Alaska Corporation Voluntary Dissolution Outline

Outline for Alaska Corporate Dissolution.

A. Corporation Has Not Issued Stock or Commenced Business.

1. If the corporation has not issued stock and has not commenced business, a voluntary dissolution may be authorized by a majority of the incorporators.

B. Corporation has issued stock or has commenced business.

1. If the corporation has issued stock and has commenced business, the approval of the shareholders is required for voluntary dissolution of the corporation.

2. Shareholder approval is obtained as follows:

a. The board of directors of the corporation adopts a plan of liquidation and refers the plan to the shareholders for action.

b. A majority of shareholders, and a majority of the holders of each class of shares entitled to vote as a class, approve the plan of liquidation.

II. Filings and Notice.

A. Filings.

1. Under the Alaska Business Corporation Act, a Certificate of Election to dissolve is filed initially with the Alaska Corporations Commissioner. Articles of dissolution are filed after the completion of the winding up and liquidation of the corporation. A.S. 10.06.608.

2. Articles of dissolution stating compliance with A.S. 10.06.620.  A.S. 10.06.623.

B. Revocation.

1. The dissolution may be revoked prior to any actual distributions to shareholders under A.S. 10.06.610.

2. Revocation of dissolution is effective on filing.

C. Notice.

1. The corporation must give notice of the dissolution to holders of known claims against the corporation.  The notice must provide for a procedure and deadline for filing claims against the corporation.  See, A.S. 10.06.615 and .620

2. In order to notify holders of unknown claims, notice of the dissolution is published by the corporation in a newspaper. See, A.S. 10.06.653 (The heading discusses publication issues in the context of court and non-court directed winding up of the enterprise.  However, the actual provisions only discuss court winding up.) This notice must also provide for a procedure for filing claims against the corporation.

D. Effect.  The effect of dissolution is to cease the existence of the enterprise for all purposes other than suits, legal proceedings and actions by shareholders, directors and officers.  A.S. 10.06.625.

III. Winding Up and Liquidation.

A. Cessation of Business.

1. The operation of the business of the corporation must cease on or before the filing of certificate of intent to terminate, except as necessary to wind up the business operations and preserve good will.  A.S. 10.06.615.

2. The only continuing activity of the corporation should be that necessary to wind up its affairs and distribute its assets in liquidation.

B. Assemble Assets.

1. The corporation must assemble its assets and sell or otherwise dispose of those assets that will not be distributed to shareholders or to claimants.

2. Particular care should be given to identifying assets such as prepaid items and contingent claims that might otherwise be overlooked.

C. Satisfy Obligations and Liabilities.

1. The corporation must pay or provide for payment of all corporate obligations and liabilities and all claims against the corporation.

2. In the case of disputed or contingent claims, provision may be made for payment by depositing funds into an escrow or liquidating trust.

D. Distribution to Shareholders.

1. The assets of the corporation remaining after payment of or providing for claims should be distributed to the shareholders.

2. All known assets should be transferred with appropriate forms of transfer or conveyance, such as deeds, bills of sale, or assignments.

3. Unknown assets can be transferred to shareholders by an assignment specifically covering such assets.

4. A statement of the fair market value of all assets transferred should be provided by the corporation to each shareholder. This statement will be required for the shareholders’ income tax returns.

E. Stock Certificates.

1. All stock certificates of the corporation should be collected and canceled.

2. Stock certificates should be collected from shareholders in exchange for the assets distributed to them.

F. Timing.

1. If installment obligations of the corporation will be distributed in the liquidation, the liquidation should be completed within 12 months following the adoption of the plan of liquidation to enable noncorporate shareholders to report gain attributable to the installment obligations on the installment basis.

2. In other cases, the liquidation should proceed as quickly as possible. A protracted liquidation may result in the corporation’s being subjected to personal holding company or accumulated earnings taxes.

IV. Tax Filings.

A. Corporation.

1. Form 966 must be filed by the corporation with the Internal Revenue Service within 30 days after adoption of the plan of complete liquidation.

2. Forms 1099-DIV must be issued to all shareholders who have received $600 or more in the liquidation by January 31 of the year following the liquidation, and copies of these forms must be filed with the Internal Revenue Service, accompanied by Form 1096.

