.

(c) For purposes of this section only,
the property and assets of the corporation include the property and
assets of any subsidiary of the corporation. As used in this
subsection, “subsidiary” means any entity wholly-owned and controlled,
directly or indirectly, by the corporation and includes, without
limitation, corporations, partnerships, limited partnerships, limited
liability partnerships, limited liability companies, and/or statutory
trusts. Notwithstanding subsection (a) of this section, except to the
extent the certificate of incorporation otherwise provides, no
resolution by stockholders or members shall be required for a sale,
lease or exchange of property and assets of the corporation to a
subsidiary. (8 Del. C. 1953, § 271; 56 Del. Laws, c. 50; 57 Del. Laws,
c. 148, § 30; 64 Del. Laws, c. 112, § 55; 65 Del. Laws, c. 127, § 9; 75
Del. Laws, c. 30, § 28.)

§ 272. Mortgage or pledge of assets.

The authorization or consent of
stockholders to the mortgage or pledge of a corporation’s property and
assets shall not be necessary, except to the extent that the
certificate of incorporation otherwise provides. (8 Del. C. 1953, §
272; 56 Del. Laws, c. 50.)

§ 273. Dissolution of joint venture corporation having 2 stockholders.

(a) If the stockholders of a corporation
of this State, having only 2 stockholders each of which own 50% of the
stock therein, shall be engaged in the prosecution of a joint venture
and if such stockholders shall be unable to agree upon the desirability
of discontinuing such joint venture and disposing of the assets used in
such venture, either stockholder may, unless otherwise provided in the
certificate of incorporation of the corporation or in a written
agreement between the stockholders, file with the Court of Chancery a
petition stating that it desires to discontinue such joint venture and
to dispose of the assets used in such venture in accordance with a plan
to be agreed upon by both stockholders or that, if no such plan shall
be agreed upon by both stockholders, the corporation be dissolved. Such
petition shall have attached thereto a copy of the proposed plan of
discontinuance and distribution and a certificate stating that copies
of such petition and plan have been transmitted in writing to the other
stockholder and to the directors and officers of such corporation. The
petition and certificate shall be executed and acknowledged in
accordance with § 103 of this title.

(b) Unless both stockholders file with
the Court of Chancery (1) within 3 months of the date of the filing of
such petition, a certificate similarly executed and acknowledged
stating that they have agreed on such plan, or a modification thereof,
and (2) within 1 year from the date of the filing of such petition, a
certificate similarly executed and acknowledged stating that the
distribution provided by such plan had been completed, the Court of
Chancery may dissolve such corporation and may by appointment of 1 or
more trustees or receivers with all the powers and title of a trustee
or receiver appointed under § 279 of this title, administer and wind up
its affairs. Either or both of the above periods may be extended by
agreement of the stockholders, evidenced by a certificate similarly
executed, acknowledged and filed with the Court of Chancery prior to
the expiration of such period. (8 Del. C. 1953, § 273; 56 Del. Laws, c.
50; 70 Del. Laws, c. 349, § 23.)

§ 274. Dissolution before issuance of shares or beginning of business; procedure.

If a corporation has not issued shares or
has not commenced the business for which the corporation was organized,
a majority of the incorporators, or, if directors were named in the
certificate of incorporation or have been elected, a majority of the
directors, may surrender all of the corporation’s rights and franchises
by filing in the office of the Secretary of State a certificate,
executed and acknowledged by a majority of the incorporators or
directors, stating that no shares of stock have been issued or that the
business or activity for which the corporation was organized has not
been begun; that no part of the capital of the corporation has been
paid, or, if some capital has been paid, that the amount actually paid
in for the corporation’s shares, less any part thereof disbursed for
necessary expenses, has been returned to those entitled thereto; that
if the corporation has begun business but it has not issued shares, all
debts of the corporation have been paid; that if the corporation has
not begun business but has issued stock certificates, all issued stock
certificates, if any, have been surrendered and cancelled; and that all
rights and franchises of the corporation are surrendered. Upon such
certificate becoming effective in accordance with § 103 of this title,
the corporation shall be dissolved. (8 Del. C. 1953, § 274; 56 Del.
Laws, c. 50; 59 Del. Laws, c. 106, § 13; 66 Del. Laws, c. 136, § 33.)

