The Vermont Statutes Online

Title 11C: Mututal Benefit Enterprises

Chapter 012: Dissolution

• § 1201. Dissolution and winding up

  A mutual benefit enterprise is dissolved only as provided in this article and upon dissolution winds up in accordance with this article. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1202. Nonjudicial dissolution

  Except as otherwise provided in sections 1203 and 1211 of this title, a mutual benefit enterprise is dissolved and its activities shall be wound up:

  (1) upon the occurrence of an event or at a time specified in the articles of organization;

  (2) upon the action of the enterprise’s organizers, board of directors, or members under section 1204 or 1205 of this title; or

  (3) 90 days after the dissociation of a member, which results in the enterprise having one patron member and no other members, unless the enterprise:

  (A) has a sole member that is a cooperative; or

  (B) not later than the end of the 90-day period, admits at least one member in accordance with the organic rules and has at least two members, at least one of which is a patron member. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1203. Judicial dissolution

  The Superior Court may dissolve a mutual benefit enterprise or order any action that under the circumstances is appropriate and equitable:

  (1) in a proceeding initiated by the Attorney General, if:

  (A) the enterprise obtained its articles of organization through fraud; or

  (B) the enterprise has continued to exceed or abuse the authority conferred upon it by law; or

  (2) in a proceeding initiated by a member, if:

  (A) the directors are deadlocked in the management of the enterprise’s affairs, the members are unable to break the deadlock, and irreparable injury to the enterprise is occurring or is threatened because of the deadlock;

  (B) the directors or those in control of the enterprise have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;

  (C) the members are deadlocked in voting power and have failed to elect successors to directors whose terms have expired for two consecutive periods during which annual members’ meetings were held or were to be held; or

  (D) the assets of the enterprise are being misapplied or wasted. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1204. Voluntary dissolution before commencement of activity

  A majority of the organizers or initial directors of a mutual benefit enterprise that has not yet begun business activity or the conduct of its affairs may dissolve the enterprise. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1205. Voluntary dissolution by the board and members

  (a) Except as otherwise provided in section 1204 of this title, for a mutual benefit enterprise to voluntarily dissolve:

  (1) a resolution to dissolve shall be approved by a majority vote of the board of directors unless a greater percentage is required by the organic rules;

  (2) the board of directors shall call a members’ meeting to consider the resolution, to be held not later than 90 days after adoption of the resolution; and

  (3) the board of directors shall mail or otherwise transmit or deliver to each member in a record that complies with section 508 of this title:

  (A) the resolution required by subdivision (1) of this subsection;

  (B) a recommendation that the members vote in favor of the resolution or, if the board determines that because of conflict of interest or other special circumstances it should not make a favorable recommendation, the basis of that determination; and

  (C) notice of the members’ meeting, which shall be given in the same manner as notice of a special meeting of members.

  (b) Subject to subsection (c) of this section, a resolution to dissolve shall be approved by:

  (1) at least two-thirds of the voting power of members present at a members’ meeting called under subdivision (a)(2) of this section; and

  (2) if the mutual benefit enterprise has investor members, at least a majority of the votes cast by patron members, unless the organic rules require a greater percentage.

  (c) The organic rules may require that the percentage of votes under subdivision (b)(1) of this section is:

  (1) a different percentage that is not less than a majority of members voting at the meeting;

  (2) measured against the voting power of all members; or

  (3) a combination of subdivisions (1) and (2) of this subsection. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1206. Winding up

  (a) A mutual benefit enterprise continues after dissolution only for purposes of winding up its activities.

  (b) In winding up a mutual benefit enterprise’s activities, the board of directors shall cause the enterprise to:

  (1) discharge its liabilities, settle and close its activities, and marshal and distribute its assets;

  (2) preserve the enterprise or its property as a going concern for no more than a reasonable time;

  (3) prosecute and defend actions and proceedings;

  (4) transfer enterprise property; and

  (5) perform other necessary acts.

  (c) After dissolution and upon application of a mutual benefit enterprise, a member, or a holder of financial rights, the Superior Court may order judicial supervision of the winding up of the enterprise, including the appointment of a person to wind up the enterprise’s activities, if:

  (1) after a reasonable time, the enterprise has not wound up its activities; or

  (2) the applicant establishes other good cause.