3. The corporation’s final income tax return must be filed by the 15th day of the third month following the close of its final tax year, which will generally be the date on which its assets are distributed to shareholders.

B. Shareholders.

1. Shareholders must report any gain or loss on the liquidation on their income tax returns for the year in which the liquidation occurs. If the shareholders have a loss, it may qualify as an ordinary loss under IRC §1244.

2. Shareholders must file certain information regarding the liquidation with those returns.

The following is my Outline for Corporate Dissolution.

 

A. Corporation Has Not Issued Stock or Commenced Business.

1. If the corporation has not issued stock and has not commenced business, a voluntary dissolution may be authorized by a majority of the incorporators under the Model Business Corporation Act.

2. If the corporation has not issued stock or has not commenced business, a voluntary dissolution may be authorized by a majority of the incorporators or by a majority of the members of the initial board of directors under the Revised Model Business Corporation Act.

B. Corporation has issued stock or has commenced business.

1. If the corporation has issued stock and has commenced business, the approval of the shareholders is required for voluntary dissolution of the corporation.  Under the Model Business Corporation Act, shareholder approval is required if the corporation has either issued stock or commenced business.

2. Shareholder approval is obtained as follows:

a. The board of directors of the corporation adopts a plan of liquidation and refers the plan to the shareholders for action.

b. A majority of shareholders, and a majority of the holders of each class of shares entitled to vote as a class, approve the plan of liquidation.

II. Filings and Notice.

A. Filings.

1. Under the Alaska Business Corporation Act, a Certificate of Election to dissolve is filed initially with the Alaska Corporations Commissioner. Articles of dissolution are filed after the completion of the winding up and liquidation of the corporation. A.S. 10.06.608.

2. Articles of dissolution stating compliance with A.S. 10.06.620.  A.S. 10.06.623.

B. Revocation.

1. The dissolution may be revoked prior to any actual distributions to shareholders under A.S. 10.06.610.

2. Revocation of dissolution is effective on filing.

C. Notice.

1. The corporation must give notice of the dissolution to holders of known claims against the corporation.  The notice must provide for a procedure and deadline for filing claims against the corporation.  See, A.S. 10.06.615 and .620

2. In order to notify holders of unknown claims, notice of the dissolution is published by the corporation in a newspaper. See, A.S. 10.06.653 (The heading discusses publication issues in the context of court and non-court directed winding up of the enterprise.  However, the actual provisions only discuss court winding up.) This notice must also provide for a procedure for filing claims against the corporation.

D. Effect.  The effect of dissolution is to cease the existence of the enterprise for all purposes other than suits, legal proceedings and actions by shareholders, directors and officers.  A.S. 10.06.625.

III. Winding Up and Liquidation.

A. Cessation of Business.

1. The operation of the business of the corporation must cease on or before the filing of certificate of intent to terminate, except as necessary to wind up the business operations and preserve good will.  A.S. 10.06.615.

2. The only continuing activity of the corporation should be that necessary to wind up its affairs and distribute its assets in liquidation.

B. Assemble Assets.

1. The corporation must assemble its assets and sell or otherwise dispose of those assets that will not be distributed to shareholders or to claimants.

2. Particular care should be given to identifying assets such as prepaid items and contingent claims that might otherwise be overlooked.

C. Satisfy Obligations and Liabilities.

1. The corporation must pay or provide for payment of all corporate obligations and liabilities and all claims against the corporation.

2. In the case of disputed or contingent claims, provision may be made for payment by depositing funds into an escrow or liquidating trust.

D. Distribution to Shareholders.

1. The assets of the corporation remaining after payment of or providing for claims should be distributed to the shareholders.

2. All known assets should be transferred with appropriate forms of transfer or conveyance, such as deeds, bills of sale, or assignments.

3. Unknown assets can be transferred to shareholders by an assignment specifically covering such assets.

4. A statement of the fair market value of all assets transferred should be provided by the corporation to each shareholder. This statement will be required for the shareholders’ income tax returns.