§ 275. Dissolution generally; procedure.

(a) If it should be deemed advisable in
the judgment of the board of directors of any corporation that it
should be dissolved, the board, after the adoption of a resolution to
that effect by a majority of the whole board at any meeting called for
that purpose, shall cause notice to be mailed to each stockholder
entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.

(b) At the meeting a vote shall be taken
upon the proposed dissolution. If a majority of the outstanding stock
of the corporation entitled to vote thereon shall vote for the proposed
dissolution, a certification of dissolution shall be filed with the
Secretary of State pursuant to subsection (d) of this section.

(c) Dissolution of a corporation may also
be authorized without action of the directors if all the stockholders
entitled to vote thereon shall consent in writing and a certificate of
dissolution shall be filed with the Secretary of State pursuant to
subsection (d) of this section.

(d) If dissolution is authorized in
accordance with this section, a certificate of dissolution shall be
executed, acknowledged and filed, and shall become effective, in
accordance with § 103 of this title. Such certificate of dissolution
shall set forth:

(1) The name of the corporation;

(2) The date dissolution was authorized;

(3) That the dissolution has been
authorized by the board of directors and stockholders of the
corporation, in accordance with subsections (a) and (b) of this
section, or that the dissolution has been authorized by all of the
stockholders of the corporation entitled to vote on a dissolution, in
accordance with subsection (c) of this section; and

(4) The names and addresses of the directors and officers of the corporation.

(e) The resolution authorizing a proposed
dissolution may provide that notwithstanding authorization or consent
to the proposed dissolution by the stockholders, or the members of a
nonstock corporation pursuant to § 276 of this title, the board of
directors or governing body may abandon such proposed dissolution
without further action by the stockholders or members.

(f) Upon a certificate of dissolution
becoming effective in accordance with § 103 of this title, the
corporation shall be dissolved. (8 Del. C. 1953, § 275; 56 Del. Laws,
c. 50; 57 Del. Laws, c. 148, §§ 31, 32; 59 Del. Laws, c. 106, § 14; 66
Del. Laws, c. 136, § 34.)

§ 276. Dissolution of nonstock corporation; procedure.

(a) Whenever it shall be desired to
dissolve any corporation having no capital stock, the governing body
shall perform all the acts necessary for dissolution which are required
by § 275 of this title to be performed by the board of directors of a
corporation having capital stock. If the members of a corporation
having no capital stock are entitled to vote for the election of
members of its governing body, they shall perform all the acts
necessary for dissolution which are required by § 275 of this title to
be performed by the stockholders of a corporation having capital stock.
If there is no member entitled to vote thereon, the dissolution of the
corporation shall be authorized at a meeting of the governing body,
upon the adoption of a resolution to dissolve by the vote of a majority
of members of its governing body then in office. In all other respects,
the method and proceedings for the dissolution of a corporation having
no capital stock shall conform as nearly as may be to the proceedings
prescribed by § 275 of this title for the dissolution of corporations
having capital stock.

(b) If a corporation having no capital
stock has not commenced the business for which the corporation was
organized, a majority of the governing body or, if none, a majority of
the incorporators may surrender all of the corporation rights and
franchises by filing in the office of the Secretary of State a
certificate, executed and acknowledged by a majority of the
incorporators or governing body, conforming as nearly as may be to the
certificate prescribed by § 274 of this title. (8 Del. C. 1953, § 276;
56 Del. Laws, c. 50; 66 Del. Laws, c. 136, § 35.)

§ 277. Payment of franchise taxes before dissolution or merger.

