SUSPENDED HOMEOWNERS ASSOCIATIONS

REINSTATEMENT SERVICE

Homeowners’ associations may be suspended by the California Secretary of State or Franchise Tax Board without the board or homeowners realizing it. Verify your association’s status promptly, as suspension can have profound consequences.

The California Association of Homeowners Associations, Inc. assists associations with restoring corporate good standing. Contact calmonson3@gmail.com for information about the reinstatement process and service fees.

The following articles outline the consequences of suspension and the importance of timely reinstatement.

CALIFORNIA LAW REGARDING SUSPENDED CORPORATIONS

Michael G. Kerbs

Law Firm of REID & HELLYER

In California, both the Secretary of State and the Franchise Tax Board may suspend a corporation. The Secretary of State may impose a suspension when a corporation fails to file its required Statement of Information or pay the related filing fees. The statement identifies the corporation’s officers and directors and its agent for service of process. A late filing may also result in a penalty.

The Franchise Tax Board may suspend a corporation for failing to pay required taxes, including the annual minimum franchise tax, or for failing to file required tax returns. Annual returns may be required even when the corporation is not actively conducting business.

Corporate suspension can have substantial consequences. A suspended corporation loses its corporate rights and privileges and may not lawfully conduct business. It may also be unable to initiate or defend a lawsuit. In addition, a suspended corporation that provides goods or services may encounter difficulty enforcing payment because it lacked authority to transact business while suspended.

A suspended California corporation may return to good standing through revival or reinstatement. Until its status is corrected, it is prohibited from transacting business, and contracts entered into during suspension may be voidable at the other party’s request. Limited exceptions may allow the corporation to amend its articles to change its name or apply to the Franchise Tax Board for tax-exempt status.

After receiving suspension, the corporation should act promptly. If the Secretary of State imposed the suspension for failure to file a Statement of Information, the corporation may seek revival by submitting the delinquent filing and paying applicable fees or penalties. If the corporate name remains available, the Secretary of State may issue a Notice of Reviver and notify the Franchise Tax Board. If another entity has taken the name, the corporation may need to amend its Articles of Incorporation before revival.

If the Franchise Tax Board imposed the suspension, reinstatement requires filing all delinquent returns and statements, paying applicable taxes, penalties, interest, and fees, and submitting an application for a Certificate of Revivor. Before issuing the certificate, the corporate name may also need to be cleared with the Secretary of State.

In summary, the consequences of suspension make timely filing and payment essential. Although revival or reinstatement may be available, delay can expose a corporation to the loss of its name, limitations in litigation, and challenges enforcing contracts. Consistent compliance with Secretary of State and Franchise Tax Board requirements helps avoid these risks.