E. Stock Certificates.

1. All stock certificates of the corporation should be collected and canceled.

2. Stock certificates should be collected from shareholders in exchange for the assets distributed to them.

F. Timing.

1. If installment obligations of the corporation will be distributed in the liquidation, the liquidation should be completed within 12 months following the adoption of the plan of liquidation to enable noncorporate shareholders to report gain attributable to the installment obligations on the installment basis.

2. In other cases, the liquidation should proceed as quickly as possible. A protracted liquidation may result in the corporation’s being subjected to personal holding company or accumulated earnings taxes.

IV. Tax Filings.

A. Corporation.

1. Form 966 must be filed by the corporation with the Internal Revenue Service within 30 days after adoption of the plan of complete liquidation.

2. Forms 1099-DIV must be issued to all shareholders who have received $600 or more in the liquidation by January 31 of the year following the liquidation, and copies of these forms must be filed with the Internal Revenue Service, accompanied by Form 1096.

3. The corporation’s final income tax return must be filed by the 15th day of the third month following the close of its final tax year, which will generally be the date on which its assets are distributed to shareholders.

B. Shareholders.

1. Shareholders must report any gain or loss on the liquidation on their income tax returns for the year in which the liquidation occurs. If the shareholders have a loss, it may qualify as an ordinary loss under IRC §1244.   Shareholders must file certain      information regarding the liquidation with those returns.

 

Alaska’s New Security Interest Law

Security interest law concerns security interests in personal property rather than real property.  The law is generally known as UCC 9, or the Uniform Commercial Code section 9.  We find the statute at Alaska Statute 45.29.101-709.    Alaska recently adopted the 2010 changes to the security interest law.  The law is effective for security interests after July 1, 2013.

The law instituted significant changes between the old recording rules and the new rules.  The impact of not recording your security interests may mean that you can’t collect your debt if the debtor becomes bankrupt.

 

What you need to record a lien.

You must give value to a debtor.  The debtor must have rights in the collateral.  The Debtor must give an acknowledged security agreement to you.

Properly Recording Perfects the Lien.

Properly recording the security interest provides notice to the world of your rights and perfects your interest.  The new rule changes substantially change the recording rules.

Account Debtors Must Comply With Notice of Debt Assignment

The statute includes new provisions that need debtors to pay the assignee of a debt rather than the original creditor.  A debtor’s failure to pay the assignee after notice of an assignment leaves the debtor liable to pay twice.

Filing Financing Statements

You will still use form UCC-1 to file the financing statement.  In most circumstances you will only need to file a single document and not multiple documents in several jurisdictions.  You don’t need to get the debtor’s signature on the financing statement to file the document.  You also don’t need to have the organization’s ID or the form of their entity.  If the proper filing place is in Alaska you can file online here.

Foreclosure After Default

You can still engage in self-help repossession of property as long as you can go ahead without breaching the peace.  You can also start a judicial foreclosure.  There are also still the rights of proceeding with a strict foreclosure.

Substance over Form

The statute will apply to transactions, even if you word your agreement in a way to try and escape the statute.  The bankruptcy court is likely to consider whether there is an obligation and whether it is secured by collateral. For example, the sale of Accounts can still be considered simply a UCC 9 security agreement transaction.  The risks of not recording the financing statement are that someone else may claim priority over you or a bankruptcy judge could rule that you are not perfected and therefore not collateralized.  Similarly transactions where you keep title may be treated as a security interest, requiring perfection.  It also applies to consignments, sales of intangibles, sales of promissory notes and accounts.

The New Location Rules

Where you record the financing statement depends on the debtor.  The debtors place determines the choice of law and the place of filing.  Registered organizations must be recorded at the place where they are organized.  Alaska companies in Alaska.  Delaware companies in Delaware.  Individual debtors in the state of their residence.  Other entities at the chief executive office.

Foreign Debtors are recorded in their own country, if their laws are like our UCC9; otherwise, you will need to record in Washington DC.  For all Canadian provinces, except Quebec you would file in Canada.  For other countries you can take a look at Prof. Arnold S. Rosenberg’s work at Thomas Jefferson School of Law here.

Other Means of Perfection

There are other means of perfection such as control or automatic perfection.  The control generally concern accounts, such as deposits, investments, electronic chattel paper and letters of credit.