No corporation shall be dissolved or
merged under this chapter until all franchise taxes due to or
assessable by the State including all franchise taxes due or which
would be due or assessable for the entire calendar month during which
the dissolution or merger becomes effective have been paid by the
corporation. (8 Del. C. 1953, § 277; 56 Del. Laws, c. 50; 70 Del. Laws,
c. 79, § 17; 71 Del. Laws, c. 120, § 16.)

§ 278. Continuation of corporation after dissolution for purposes of suit and winding up affairs.

All corporations, whether they expire by
their own limitation or are otherwise dissolved, shall nevertheless be
continued, for the term of 3 years from such expiration or dissolution
or for such longer period as the Court of Chancery shall in its
discretion direct, bodies corporate for the purpose of prosecuting and
defending suits, whether civil, criminal or administrative, by or
against them, and of enabling them gradually to settle and close their
business, to dispose of and convey their property, to discharge their
liabilities and to distribute to their stockholders any remaining
assets, but not for the purpose of continuing the business for which
the corporation was organized. With respect to any action, suit or
proceeding begun by or against the corporation either prior to or
within 3 years after the date of its expiration or dissolution, the
action shall not abate by reason of the dissolution of the corporation;
the corporation shall, solely for the purpose of such action, suit or
proceeding, be continued as a body corporate beyond the 3-year period
and until any judgments, orders or decrees therein shall be fully
executed, without the necessity for any special direction to that
effect by the Court of Chancery. (8 Del. C. 1953, § 278; 56 Del. Laws,
c. 50; 66 Del. Laws, c. 136, § 36.)

§ 279. Trustees or receivers for dissolved corporations; appointment; powers; duties.

When any corporation organized under this
chapter shall be dissolved in any manner whatever, the Court of
Chancery, on application of any creditor, stockholder or director of
the corporation, or any other person who shows good cause therefor, at
any time, may either appoint 1 or more of the directors of the
corporation to be trustees, or appoint 1 or more persons to be
receivers, of and for the corporation, to take charge of the
corporation’s property, and to collect the debts and property due and
belonging to the corporation, with power to prosecute and defend, in
the name of the corporation, or otherwise, all such suits as may be
necessary or proper for the purposes aforesaid, and to appoint an agent
or agents under them, and to do all other acts which might be done by
the corporation, if in being, that may be necessary for the final
settlement of the unfinished business of the corporation. The powers of
the trustees or receivers may be continued as long as the Court of
Chancery shall think necessary for the purposes aforesaid. (8 Del. C.
1953, § 279; 56 Del. Laws, c. 50; 66 Del. Laws, c. 136, § 37.)

§ 280. Notice to claimants; filing of claims.

(a)(1) After a corporation has been
dissolved in accordance with the procedures set forth in this chapter,
the corporation or any successor entity may give notice of the
dissolution, requiring all persons having a claim against the
corporation other than a claim against the corporation in a pending
action, suit or proceeding to which the corporation is a party to
present their claims against the corporation in accordance with such
notice. Such notice shall state:

a. That all such claims must be presented
in writing and must contain sufficient information reasonably to inform
the corporation or successor entity of the identity of the claimant and
the substance of the claim;

b. The mailing address to which such a claim must be sent;

c. The date by which such a claim must be
received by the corporation or successor entity, which date shall be no
earlier than 60 days from the date thereof; and

d. That such claim will be barred if not received by the date referred to in subparagraph c. of this subsection; and

e. That the corporation or a successor
entity may make distributions to other claimants and the corporation’s
stockholders or persons interested as having been such without further
notice to the claimant; and

f. The aggregate amount, on an annual
basis, of all distributions made by the corporation to its stockholders
for each of the 3 years prior to the date the corporation dissolved.

Such notice shall also be published at
least once a week for 2 consecutive weeks in a newspaper of general
circulation in the county in which the office of the corporation’s last
registered agent in this State is located and in the corporation’s
principal place of business and, in the case of a corporation having
$10,000,000 or more in total assets at the time of its dissolution, at
least once in all editions of a daily newspaper with a national
circulation. On or before the date of the first publication of such
notice, the corporation or successor entity shall mail a copy of such
notice by certified or registered mail, return receipt requested, to
each known claimant of the corporation including persons with claims
asserted against the corporation in a pending action, suit or
proceeding to which the corporation is a party.

