Subsidiary reinstated after parent disolves

[E. Mike Durbin]

Jurisdiction

Illinois

I think this is a kind of unique circumstance. At least I can't find any examples. This is a real situation.

Company B acquires all the stock in Company A

Company B goes bankrupt, sell most assets (including subsidiary assets) in an asset sales agreement, then dissolves. All subsidiaries also dissolved.

Company A, several years later, is reinstated.

Question 1: What happened to the stock that Company B owned in Company A when it dissolved? The stock was not part of the asset sales agreement and all subsidiaries were dissolved.

Question 2: When reinstated, does Company A reissue the stock to it's new investors?

Note that under Illinois section 10.15(g) Company A now exists as if it had never been dissolved. The question is what happened to it's stock?

 

[Zigner]

All subsidiaries also dissolved.

I think that answers your question.

 

[army judge]

All subsidiaries also dissolved.

I think that answers your question.

You nailed it again, counselor.

Good on you.

 

[zddoodah]

A couple questions for you: Why are you asking? What is your connection tot he two companies mentioned?

Company B goes bankrupt, sell most assets (including subsidiary assets) in an asset sales agreement, then dissolves. All subsidiaries also dissolved.

Please elaborate about this. Did Company B file a Ch. 7 bankruptcy? A Ch. 11? Something else? If Company B is liquidating assets, it sounds like a Ch. 7. Are both Company A and Company B Illinois corporations? What does "including subsidiary assets" mean? It sounds like you're saying that Company A was liquidated and dissolved (or dissolved without liquidation), which would result in the assets of Company A becoming assets of Company B and, hence, property of the bankruptcy estate. Also, were the dissolutions administrative dissolutions pursuant to 805 ILCS 5/12.35 or complete dissolution pursuant to 805 ILCS 5/12.05?

Company A, several years later, is reinstated.

I have no idea what this might mean (unless you're talking about reinstatement following administrative dissolution). Do you mean that someone (who?) formed a new corporation with the same name?

What happened to the stock that Company B owned in Company A when it dissolved?

How should we know? You'd have to tell us, but you didn't. However, you did tell us that Company A was dissolved. If we assume you used that term correctly, that means that Company A's assets were liquidated with the proceeds being used to pay Company A's liabilities, and the remainder distributed to Company B as the sold shareholder. At that point, there is no more Company A stock.

Question 2: When reinstated, does Company A reissue the stock to it's new investors?

Again, I have no idea what you mean by "reinstated" in this context. Ordinary dissolution cannot be undone except within a very short window following the filing of articles of dissolution.

Note that under Illinois section 10.15(g) Company A now exists as if it had never been dissolved.

If this is a reference to 805 ILCS 5/10.15(g), that section has nothing to do with a dissolved corporation, and that subsection has to do with the restatement (not reinstatement) of articles of incorporation.

 

[E. Mike Durbin]

I think that answers your question.

For a person who dies with no heirs, the stock goes to the state.

My question is if a company dissolves.

 

[E. Mike Durbin]

A couple questions for you: Why are you asking? What is your connection tot he two companies mentioned?



Please elaborate about this. Did Company B file a Ch. 7 bankruptcy? A Ch. 11? Something else? If Company B is liquidating assets, it sounds like a Ch. 7. Are both Company A and Company B Illinois corporations? What does "including subsidiary assets" mean? It sounds like you're saying that Company A was liquidated and dissolved (or dissolved without liquidation), which would result in the assets of Company A becoming assets of Company B and, hence, property of the bankruptcy estate. Also, were the dissolutions administrative dissolutions pursuant to 805 ILCS 5/12.35 or complete dissolution pursuant to 805 ILCS 5/12.05?



I have no idea what this might mean (unless you're talking about reinstatement following administrative dissolution). Do you mean that someone (who?) formed a new corporation with the same name?



How should we know? You'd have to tell us, but you didn't. However, you did tell us that Company A was dissolved. If we assume you used that term correctly, that means that Company A's assets were liquidated with the proceeds being used to pay Company A's liabilities, and the remainder distributed to Company B as the sold shareholder. At that point, there is no more Company A stock.



Again, I have no idea what you mean by "reinstated" in this context. Ordinary dissolution cannot be undone except within a very short window following the filing of articles of dissolution.



