October 27, 2021

Volume XI, Number 300

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Why A Dissolved Corporation May Sue While A Suspended Corporation May Not

Under the California General Corporation Law a corporation that is dissolved nevertheless continues to exist for the purpose, among others, of prosecuting actions.  Cal. Corp. Code § 2010(a).   Further, no action to which a dissolved corporation is a party abates by reason of the corporation's dissolution.  Cal. Corp. Code § 2010(b).   Matters are quite different when a corporation is suspended rather than dissolved.   Under the Revenue & Taxation Code, a corporation may be "suspended" for failure to pay taxes.  Cal. Rev. & Tax. Code § 23301.   A suspended corporation may be revived but during its period of suspension, it may not prosecute or defend an action, seek a writ of mandate, appeal from an adverse judgment, or renew a judgment obtained before suspension.  Center for Self-Improvement & Community Development v. Lennar Corp., 173 Cal. App. 4th 1543, 1552, 94 Cal. Rptr. 3d 74, 79-80 (2009) (citing Grell v. Laci Le Beau Corp., 73 Cal.App.4th 1300, 1306, 87 Cal. Rptr. 2d 358 (1999)).

A nettling question arises when a suspended corporation subsequently dissolves.  When this happens does Corporations Code Section 2020 trump Revenue & Taxation Code Section 23301?   To prevent any murmurs of dubiety about the likelihood of such an event, I hasten to point out that this sequence actually occurred in Pulte Homes Corp. v. Williams Mechanical, Inc., 2 Cal. App. 5th 267, 206 Cal. Rptr. 3d 244 (2016).   Unfortunately, I cannot report an answer because the Court of Appeal decided the case on other grounds, despite characterizing the question as "fraught with difficulty" in an unpublished portion of its opinion. 

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 235
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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