Recording your Financing Statements

The financing statement lasts for six years without a continuation.  When you search the state records you do not know whether the recorded documents were actually authorized.  They are based solely on the name of the debtor as typed by the submitting party.  All financing statement once recorded stay in the system, even if they have been terminated. If the financing statement has been wrongfully terminated your interest may be subject to the existing claims.  Accordingly, reviewing the state documents is merely the start of your due diligence.

Debtor Name Trap

Many people working for companies don’t actually know what the official name for their business is as recorded in the State’s records.  If you simply take your debtor’s word for the name of the enterprise, it is likely the name will be incorrect and that could leave you unsecured.  It is a best practice to get a copy of the record recorded with the state.  You want the name from the articles of incorporation.  When the debtor is an individual you want to use their name as typed on their current drivers license issued by the State of Alaska.

 

For more information on the changes to Alaska UCC 9 give us a call.

Alaska LLC Operating Agreements

Alaska LLC Operating Agreements

Partnerships have been around forever.  Corporations have been with us for 400 years. The American LLC was invented in Wyoming in 1977.  Alaska joined the fray more recently; however, they seem to have selected this entity as their entity of choice because the state makes it available for self filing online.  An Anchorage LLC lawyer helps point out some of the issues the State leaves out on their web site and why a visit with a lawyer can pay dividends later. Continue reading “Alaska LLC Operating Agreements”

Alaska Contractor’s Outlook with Government Shut Down

Government Shut Down Affects Contractors
http://flickr.com/photos/84539227@N00/10111702255

How will the government shut down affect Alaska contractors?

Considering all the moving parts and implications of the government shutdown what should Alaska contractors focus on now.  In short, brace yourself, what is happening now is not a one-off situation; this is  ground-zero for the foreseeable future.

Sequestration happened in March.  During that time federal job losses averaged 9,000 per month, or 72,000 jobs lost. We anticipate that federal payroll decline will escalate.

We expect continued:

1. Reduction in new contracts;
2. Changes in administration contract administration on existing contracts;
3. Changes in procurement type;
4. Increase in Bid Protest activity; and
5. Increase in CDA Claims activity

Cost and need will drive new contracts. The government will likely focus on existing programs over long-term projects. On vehicle usage, conservatism should be anticipated as the rule; the Fed has lots of flexibility for greater restrictions – so dot the I’s and cross the T’s.  You can expect a frequent use legacy indefinite in quantity contracts  (IDIQ) and a desire to lock contractors in to  Firm Fixed Price contracts.

Alaska Contractors can expect the government to offload risk to the contractor community.  Alaska Contractors will need to  manage this increased risk.  Alaska Contractors should approach opportunities with a focus on discipline and rigorous risk evaluation. Fully-funded contracts and phases should be safe; forward phases and contract options are  at risk and should be re-negotiated as soon as possible.

The same applies to your IDIQ task-orders.  The funded task or delivery orders should be safe.   Those that are not are at risk. You should determine 1) whether your contract relates to a sequestration exempt program; 2) whether it is impacted by any new congressional budget, 3) whether it is fully or incrementally funded, 4) when the agency anticipates exercise of options or issuance of task orders, and 5) what changes are planned.

With scarce contract opportunities; we expect an impact on Bid Protests and CDA Claims. The GAO shutdown creates doubt that protests will trigger an automatic stay.   If the GAO protests fails to stop disputed contracts, you may reconsider rolling the dice in more expensive litigation at the U.S. Court of Federal Claims. However, if you decide to engage the GAO; the Agency has issued guidance to federal contractors about how bid protests and related filings will be handled during this period.

Opinion Letters from Attorneys in Business Transactions

In June 2013, the  ABA published their Report on the 2010 Survey of Law Firm

Opinion Practices

By the Legal Opinions Committee of the ABA Section of Business Law

The ABA performed the Survey in 2002.  Even though it has taken a long time, it is interesting to see the reported practices from firms across the nation on these issues.  The ABA published the report in a members only section of the ABA web site, here.  I found it interesting that KL Gates, is providing full access to the report on their website here.

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Alternatives to Selling My Annuity

Alternatives to Selling My Annuity

People have all seen the J.G. Wentworth advertising “Its my money and I want it NOW!”  They’ve done a great job of getting people interested in immediate gratification from their rights to future money.  Many people become reliant on the receipt of those future funds and fail to realize the other options available to them.