If this is a reference to 805 ILCS 5/10.15(g), that section has nothing to do with a dissolved corporation, and that subsection has to do with the restatement (not reinstatement) of articles of incorporation.

Yes. Company B filed for bankruptsy, and entered into an asset purchase agreement before dissolving.

Company A was an Illinois company.

I don't know what kind of dissolution they were. However, Company A *has* been reinstated (as if it was administratively dissolved) per Illinois statute 10.15(g), and is now operating with the exact number of authorized and issued shares as before -- as if it had never been dissolved (per Illinois statute 12.25).

Yes, almost all assets in Company B were sold in the asset purchase agreement, but not all.

My question is, while Illinois statute 12.45 states that the company A exists "as if it had never been dissolved), what happened to the stock when company B dissolved?

My belief (without any legal basis) is that when the companies were dissolved, the stock "evaporated(??)". When company A was reinstated, it (re)issued new stock. Company A is currently opperating under that belief. SO, MORE IMPORTANTLY, who owns stock in company A after it's been reinstated? When the original stock holders no longer exist.

I understand that only a company that is administratively dissolved can be reinstated, but that is past. Company A is reinstated, and is shown on the Illinois Sec. of State site as a company in good standing. In fact, company A has already successfully reclaimed assets through the Illinois iCash program.

Sorry about quoting the wrong statues. Yes, 10.15(g) is for reinstatement. 12.45 is for operating is if it had not been dissolved.

 

[zddoodah]

From the private message you sent me:

"Thanks for replying to my questions a few weeks ago. I replied back, and answered al but one of your questions. The question:

'Why are you asking? What is your connection tot he two companies mentioned?'

I am the original founder and president of company A (both originally, and currently)."

 

[adjusterjack]

Mike, you posted the following in a new thread when you should have added it to this one.

I didn't have much success with my last question. Probably because I couldn't phrase it correctly. So I'd like to try again.

A parent company goes bankrupt, and all assets become managed by a bankruptcy trustee. Assets are sold, parent is dissolved.

1) I'm assuming the stock in the subsidiaries goes to the trustee (was not one of the assets sold)?

2) 15 years ago:

"The estate having been fully administered, further administration of the reopened case having been completed, or the case reopened for the filing of further proceedings which either have been filed and no further court action is required or were not filed within 90 days of the reopening; IT IS ORDERED that the case is closed and if a trustee has been appointed, the trustee is discharged from and relieved of his trust. Jurisdiction is retained over any pending adversary(s)."

Where us the stock now?

3) The subsidiary is reinstated (805 ILCS 5/10.15(g)) and exists as if it was never dissolved (805 ILCS 5/12.45). Now where is the stock?

Thanks!!!!

I've deleted the other thread as a duplicate.

 

[E. Mike Durbin]

Unclaimed Property in Chapter 9 and 11 Cases

In Chapter 9 and 11 cases, the confirmed plan provides for the distribution of funds paid to creditors and a mechanism for handling monies that are returned unclaimed (see Disposition of Unclaimed Funds Under a Confirmed Plan). If the plan mechanism fails, sections 347(b) and 1143 of the Bankruptcy Code provide a backstop. If the plan requires the creditor to present or surrender a security or render some performance as a condition to participating in a distribution, it must do so within five years of the confirmation order or forego its right to participate in any distribution under the plan (§ 1143, Bankruptcy Code). Unless the plan provides otherwise, five years after confirmation of a Chapter 11 plan, unclaimed property reverts to either:

The Chapter 11 debtor.
The entity acquiring the debtor's assets under the plan.

(§§ 347(b) and 1143, Bankruptcy Code and see TLI, Inc. v. Lynn (In re TLI, Inc.), 213 B.R. 946, 950 (N.D. Tex. 1997), aff'd, 159 F.3d 1355 (5th Cir.1998).)

Because of the possibility that the right to the money might revert to someone other than the creditor, unclaimed funds are not usually deposited with the clerk in Chapter 11 cases (see In re George Rodman, Inc., 50 B.R. 313 (Bankr.W.D.Okla. 1985)), although exceptions exist (see Deposit of Unclaimed Funds with Court in Chapter 9 and 11 Cases).

NOTE: Since the parent company was dissolved before the 5 years were up, and we're talking about stock in the subsidiaries, does this still apply?

 

[Zigner]

Specific review and advice is beyond the scope of this (or any) legal forum. Please seek out appropriate legal counsel for such review and advice.