A frequent question at our Corporate Transparency Act webinars is whether an entity that dissolves before December 31, 2024 would still be obligated to file a beneficial ownership information (BOI) report. The question is important. If a dissolved entity ceases to constitute a “reporting company,” so that it has no duty to file, then any reporting company that is no longer active could dissolve itself before the end of 2024 and have no duty to file. On the other hand, if the CTA compels every reporting company in existence at the start of 2024 to file (regardless of whether it dissolves during 2024) then dissolution does not end the company’s legal life.
What is Dissolution?
One of the challenges is that the states define and treat dissolution differently. And, even within a single state, there can be multiple types of dissolution procedures and different procedures for different types of entities.
Dissolution for Georgia Corporations
Voluntary Dissolution
In the Georgia Business Corporations Code, an entity may undergo a voluntary dissolution (O.C.G.A. 14-2-1401 et seq.), an administrative dissolution (O.C.G.A. 14-2-1420 et seq.) or a judicial dissolution (O.C.G.A. 14-2-1430 et seq.).
A Georgia voluntary dissolution begins with a resolution adopted by the board of directors (and sometimes also a shareholder vote). Once approved, the corporation “shall begin dissolution” by delivering a “notice of intent to dissolve” to the Secretary of State. O.C.G.A. 14-2-1403. That process, however, may be revoked “at any time prior to the filing of articles of dissolution” by action of the board of directors (or shareholders) “in the same manner as the dissolution was authorized.” O.C.G.A. 14-2-1404(b). After notice of revocation is filed with the Secretary of State, the revocation “relates back to and takes effect as of the effective date of the filing of notice of intent to dissolve” so that “the corporation resumes carrying on its business as if dissolution proceedings had never occurred.” O.C.G.A. 14-2-1404(e).
Absent a revocation, however, filing the notice of intent to dissolve causes a corporation to “continue[s] its corporate existence” but prohibits it from carrying on “any business except that appropriate to wind up and liquidate its business and affairs.” O.C.G.A. 14-2-1405.
In a voluntary dissolution, after “all known debts, liabilities and obligations of the corporation have been paid and discharged, or adequate provision made therefore, the corporation may dissolve by delivering to the Secretary of State” articles of dissolution. O.C.G.A. 14-2-1408.
Thereafter, “upon filing articles of dissolution the corporation shall cease to exist, except for the purpose of actions or other proceedings, which may be brought against the corporation by service upon any of its last executive officers named in its last annual registration, and except for such actions as the shareholders, directors, and officers take to protect any remedy, right or claim on behalf of the corporation, or to defend compromise, or settle any claim against the corporation , all of which may proceed in the corporate name.” O.C.G.A. 14-2-1408(b) (emphasis added).
Nevertheless, even after a corporation is finally dissolved, it may be revived by filing an amendment to its articles of incorporation. O.C.G.A. 14-2-1409. Thus, a voluntary corporate dissolution has several stages, eventually culminating in a final dissolution that is not entirely final, since a voluntarily dissolved corporate can be revived years after its “final dissolution.”
Involuntary Dissolution
In contrast, a Georgia corporate administrative dissolution is administered by the Secretary of State if a corporation fails to pay its applicable annual registration, fails to pay its license or occupation tax return, fails to maintain a registered agent or registered office for 60 days or more, or fails to attend to any other administrative obligations. O.C.G.A. 14-2-1420. The Secretary of State must mail a notice of pending administrative dissolution to the corporation. If the administrative failures are not remedied within 60 days, the Secretary of State may immediately dissolve the corporation, subject to the corporation’s ability to wind-up and liquidate. A corporation that was administratively dissolved may apply for reinstatement for up to five years after the effective date of dissolution. O.C.G.A. 14-2-1422. If the Secretary of State denies an application for reinstatement, the aggrieved corporation may file an appeal in Superior Court. Consequently, an administrative dissolution is relatively swift, but can be administratively reversed for up to five years (or even longer if an administrative denial is litigated).
A Georgia court may also dissolve a corporation, on the application of the State Attorney General or in a proceeding brought by a shareholder or creditor with proper cause. In judicial dissolution proceedings, the court has wide discretion to “issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs [and] take other action required to preserve the corporate assets wherever located, and carry on the business of the corporation until a full hearing can be held.” O.C.G.A. 14-2-1431(c).