Borrowing Money Inside the Annuity Contract

Some annuities and insurance policies provide for borrowing against the future sums that they owe you in the contract.  You need a copy of the annuity contract to know if this is possible.  Generally the transaction costs are much lower on these types of transactions.  They can be the cheapest way to get funds early.

Continue reading “Alternatives to Selling My Annuity”

Valuing My Money — Like an Investor. What is it worth?

This is part two of a series on selling your rights to money in the future.  These rights may arise from an:

  • annuity,
  • structured settlement,
  • court judgment,
  • court settlement,
  • note payments or
  • other contract rights for money in the future.

When the dollars you will receive and the dates for their payment are known values for the payments may be described with precision.  When the payments are all the same size and the dates are uniformly separated the value may be expressed by resorting to single formulas.  When the amounts and dates change then the formulas become more complicated.  The formulas related to valuing these transactions are taught as upper level college courses, but you could take an online class here.  It is impossible to teach an entire college course in a single blog post.  Much less the issues related to the secondary market on annuities.  (You can find a great book on that here.)  The formulas generally reduce the comparison to a single number called the discount rate.  You can look for their statement of the discount rate applied.  You should then find someone competent to independently verify that the rate the state is actually the rate computed.

Continue reading “Valuing My Money — Like an Investor. What is it worth?”

Surface Transportation Assistance Act — Whistleblower Claims

Eric J. Emerson, Donald E. Elder, and Abraham Sandoval published an excellent article on Surface Trasportation Act — Whistleblower claims.  The full article can be found on their web site Surface Trasportation Assistance Act — Whistleblower claims.  They report that these types of claims have risen 30% since 2006.  These matters are governed by OSHA and have provisions allowing for $250,000 in punitive damages.  The most common protected employee activity is a refusal to drive.  It is interesting that third-party logsitics firms, leasing agent and brokers also face potential exposure to STAA claims based on perceived control over employees.

A driver’s refusal to drive is protected under two different provisions. First, 49 U.S.C. sec. 31105(a)(1)(B)(i) provides protection to the driver when they refuse to operate the vehicle because it would violate a regulation, standard or order of the US related to commercial safety.  Second, 49 U.S.C. 31105(a)(1)(B)(ii) the driver may refuse to drive if they have a reasonable apprehension of serious injury “to the employee or the public because of the vehicle’s hazardous safety or security condition.”

The elements of the employee claim are:

  1. The employee engaged in activity or conduct the statute protects;
  2. The employer took unfavorabel action against the employee;
  3. The employee’s protected activity was a contributing factor in the adverse action.

Adverse action inludes: termination; blacklisting; demotion; overtime denial; promotion denial; benefit denial; not rehired; threats; reassignment to low promotion prospect positions; reduction in pay or hours.

Super short statute of limitations of only 180 days from the adverse action.

The employer defense to the adverse action is very high.  The employer must show by clear and convincing evidence they would have taken the adverse action despite the protected activity.

It’s a great article and they discuss a lot more cases.

 

 

Great Business Attorney Questions

  • Prospective Business Attorney Questions and Answers.

If you’ve never hired a business attorney before, you might not know where to start.  You might also not know exactly what you are looking for.  These questions will help you in your quest for finding a business attorney that can help you start, grow and sell your business.

 

Business Attorney
Will your business attorney help your register ring?
  • Are you an experienced Business Attorney?

    Ask direct questions about your prospective lawyer’s experience.  Accounting is the language of business — Have they ever taken an accounting course?  What was your undergraduate degree?  What practical experience do you have in business? If you know you want to incorporate your business, for example, ask if he or she has ever handled an incorporation.  Alaska Law Offices, Inc. is experienced in business. We have two Certified Public Accountants on staff, with more than fifty years experience in business.  We have experience, starting, running and growing businesses.  In addition to growing our own we have audited, managed and consulted in manufacturing, service, construction, real property, transportation and medical businesses.  We have assisted in entity selection, employment contracts, and a host of other business needs.

 

  • Are you a well-connected Business Attorney?

