I am the registered owner of a defunct company that has a judgment against it. In the Commonwealth of Virginia, can I close that company with the active judgment?
Answer by Ethan Stone, Stone Business Law
First, a quick but important clarification: I’m not your lawyer and this answer doesn’t establish a lawyer-client relationship. I’m giving a generic answer to a generic question to educate the users of this site. The information below is general in nature and should not be understood as a substitute for personal legal advice.
I’m also not a Virginia lawyer and I haven’t looked at Virginia’s corporations laws. The following answer reflects the typical arrangement under most states’ corporate laws.
The answer is that you can dissolve the company if you want, but to avoid personal liability for that judgment, you’ll have to put aside assets to cover it (usually in trust) before you distribute anything to the shareholders. Reading between the lines, I’m guessing that there may not be enough assets to cover the judgment. In that case, you can dissolve the company and put all of the assets aside to pay the judgment (and any other remaining liabilities of the company).
If the company clearly does not have enough assets to pay the judgment and there are few or no other creditors, you might consider talking to the judgment creditor to see if you can formally settle the claim by turning over the company’s remaining assets. If the creditor(s) are willing to do that in advance of dissolution, it will make dissolution easier. Since there are legal doctrines that can allow a corporate creditor to impose personal liability on shareholders, formally settling the judgment will also provide you with a bit more peace of mind.
You might also take a look at an earlier answer I posted to a similar question here:http://www.foundersspace.com/company-formation/can-i-simply-abandon-a-california-corp/.