  (d) If a person is appointed pursuant to subsection (c) of this section to wind up the activities of a mutual benefit enterprise, the enterprise shall promptly deliver to the Secretary of State for filing an amendment to the articles of organization to reflect the appointment. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1207. Distribution of assets in winding up mutual benefit enterprise

  (a) In winding up a mutual benefit enterprise’s business, the enterprise shall apply its assets to discharge its obligations to creditors, including members that are creditors. The enterprise shall apply any remaining assets to pay in money the net amount distributable to members in accordance with their right to distributions under subsection (b) of this section.

  (b) Unless the organic rules otherwise provide, in this subsection, “financial interests” means the amounts recorded in the names of members in the records of a mutual benefit enterprise at the time a distribution is made, including amounts paid to become a member, amounts allocated but not distributed to members, and amounts of distributions authorized but not yet paid to members. Unless the organic rules otherwise provide, each member is entitled to a distribution from the enterprise of any remaining assets in the proportion of the member’s financial interests to the total financial interests of the members after all other obligations are satisfied. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1208. Known claims against dissolved mutual benefit enterprise

  (a) Subject to subsection (d) of this section, a dissolved mutual benefit enterprise may dispose of the known claims against it by following the procedure in subsections (b) and (c) of this section.

  (b) A dissolved mutual benefit enterprise shall notify its known claimants of the dissolution in a record. The notice shall:

  (1) specify that a claim be in a record;

  (2) specify the information required to be included in the claim;

  (3) provide an address to which the claim shall be sent;

  (4) state the deadline for receipt of the claim, which may not be less than 120 days after the date the notice is received by the claimant; and

  (5) state that the claim will be barred if not received by the deadline.

  (c) A claim against a dissolved mutual benefit enterprise is barred if the requirements of subsection (b) of this section are met, and:

  (1) the enterprise is not notified of the claimant’s claim, in a record, by the deadline specified in the notice under subdivision (b)(4) of this section;

  (2) in the case of a claim that is timely received but rejected by the enterprise, the claimant does not commence an action to enforce the claim against the enterprise within 90 days after receipt of the notice of the rejection; or

  (3) if a claim is timely received but is neither accepted nor rejected by the enterprise within 120 days after the deadline for receipt of claims, the claimant does not commence an action to enforce the claim against the enterprise:

  (A) after the 120-day period; and

  (B) within 90 days after the 120-day period.

  (d) This section does not apply to a claim based on an event occurring after the date of dissolution or a liability that is contingent on that date. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1209. Other claims against dissolved mutual benefit enterprise

  (a) A dissolved mutual benefit enterprise may publish notice of its dissolution and request persons having claims against the enterprise to present them in accordance with the notice.

  (b) A notice under subsection (a) of this section shall:

  (1) be published at least once in a newspaper of general circulation in the county in which the dissolved mutual benefit enterprise’s principal office is located or, if the enterprise does not have a principal office in this State, in the county in which the enterprise’s designated office is or was last located;

  (2) describe the information required to be contained in a claim and provide an address to which the claim is to be sent; and

  (3) state that a claim against the enterprise is barred unless an action to enforce the claim is commenced not later than three years after publication of the notice.

  (c) If a dissolved mutual benefit enterprise publishes a notice in accordance with subsection (b) of this section, the claim of each of the following claimants is barred unless the claimant commences an action to enforce the claim not later than three years after the first publication date of the notice:

  (1) a claimant that is entitled to but did not receive notice in a record under section 1208 of this title; and

  (2) a claimant whose claim is contingent or based on an event occurring after the effective date of dissolution.

  (d) A claim not barred under this section may be enforced:

  (1) Against a dissolved mutual benefit enterprise, to the extent of its undistributed assets.

  (2) If the enterprise’s assets have been distributed in connection with winding up the enterprise’s activities against a member or holder of financial rights, to the extent of that person’s proportionate share of the claim or the enterprise’s assets distributed to the person in connection with the winding up, whichever is less. The person’s total liability for all claims under this subdivision shall not exceed the total amount of assets distributed to the person as part of the winding up of the enterprise. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1210. Court proceeding

  (a) Upon application by a dissolved mutual benefit enterprise that has published a notice under section 1209 of this title, the Superior Court in the county where the enterprise’s principal office is located or, if the enterprise does not have a principal office in this State where its designated office in this State is located, may determine the amount and form of security to be provided for payment of claims against the enterprise that are contingent, have not been made known to the enterprise, or are based on an event occurring after the effective date of dissolution but that, based on the facts known to the enterprise, are reasonably anticipated to arise after the effective date of dissolution.