    Your business attorney will know a lot about business.  However, there will come times when you are going to need a specialist in something they don’t know.  You want your lawyer to know when you need a referral to a specialist.  They should keep you from needing to finding those specialists when you need them.  Alaska Law Offices, Inc. is a connected business law firm.  We have extensive contacts in Alaska and among lawyers across the nation in specialized practice areas.  When our clients needs call for it we consult with other counsel to streamline their work.  If a referral will be more efficient or expeditious we are happy to make the referral.

 

  • Do you have other Business Clients in my industry?

    A good business attorney will be familiar with your industry or interested in learning more about it.  This is a double edged sword.  The more they are entrenched in an industry, the more efficient they become for you.  Improvements to a business documents and models frequently are shared with all of their clients.  However, this may keep you from enjoying the market advantage or your own developments for as long.  Alaska Law Offices, Inc. has business clients in several Alaska industries.  We are always discuss potential conflicts of interest with prospective clients before starting a new engagement.  We also bring a wealth of information from our experience having managed and audited business in the: transportation; construction; manufacturing; real estate; medical practice; banking; finance; sales and marketing sectors.

 

  • Are you a good Business Attorney teacher?

    Business attorneys do their most valuable work when they teach you and your staff how to stay out of trouble.  They do this by providing you the law applicable to your business and assisting in creating documents or procedures to stay compliant.  A good business lawyer contributes to your business by staying up with the changes in your business.  Alaska Law Offices, Inc. has fourth generation teachers.  Our staff has taught courses in vocational schools, community colleges and the university level.  The classes have covered topics including: business communication; secured transactions; collection practices; entity selection; taxation; business modeling; business simulation; accounting; management; personnel; negotiation; real property finance; computer programming and systems management.   We really enjoy working with people and teaching them new skills.

 

  • Are you a salesman, a manager, or a worker?

    Every business needs all three types of people, law firms are no different.  The “salesman” looks for new clients; the “manager” makes sure the client’s work gets done; the “worker” gets your work done. You want an attorney with a good mix of manager and worker.  Ask to meet the worker  and be sure you are comfortable with them.  Alaska Law Offices, Inc. are a good mix of manager and worker.  We get the job done in an efficient cost effective way.

 

  • What are your billing options?

    Unlike personal injury lawyers, business lawyers don’t generally work on “contingency fee.” Most lawyers will charge a flat one-time fee for routine matters, such as forming a corporation or LLC.  Find out if the flat fee includes out of pocket expenses, like filing fees and courier charges.  Most business attorneys will require a retainer before starting work.  Typically Alaska Law Offices, Inc. will engage businesses on an annual retainer basis for the regular and routine business advice and reminders that businesses need.  For retainer clients we also offer flat fee services for additional services that are outside the regular annual schedule.  We also provide additional serves on an ad hoc time and hourly fee.

 

  • Limits on Flat Fees?

    Flat fees generally are not quoted when the  the matter involves litigation or negotiations with third parties.  “Even though it’s a transaction I’ve done dozens of times, if the other side’s lawyer turns out to be a blithering idiot who wants to fight over every comma and semicolon in the contracts, then I can’t control the amount of time I will be putting into the matter, and will end up losing money if I quote a flat fee.” In such situations, you will have to pay the lawyer’s hourly rate. You should always ask for a written estimate of the amount of time involved, and advance notice if circumstances occur that will cause the lawyer to exceed his or her estimate.

 

  • Is the Retainer Refundable?

    Ask whether the retainer will be used and not held indefinitely in escrow., and that the lawyer commits to return any unused portion of the retainer if the deal fails to close for any reason.  Alaska Law Offices, Inc. uses two types of retainers, the annual service retainer and the ad hoc service retainer.  The annual retainer is earned throughout the year as the services are performed.  The ad hoc service retainer in contrast is an estimate of fees and is refundable when the job is complete if any amount remains unearned.

 

  • Whether You Should Give Your Business Attorney an Interest in Your business.

    You should be suspicious of any lawyer who offers to take an ownership interest in your business in lieu of a fee.  Giving your attorney an interest in your business creates a potential conflict of interest.  When attorneys interests are conflicted they can no longer fully serve your interests.  You should keep the blue sky value of your business for yourself.