(2) Any claim against the corporation
required to be presented pursuant to this subsection is barred if a
claimant who was given actual notice under this subsection does not
present the claim to the dissolved corporation or successor entity by
the date referred to in subparagraph (1)c. of this subsection.

(3) A corporation or successor entity may
reject, in whole or in part, any claim made by a claimant pursuant to
this subsection by mailing notice of such rejection by certified or
registered mail, return receipt requested, to the claimant within 90
days after receipt of such claim and, in all events, at least 150 days
before the expiration of the period described in § 278 of this title;
provided however, that in the case of a claim filed pursuant to § 295
of this title against a corporation or successor entity for which a
receiver or trustee has been appointed by the Court of Chancery the
time period shall be as provided in § 296 of this title, and the 30-day
appeal period provided for in § 296 of this title shall be applicable.
A notice sent by a corporation or successor entity pursuant to this
subsection shall state that any claim rejected therein will be barred
if an action, suit or proceeding with respect to the claim is not
commenced within 120 days of the date thereof, and shall be accompanied
by a copy of §§ 278-283 of this title and, in the case of a notice sent
by a court-appointed receiver or trustee and as to which a claim has
been filed pursuant to § 295 of this title, copies of §§ 295 and 296 of
this title.

(4) A claim against a corporation is
barred if a claimant whose claim is rejected pursuant to paragraph (3)
of this subsection does not commence an action, suit or proceeding with
respect to the claim no later than 120 days after the mailing of the
rejection notice.

(b)(1) A corporation or successor entity
electing to follow the procedures described in subsection (a) of this
section shall also give notice of the dissolution of the corporation to
persons with contractual claims contingent upon the occurrence or
nonoccurrence of future events or otherwise conditional or unmatured,
and request that such persons present such claims in accordance with
the terms of such notice. Provided however, that as used in this
section and in § 281 of this title, the term “contractual claims” shall
not include any implied warranty as to any product manufactured, sold,
distributed or handled by the dissolved corporation. Such notice shall
be in substantially the form, and sent and published in the same
manner, as described in subsection (a)(1) of this section.

(2) The corporation or successor entity
shall offer any claimant on a contract whose claim is contingent,
conditional or unmatured such security as the corporation or successor
entity determines is sufficient to provide compensation to the claimant
if the claim matures. The corporation or successor entity shall mail
such offer to the claimant by certified or registered mail, return
receipt requested, within 90 days of receipt of such claim and, in all
events, at least 150 days before the expiration of the period described
in § 278 of this title. If the claimant offered such security does not
deliver in writing to the corporation or successor entity a notice
rejecting the offer within 120 days after receipt of such offer for
security, the claimant shall be deemed to have accepted such security
as the sole source from which to satisfy the claim against the
corporation.

(c)(1) A corporation or successor entity
which has given notice in accordance with subsection (a) of this
section shall petition the Court of Chancery to determine the amount
and form of security that will be reasonably likely to be sufficient to
provide compensation for any claim against the corporation which is the
subject of a pending action, suit or proceeding to which the
corporation is a party other than a claim barred pursuant to subsection
(a) of this section.

(2) A corporation or successor entity
which has given notice in accordance with subsections (a) and (b) of
this section shall petition the Court of Chancery to determine the
amount and form of security that will be sufficient to provide
compensation to any claimant who has rejected the offer for security
made pursuant to subsection (b)(2) of this section.

(3) A corporation or successor entity
which has given notice in accordance with subsection (a) of this
section shall petition the Court of Chancery to determine the amount
and form of security which will be reasonably likely to be sufficient
to provide compensation for claims that have not been made known to the
corporation or that have not arisen but that, based on facts known to
the corporation or successor entity, are likely to arise or to become
known to the corporation or successor entity within 5 years after the
date of dissolution or such longer period of time as the Court of
Chancery may determine not to exceed 10 years after the date of
dissolution. The Court of Chancery may appoint a guardian ad litem in
respect of any such proceeding brought under this subsection. The
reasonable fees and expenses of such guardian, including all reasonable
expert witness fees, shall be paid by the petitioner in such proceeding.