If a Georgia court issues a decree ordering a corporation dissolved, it has the “same effect as a notice of intent to dissolve” as described above. O.C.G.A. 14-2-1433(a). Following the judicial decree, however, the winding-up process is to be directed by the court, with the costs and expenses of dissolution being paid from the remaining assets of the corporation. Once completed, the court should enter a “decree of dissolution” which is to have the “same effect as articles of dissolution.” O.C.G.A. 14-2-1433(c).
Thus, through three different avenues – voluntary dissolution, administrative dissolution, and judicial dissolution – a Georgia corporation can reach an end of its corporate life, and yet retain a potential for reinstatement for years to follow.
Dissolution for Georgia LLCs
In contrast to Georgia corporations, Georgia LLCs are different.
First, the dissolution rules for an LLC formed prior to July 1, 1991 are slightly different that those formed after that date. (LLCs formed after the date have more leeway for perpetual existence than those formed before the cutoff.)
In either case, however, an LLC may be dissolved as specified in its articles of organization or written operating agreement, or when approved by all the LLC’s members or when a judicial decree of dissolution is entered under O.C.G.A. 14-11-603.
The Secretary of State may also administratively dissolve an LLC in roughly the same manner as it would a corporation. O.C.G.A. 14-11-603(b). Like a corporation, an LLC that is administratively dissolved continues its existence to the extent necessary to wind up and liquidate its business. O.C.G.A. 14-11-603(b)(3). And, like a corporation, an LLC that has been finally administratively dissolved may apply for reinstatement within five years after the effective date of dissolution. O.C.G.AG. 14-11-603(b)(4).
Impact of Dissolution on a Reporting Company’s Duty to File a BOI Report
FinCEN’s Final Rule for BOI reporting does not directly address the question of whether a dissolved entity is relieved of its duty to file a BOI report. FinCEN also has not yet addressed the question in its BOI FAQs.
FinCEN adopted a rule to exempt an “inactive entity” that met six separate criteria for inactivity. Because the six criteria are very precise (for example, an inactive entity may not own any kind or type of assets and may not have sent or received any funds in excess of $1,000 during the preceding twelve months) only a truly dormant entity will qualify for this exemption.
In its discussion of the inactive entity exemption in the 2022 release of the Final Rule, FinCEN noted that there was “variety in types of termination and degrees of finality under state laws” that made it difficult for FinCEN to specify when an entity’s corporate life was terminated. 87 FR 59498, 59545.
Consequently, FinCEN expressly noted that it “understands that specific factual scenarios may arise during implementation that warrant additional clarification. In those cases, the agency [FinCEN] welcomes questions from stakeholders and anticipates addressing their concerns through guidance.” 87 FR 59498, 59545
Later in its analysis of the Final Rule, FinCEN tried to calculate the number of reporting companies that would need to file during 2024. As part of its calculation, FinCEN estimated the number of new entities formed during 2024 but noted its calculation did not include any estimate for the number of entities that might dissolve during 2024 and therefore not file. 87 FR 59498, 59569. In its analysis, therefore, FinCEN tacitly acknowledges that an entity’s dissolution means the end of its corporate existence and the elimination of its duty to file a BOI report.
Nevertheless, lawyers who have studied these provisions have sometimes reached different conclusions. Some have suggested that any reporting company that exists on January 1, 2024 has a duty to file before the end of 2024, even if it dissolves during 2024. (Law Inc.) Others have concluded that a reporting company that fully dissolves before its initial BOI report is finally due escapes the duty to file an initial BOI report. (Perkins Coie, Wolters Kluwer, Taylor English Duma).
Conclusion
An entity that has been dissolved under state law so that it no longer has any legal existence, should be exempt from a duty to file a BOI report. Because there is no specific regulation on point, counsel for reporting companies should take care when advising clients that they do not need to file a BOI report.
After all, if the entity does not exist, it cannot have a senior officer who could be authorized to file. Once an entity is fully and finally dissolved, it will have no senior officers. Entities that have merely filed a “notice of dissolution” or any precursor filings that initiate the process of liquidation still have a legal existence, however, even if that legal existence is limited to activities required for winding up and dissolution. Such entities, so long as they still have a form of legal existence, should therefore file a BOI report when due.
