SUSPENDED HOMEOWNERS ASSOCIATIONS
Boards of Directors and Homeowners, you may not be aware that your association has been suspended by the State of California Secretary of State or the State Franchise Tax Board. If in doubt you are encouraged totake the time to find out. This is a serious matter that should not go unattended.
The California Association of Homeowners Associations, Inc. has assisted numerous associations "revive" their association and we will assist you. Contact our office for information and the cost of this important service.
The following articles will emphasize the importance of this service. You are advised not to leave this article until you have finished reading it. There are many associations that fall into this category.
THE LAW SUSPENDED CORPORATIONS IN CALIFORNIA
Michael G. Kerbs
Law Firm of REID & HELLYER
In California, both the Secretary of State's office and the Franchise Tax Board have the authority to suspend a California corporation. The Secretary of State's office can suspend a corporation based upon the failure to file and pay the annual Statement of Information. This statement contains the identity of the officers and directors of the corporation, as well as its agent for service of process. The failure to file a Statement of Information on time may result in a $250.00 late fee.
The Franchise Tax Board has the authority to suspend a corporation based upon the failure to pay the minimum tax of $800.00 a year or the failure to pay any taxes that are owed. In addition, a corporation may be suspended for the failure to file tax returns. Tax returns are required on an annual basis even if the corporation is not doing business.
The impact of a corporation being placed in suspended status is substantial. When a corporation is suspended, it has lost all rights and privileges as a corporation and cannot legally operate. In that regard, technically a suspended corporation is required to close its business and stop all business related activity. Moreover, a suspended corporation cannot sue or defend any action in court. Furthermore, a suspended corporation that provides a service, or goods, to third parties while suspended may not be able to collect payment for such services or goods since the suspended corporation technically was not permitted to engage in any business transactions.
A California corporation can be placed back in good standing after its has been suspended by being revived or reinstated. Until the corporation corrects its suspended status, the corporation is prohibited from transacting business and any contract executed by a suspended corporation is voidable at the demand of the other party. The only exceptions to the loss of corporate privileges upon suspension are that the corporation may (1) change its name by amendment to its Articles of Incorporation and (2) apply to the Franchise Tax Board for tax exempt status.
Once notification is received of the suspension, it is important to move as quickly as possible to have the corporation revived or reinstated. A corporation that was suspended by the Secretary of State because of the failure to file the required annual Statement of Information can be revived by sending a letter to the Secretary of State along with (1) the delinquent Statement of Information and (2) the payment of the overdue fees and/or penalties imposed. Provided that the corporate name is still available, the Secretary of State will send a "Notice of Reviver" to the corporation and notify the Franchise Tax Board. If the corporation's name was taken by another corporation during the suspension period, then the Secretary of State will advise the corporation that it must change its name by amending its Articles of Incorporation before the corporation can be revived.
In the event that the corporation was suspended by the Franchise Tax Board, the suspended corporation may have its corporate privileges reinstated only by filing all delinquent tax returns and statements, paying all applicable taxes, penalties, interest and fees, and filing an application for a Certificate of Revivor with the Franchise Tax Board. Before the Franchise Tax Board issues the Certificate of Revivor, the Secretary of State must again approve the corporate name to insure that another corporation did not take the name during the period of suspension.
In summary, the potential adverse consequences that can flow from the suspension of the California corporation dictate that both the required Statement of Information and the payment of the minimum annual franchise tax and tax return be transmitted on a timely basis. While a corporation can be revived or reinstated following a suspension, the danger exists that the corporation's name will be taken by another entity during the time of the suspension. Additionally, the risk of being unable to participate in litigation, as well as the risk of having a contract voided by the other party, greatly outweigh the burden of complying with the requirements of the Secretary of State and the Franchise Tax Board.
YOU HAVE A SUSPENDED CALIFORNIA CORPORATION. NOW WHAT?
by Ann Penners Bergen ·
A suspended California corporation. What does it mean? What do you need to do?
Why Did Your California Corporation Get Suspended?
In California, if you do not pay your corporate taxes, your corporation will be suspended. You can find this rule in California Revenue & Taxation Code section 23301. The same thing can happen if you don't file a corporate tax return. This can also occur if you do not timely file either the original Statement of Information for your corporation or file your corporation's annual Statement of Information. (See California Corporations Code
section 2205.) So, if your California corporation is suspended, it is likely because you did not (a) pay your taxes; (b) file a tax return or (c) file an updated Statement of Information.
What Does it Mean If Your California Corporation is Suspended?
A suspended California corporation loses its rights to exercise its power, privileges and rights. A suspended corporation cannot bring a lawsuit. It cannot defend itself against a lawsuit. It cannot file a notice of appeal. If a lawyer representing a California corporation learns that is is suspended, there are serious consequences for proceeding with the lawsuit. A suspended California corporation cannot engage in any type of real estate transaction. A suspended California corporation also can lose its corporate name. Another corporation may take away the suspended corporations name by filing articles of incorporation, a name reservation or amending its articles with the Secretary of State. Unlike some of the other consequences of being suspended, which can be restored, losing your corporation's name to another cannot be restored.
What Do You Do If Your California Corporation is Suspended?
A suspended California corporation can apply to be reinstated to the Franchise Tax Board after it complies with its obligations (filing a tax return and/or paying taxes.) Your corporation is then issued a "Certificate of Revivor." Once your corporation is reinstated, many of your corporate powers are restored. If your corporation was suspended for failing to file a Statement of Information, after the Statement of Information is filed and the fine is paid, reinstatement occurs.)
What Happens After My California Corporation Is Revived
Once your California corporation is revived, if it is in a lawsuit, it can once against defend itself or prosecute an action. It can also go forward with its appeal. One defense that will continue to run while the corporation is suspended is the statute of limitations. Thus, you should talk with your lawyer if there are statute of limitations issues with a suspended corporation. Once revived, your California corporation can also proceed with real estate transactions.
Unfortunately, if your corporate name has been taken away, you probably were required to use a new name to revive your corporation and that corporate name has been lost to you.