(d) The giving of any notice or making of
any offer pursuant to this section shall not revive any claim then
barred or constitute acknowledgment by the corporation or successor
entity that any person to whom such notice is sent is a proper claimant
and shall not operate as a waiver of any defense or counterclaim in
respect of any claim asserted by any person to whom such notice is sent.

(e) As used in this section, the term
“successor entity” shall include any trust, receivership or other legal
entity governed by the laws of this State to which the remaining assets
and liabilities of a dissolved corporation are transferred and which
exists solely for the purposes of prosecuting and defending suits, by
or against the dissolved corporation, enabling the dissolved
corporation to settle and close the business of the dissolved
corporation, to dispose of and convey the property of the dissolved
corporation, to discharge the liabilities of the dissolved corporation
and to distribute to the dissolved corporation’s stockholders any
remaining assets, but not for the purpose of continuing the business
for which the dissolved corporation was organized.

(f) The time periods and notice
requirements of this section shall, in the case of a corporation or
successor entity for which a receiver or trustee has been appointed by
the Court of Chancery, be subject to variation by, or in the manner
provided in, the Rules of the Court of Chancery. (8 Del. C. 1953, §
280; 56 Del. Laws, c. 50; 66 Del. Laws, c. 136, § 38; 67 Del. Laws, c.
376, §§ 21-25; 69 Del. Laws, c. 266, §§ 1-17; 70 Del. Laws, c. 186, §
1.)

§ 281. Payment and distribution to claimants and stockholders.

(a) A dissolved corporation or successor entity which has followed the procedures described in § 280 of this title:

(1) Shall pay the claims made and not rejected in accordance with § 280(a) of this title,

(2) Shall post the security offered and not rejected pursuant to § 280(b)(2) of this title,

(3) Shall post any security ordered by the Court of Chancery in any proceeding under § 280(c) of this title, and

(4) Shall pay or make provision for all
other claims that are mature, known and uncontested or that have been
finally determined to be owing by the corporation or such successor
entity.

Such claims or obligations shall be paid
in full and any such provision for payment shall be made in full if
there are sufficient assets. If there are insufficient assets, such
claims and obligations shall be paid or provided for according to their
priority, and, among claims of equal priority, ratably to the extent of
assets legally available therefor. Any remaining assets shall be
distributed to the stockholders of the dissolved corporation; provided,
however, that such distribution shall not be made before the expiration
of 150 days from the date of the last notice of rejections given
pursuant to § 280(a)(3) of this title. In the absence of actual fraud,
the judgment of the directors of the dissolved corporation or the
governing persons of such successor entity as to the provision made for
the payment of all obligations under paragraph (4) of this subsection
shall be conclusive.

(b) A dissolved corporation or successor
entity which has not followed the procedures described in § 280 of this
title shall, prior to the expiration of the period described in § 278
of this title, adopt a plan of distribution pursuant to which the
dissolved corporation or successor entity (i) shall pay or make
reasonable provision to pay all claims and obligations, including all
contingent, conditional or unmatured contractual claims known to the
corporation or such successor entity, (ii) shall make such provision as
will be reasonably likely to be sufficient to provide compensation for
any claim against the corporation which is the subject of a pending
action, suit or proceeding to which the corporation is a party and
(iii) shall make such provision as will be reasonably likely to be
sufficient to provide compensation for claims that have not been made
known to the corporation or that have not arisen but that, based on
facts known to the corporation or successor entity, are likely to arise
or to become known to the corporation or successor entity within 10
years after the date of dissolution. The plan of distribution shall
provide that such claims shall be paid in full and any such provision
for payment made shall be made in full if there are sufficient assets.
If there are insufficient assets, such plan shall provide that such
claims and obligations shall be paid or provided for according to their
priority and, among claims of equal priority, ratably to the extent of
assets legally available therefor. Any remaining assets shall be
distributed to the stockholders of the dissolved corporation.