  (b) Not later than 14 days after filing an application under subsection (a) of this section, a dissolved mutual benefit enterprise shall give notice of the proceeding to each known claimant holding a contingent claim.

  (c) The court may appoint a representative in a proceeding brought under this section to represent all claimants whose identities are unknown. The dissolved mutual benefit enterprise shall pay reasonable fees and expenses of the representative, including all reasonable attorney’s and expert witness fees.

  (d) Provision by the dissolved mutual benefit enterprise for security in the amount and the form ordered by the court satisfies the enterprise’s obligations with respect to claims that are contingent, have not been made known to the enterprise, or are based on an event occurring after the effective date of dissolution, and the claims may not be enforced against a member that received a distribution. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012; amended 2017, No. 11, § 14.)

• § 1211. Administrative dissolution

  (a) The Secretary of State may dissolve a mutual benefit enterprise administratively if the enterprise does not:

  (1) pay, not later than 60 days after the due date, any fee, tax, or penalty due to the Secretary of State under this title; or

  (2) deliver not later than 60 days after the due date its annual report to the Secretary of State.

  (b) If the Secretary of State determines that a ground exists for dissolving a mutual benefit enterprise administratively, the Secretary of State shall file a record of the determination and serve the enterprise with a copy of the record.

  (c) If, not later than 60 days after service of a copy of the Secretary of State’s determination under subsection (b) of this section, the enterprise does not correct each ground for dissolution or demonstrate to the satisfaction of the Secretary of State that each uncorrected ground determined by the Secretary of State does not exist, the Secretary of State shall dissolve the enterprise administratively by preparing and filing a declaration of dissolution that states the grounds for dissolution. The Secretary of State shall serve the enterprise with a copy of the declaration.

  (d) A mutual benefit enterprise that has been dissolved administratively continues its existence only for purposes of winding up its activities.

  (e) The administrative dissolution of a mutual benefit enterprise does not terminate the authority of its agent for service of process. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1212. Reinstatement following administrative dissolution

  (a) A mutual benefit enterprise that has been dissolved administratively may apply to the Secretary of State for reinstatement not later than two years after the effective date of dissolution. The application shall be delivered to the Secretary of State for filing and state:

  (1) the name of the enterprise and the effective date of its administrative dissolution;

  (2) that the grounds for dissolution either did not exist or have been eliminated; and

  (3) that the enterprise’s name satisfies the requirements of section 111 of this title.

  (b) If the Secretary of State determines that an application contains the information required by subsection (a) of this section and that the information is correct, the Secretary of State shall:

  (1) prepare a declaration of reinstatement;

  (2) file the original of the declaration; and

  (3) serve a copy of the declaration on the enterprise.

  (c) When reinstatement under this section becomes effective, it relates back to and takes effect as of the effective date of the administrative dissolution, and the mutual benefit enterprise may resume or continue its activities as if the administrative dissolution had not occurred. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1213. Denial of reinstatement; appeal

  (a) If the Secretary of State denies a mutual benefit enterprise’s application for reinstatement following administrative dissolution, the Secretary of State shall prepare and file a notice that explains the reason for denial and serve the enterprise with a copy of the notice.

  (b) Not later than 30 days after service of a notice of denial of reinstatement by the Secretary of State, a mutual benefit enterprise may appeal the denial by petitioning the Superior Court to set aside the dissolution. The petition shall be served on the Secretary of State and contain a copy of the Secretary of State’s declaration of dissolution, the enterprise’s application for reinstatement, and the Secretary of State’s notice of denial.

  (c) The court may summarily order the Secretary of State to reinstate the dissolved enterprise or may take other action the court considers appropriate. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 1214. [Reserved.]

• § 1215. Statement of termination

  (a) A dissolved mutual benefit enterprise that has completed winding up may deliver to the Secretary of State for filing a statement of termination that states:

  (1) the name of the enterprise;

  (2) the date of filing of its initial articles of organization; and

  (3) that the enterprise is terminated.

  (b) The filing of a statement of termination does not itself terminate the mutual benefit enterprise. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)