---
name: plan-of-liquidation
title: Plan of Liquidation and Dissolution
description: Drafts a Plan of Liquidation and Dissolution for U.S. corporations undergoing voluntary dissolution. Covers board/shareholder approvals, creditor notice, asset liquidation priority, distribution waterfalls, state dissolution filings, and IRS Form 966 compliance. Use when winding down a corporation, drafting dissolution plans, or preparing liquidation documents for corporate closings.
author: CaseMark
author_url: https://github.com/CaseMark/skills/tree/main/skills/legal/plan-of-liquidation
license: Apache-2.0
version: 0.1.0
execution_mode: open
jurisdiction: us
practice: corporate
language: en
---

# Plan of Liquidation and Dissolution

Drafts a formal plan for winding down a U.S. corporation — satisfying creditors, distributing assets, and achieving legal dissolution under state statutes and federal tax rules.

## Prerequisites

Gather before drafting:

1. **Corporate formation documents** — articles, bylaws, amendments (especially liquidation preferences for multiple share classes)
2. **Board resolution** — approving dissolution with vote count, quorum, date
3. **Shareholder approval** — minutes or written consent showing requisite vote threshold met
4. **Creditor inventory** — known creditors with addresses, amounts, secured/unsecured status
5. **Asset inventory** — real property, equipment, IP, receivables, investments, cash
6. **Pending obligations** — litigation, contracts, employee benefits, environmental liabilities
7. **State of incorporation** — jurisdiction-specific dissolution statute requirements

## Quick Start

1. Confirm board and shareholder approvals are documented
2. Identify state dissolution statute (e.g., DGCL § 275, RMBCA § 14.02) [VERIFY]
3. Draft plan sections in order below
4. Mark all jurisdiction-specific items with [VERIFY]
5. Use bracketed placeholders for dates and amounts the client must confirm

## Plan Sections

### 1. Preamble & Recitals

| Element | Content |
|---------|---------|
| Corporate identity | Full legal name, state/date of incorporation, principal office |
| Statutory authority | Cite state dissolution statute [VERIFY] |
| Board determination | Dissolution serves best interests of corporation and shareholders |
| Business rationale | Brief factual basis — avoid detail creating liability exposure |

### 2. Approval & Authorization

- Board vote: date, vote count, quorum confirmed
- Shareholder vote: date, shares for/against by class, statutory threshold met
- Written consent in lieu of meeting: document notice/consent compliance
- Separate class votes if preferred stock has special voting rights

### 3. Creditor & Stakeholder Notice

| Notice Type | Requirements |
|-------------|-------------|
| Known creditors | Certified mail or personal service; state claim deadline (typically 120+ days) |
| Unknown creditors | Publication in designated newspaper(s); frequency/duration per statute |
| Employees | Termination notices; WARN Act compliance if applicable |
| Government | Tax authorities, regulatory agencies, license holders |
| Other | Customers, vendors, material contract counterparties |

Timeline must comply with state statute for post-filing notice periods.

### 4. Liquidation Process

**Priority waterfall:**

1. Liquidation costs and expenses
2. Employee wages and benefits
3. Tax obligations
4. Secured creditor claims
5. Unsecured creditor claims
6. Shareholder distributions

**Wind-down checklist:**

- [ ] Complete or terminate existing contracts
- [ ] Collect accounts receivable
- [ ] Liquidate inventory and equipment
- [ ] Resolve pending litigation
- [ ] Address IP assets (assignment, abandonment, licensing)
- [ ] Establish reserves for contingent/disputed/unliquidated claims
- [ ] Identify liquidation oversight person or committee
- [ ] Engage professionals as needed (appraisers, auctioneers)

### 5. Asset Distribution

- Per-share calculation methodology for each share class
- Liquidation preferences and participation rights per articles
- Distribution timeline
- In-kind distributions: valuation method and allocation
- Tax treatment: corporate gain/loss recognition; shareholder exchange under IRC § 331 [VERIFY]
- Nonprofit entities: distribution to qualifying § 501(c)(3) organizations if applicable

### 6. Dissolution Filings

| Filing | Details |
|--------|---------|
| Articles/Certificate of Dissolution | Secretary of State; corporate name, incorporation date, authorization, creditor notice confirmation, tax compliance |
| Tax clearance certificate | Required in many states before dissolution accepted |
| Final reports | State-specific annual/final report requirements |
| Regulatory consents | Industry-specific agency approvals if required |

Obtain and retain certified copies of all filed documents.

### 7. Tax & Compliance

- **IRS Form 966** — file within 30 days of adopting plan
- **Final federal return** — Form 1120 (or variant), mark as final
- **Final state returns** — income, franchise, sales, employment tax
- Cancel EIN, sales tax permits, business licenses
- Obtain tax clearances from all relevant jurisdictions
- **Record retention** — maintain records 3–7 years post-dissolution

### 8. Effective Date & Execution

- Plan effective date and anticipated dissolution date
- Dissolution effective upon filing (or later date if specified)
- Signature blocks: President and Secretary (or equivalent officers)
- Certification of authority and accuracy

## Common Pitfalls

- **Jurisdiction variance** — dissolution procedures differ significantly by state; confirm all statutory citations, notice periods, and filing requirements against state of incorporation
- **Fiduciary exposure** — draft provisions demonstrating good faith, fair dealing, and compliance with duties to shareholders and creditors
- **Minority shareholder challenges** — ensure procedural fairness is documented to anticipate objections
- **Special circumstances** — flag pending litigation, environmental liabilities, ERISA plan terminations, or industry-specific regulatory issues
- **Speculative timelines** — never include concrete dates without client confirmation; use bracketed placeholders