(c) Directors of a dissolved corporation
or governing persons of a successor entity which has complied with
subsection (a) or (b) of this section shall not be personally liable to
the claimants of the dissolved corporation.

(d) As used in this section, the term “successor entity” has the meaning set forth in § 280(e) of this title.

(e) The term “priority,” as used in this
section, does not refer either to the order of payments set forth in
subsection (a)(1)-(4) of this section or to the relative times at which
any claims mature or are reduced to judgment. (8 Del. C. 1953, § 281;
56 Del. Laws, c. 50; 66 Del. Laws, c. 136, § 39; 67 Del. Laws, c. 376,
§§ 26-28; 68 Del. Laws, c. 163, § 1; 69 Del. Laws, c. 266, §§ 18-21; 70
Del. Laws, c. 299, § 4; 71 Del. Laws, c. 120, §§ 17, 18.)

§ 282. Liability of stockholders of dissolved corporations.

(a) A stockholder of a dissolved
corporation the assets of which were distributed pursuant to § 281(a)
or (b) of this title shall not be liable for any claim against the
corporation in an amount in excess of such stockholder’s pro rata share
of the claim or the amount so distributed to such stockholder,
whichever is less.

(b) A stockholder of a dissolved
corporation the assets of which were distributed pursuant to § 281(a)
of this title shall not be liable for any claim against the corporation
on which an action, suit or proceeding is not begun prior to the
expiration of the period described in § 278 of this title.

(c) The aggregate liability of any
stockholder of a dissolved corporation for claims against the dissolved
corporation shall not exceed the amount distributed to such stockholder
in dissolution. (8 Del. C. 1953, § 282; 56 Del. Laws, c. 50; 66 Del.
Laws, c. 136, § 40; 71 Del. Laws, c. 339, §§ 57, 58.)

§ 283. Jurisdiction.

The Court of Chancery shall have
jurisdiction of any application prescribed in this subchapter and of
all questions arising in the proceedings thereon, and may make such
orders and decrees and issue injunctions therein as justice and equity
shall require. (66 Del. Laws, c. 136, § 41.)

§ 284. Revocation or forfeiture of charter; proceedings.

(a) The Court of Chancery shall have
jurisdiction to revoke or forfeit the charter of any corporation for
abuse, misuse or nonuse of its corporate powers, privileges or
franchises. The Attorney General shall, upon the Attorney General’s own
motion or upon the relation of a proper party, proceed for this purpose
by complaint in the county in which the registered office of the
corporation is located.

(b) The Court of Chancery shall have
power, by appointment of receivers or otherwise, to administer and wind
up the affairs of any corporation whose charter shall be revoked or
forfeited by any court under any section of this title or otherwise,
and to make such orders and decrees with respect thereto as shall be
just and equitable respecting its affairs and assets and the rights of
its stockholders and creditors.

(c) No proceeding shall be instituted
under this section for nonuse of any corporation’s powers, privileges
or franchises during the first 2 years after its incorporation. (8 Del.
C. 1953, § 283; 56 Del. Laws, c. 50; 66 Del. Laws, c. 136, § 41; 71
Del. Laws, c. 339, § 59.)

§ 285. Dissolution or forfeiture of charter by decree of court; filing.

Whenever any corporation is dissolved or
its charter forfeited by decree or judgment of the Court of Chancery,
the decree or judgment shall be forthwith filed by the Register in
Chancery of the county in which the decree or judgment was entered, in
the office of the Secretary of State, and a note thereof shall be made
by the Secretary of State on the corporation’s charter or certificate
of incorporation and on the index thereof. (8 Del. C. 1953, § 284; 56
Del. Laws, c. 50; 60 Del. Laws, c. 371, § 13; 66 Del. Laws, c. 136, §
41.)

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