If a company does not follow the laws in the state where it is incorporated, the state can conduct an administrative dissolution, which disbands the company. The state usually establishes warning periods for each type of violation, depending on its severity, before it begins the dissolution process. If the annual report mentions that the company is in the process of administrative dissolution, it means that the state government is terminating the company.
Taxes
A state may order an administrative dissolution if a company refuses to pay its state taxes or file a state tax return. The state department of revenue cannot dissolve the company; the agency must send a letter to the secretary of state -- who does have the authority to dissolve the company -- stating the company’s tax delinquency.
Address
State law requires the company to designate a registered agent or a registered office to receive official documents. The company must tell the secretary of state its new address if it moves. The secretary of state may send a letter to the address of one of the company’s directors, if there is no response from the company’s registered office. If the secretary of state is unsuccessful in contacting the company, the company will be dissolved, possibly without the knowledge of any of its shareholders.
Liquidation
When the order of administrative dissolution is effective, the company does not immediately lose its state registration. According to the Georgia Secretary of State, the company must begin the liquidation process once it receives this notice and sell off any property it owns to repay equity holders and creditors. After liquidation is complete, the secretary of state cancels the company’s registration.
Reinstatement
A company that undergoes administrative dissolution can ask the secretary of state for reinstatement. The state may require the company’s directors to wait several years before reinstatement is possible. Another company can register the dissolved company’s name; if this happens, the reinstated company must register under a new name.
Scheduled Administrative Dissolution
A state usually sets up a regular administrative dissolution process to remove the registration of companies that have gone out of business. According to the Georgia Secretary of State, a state typically performs this task once each year.
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Writer Bio
Eric Novinson has written articles on Daily Kos, his own blog and various other websites since 2006. He holds a Bachelor of Science in business administration from Humboldt State University.