A letter of dissolution of a corporation is a letter written by a company and it can be addressed to any of the stakeholders, including shareholders, clients, suppliers, employees, government, etc. In this letter, the corporation informs the addressee about its dissolution and the date of effect.
A corporation may get dissolved due to several reasons, such as:
- Financial issues.
- High debts.
- Conflicts among shareholders or board of directors.
- Vote of shareholders for dissolution.
- Government or court orders, etc.
Irrespective of the reason, if the corporation is being dissolved, it is important to inform the concerned parties in a timely manner, so as to limit their inconvenience. The concerned parties could include:
- Customers or clients.
- Government authorities.
Usually, a formal letter of dissolution of a corporation is sent to the stakeholders, which may vary as per the dissolution information, decisions related to the stakeholders, and the type of addressee, to which the letter is being written. However, generally, the following information is included in such letters, which can be edited as per the needs:
- Details of the addressee.
- Details of addressor.
- Notify about the dissolution.
- Date of effectiveness.
- Reason of dissolution if the corporation wants to disclose.
- Address the issues and provide the solutions (if possible), that are related to the specific addressee.
- Apologize for the inconvenience caused, if required.
This letter has the following benefits:
- It notifies the stakeholders about the dissolution.
- It explains to them how the dissolution would affect their relationship with the corporation.
- It clarifies any misunderstandings and confusions for the stakeholders.
- It provides the time to the stakeholders to look for the alternatives, so to minimize the effects on them.
When a letter of dissolution of a corporation is received by the concerned stakeholder, he not only gets informed but also gets to know that how would the dissolution impact him. For instance, if it is addressed to the employees, they would know that their jobs are ending. Another example is of the client, if it is sent to the supplier, he would know the contract ending date, as well as the clearance of his dues.
This letter is a formal and legal document and is kept in the records of the corporation as well as the stakeholders. It can be used for any reference as well as can serve the purpose of legal evidence.
Sample Letter of Dissolution of Corporation
Dear Mr. Johnathan,
I am writing this letter to notify your company about the dissolution of our corporation ABC Limited. It will be effective from 1st September 20XX.
It has been a pleasure to work with you. Your company has always been a reliable supplier of raw materials, which is why we signed a long-term contract with XYZ Limited to be our constant supplier. However, our company has been facing financial issues, and we had no choice other than to dissolve, to pay off our creditors.
As ABC Limited will no longer exist as a corporation from 1st September 20XX, all our contracts are subject to that date as well. We apologize for any inconvenience, but we are terminating our contract with XYZ Limited from 31st July 20XX. We are providing a one-month notice so that you can search for more clients as well as we can clear all your dues.
We apologize again and wish you the best of luck.
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