DGCL section 278: how long a dissolved Delaware corporation can wind up

The short answer: three years, or longer if Chancery directs

Section 278 of the Delaware General Corporation Law keeps a dissolved corporation in existence for three years from dissolution, or for a longer period if the Court of Chancery directs, so that it can finish its affairs. During that time it can prosecute and defend suits, settle and close its business, dispose of and convey its property, discharge its liabilities and distribute remaining assets to stockholders. It cannot use the period to continue the business it was formed to carry on.

For counsel advising a dissolved client with valuable archives, the period is a window to realize the records' value. The line to watch is the one between disposing of property, which the statute allows, and carrying on business, which it does not.

This is general information, not legal, tax or financial advice. Confirm with your own counsel before acting.

What section 278 provides

The summary below paraphrases section 278 of Title 8 of the Delaware Code and is not linked to a verified copy of the statute here. Read the current official text before relying on it, because the General Assembly amends the DGCL most years.

• Term. A corporation that expires by its own limitation or is otherwise dissolved continues as a body corporate for three years from expiration or dissolution, or for such longer period as the Court of Chancery directs in its discretion.
• Purposes. Prosecuting and defending suits, whether civil, criminal or administrative; enabling the corporation gradually to settle and close its business; disposing of and conveying its property; discharging its liabilities; and distributing any remaining assets to stockholders.
• Limit. Not for the purpose of continuing the business for which the corporation was organized.
• Pending suits. For an action begun by or against the corporation before or within the three years, the corporation continues beyond that period until any judgments, orders or decrees in it are fully executed, without a special direction from the court.

Two neighboring sections matter in practice. Section 279 lets the Court of Chancery, at any time, on the application of a creditor, stockholder, director or anyone else showing good cause, appoint trustees or receivers to take charge of a dissolved corporation's property and do whatever the corporation could have done to finish its unfinished business. Sections 280 and 281(b) set the two routes for providing for claims before assets are distributed; the comparison of section 280 and 281(b) covers how each treats leftover assets.

Does a records license count as winding up?

A one-time license of historical records looks more like disposing of property than carrying on business, but the structure of the deal decides it.

SourceX deals usually sit in the left-hand column: one all-in price paid once, typically within about 60 days of invoicing after the buyer selects the data, for a license that is typically exclusive for AI training over an agreed term. That term can outlast the winding-up period, so ask early who will hold the company's rights and answer for any surviving obligations once the corporation's existence for winding up ends, and how those obligations are provided for under section 280 or 281(b).

Where you are in the period changes the advice

If the company's charter became void, or the owners want to undo the dissolution, the routes differ; see reviving a dissolved corporation to complete an asset deal. If the company is insolvent and needs a different process from dissolution, compare how long an assignment for the benefit of creditors takes.

Who signs for a dissolved Delaware corporation

The directors in office at dissolution generally remain responsible for winding up and act by board resolution, and officers sign within the authority the board gives them. Once a section 279 trustee or receiver is appointed, that person acts under the court's order. For how other states approach the question, see who can sign for a dissolved corporation. If the board was deadlocked before dissolution, the analysis in custodians in deadlocked companies may apply first.

Rights and privacy checks before any license

Ownership can be split. Copyright ownership may be transferred in whole or in part, and any exclusive right can be transferred and owned separately (17 U.S.C. 201), which is why a company can license AI-training rights in records it owns while keeping everything else.

Privacy promises cannot be rewritten after the fact. FTC staff have warned that adopting more permissive data practices, such as using consumer data for AI training, through a surreptitious, retroactive change to terms of service or a privacy policy may be unfair or deceptive (FTC Office of Technology). A dissolved company is held to what it promised while it operated.

The company must also meet the baseline on who qualifies: a US business with 50+ full-time employees at peak (contractors excluded), several years of documented operations, rights to license its records and a sponsor with authority, which during winding up is the board or a court-appointed fiduciary. The company fit checker gives a preliminary, non-binding read.

Questions to ask before relying on section 278

• When did dissolution take effect, and how much of the period remains?
• Has the company provided for claims under section 280 or 281(b), and does a license change that analysis?
• Who are the directors now, and are any unavailable or conflicted?
• Will the license term or any surviving obligation outlast the corporation's winding-up existence?
• Would a court-directed extension or a section 279 appointment give the buyer more comfort?

For counsel and advisers who see these situations

Restructuring counsel, wind-down advisers and former officers are often the first to realize that a dissolved company's archive has value. Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company, and the reward is paid only after the buyer pays and SourceX receives its fee. No reward is guaranteed, and lawyers should read their own state's professional conduct rules on referral payments and client disclosure before registering.

Next step

Confirm the dissolution date and the board's current membership, then run the company through the fit check. To introduce a dissolved client or a former employer, register as a partner; the company itself can apply at sourcex.si/apply.