Don’t Get Ambushed By Administrative Dissolution

“Administrative dissolution” means taking away the rights, powers, and authority of a corporation. Administrative dissolution is an action taken by the administrator overseeing business entities in the state of incorporation, due to the corporation’s failure to comply with certain obligations of the state corporation statute.

“Administrative revocation” means taking away a corporation’s authority to do business in a state in which it had qualified to do business, other than its home state.

The two most common grounds for dissolution or revocation are failure to pay franchise taxes or failure to deliver an annual report within a specified period of time. It happens to thousands of corporations each year, and in many cases the people running the business have no idea it happened and continue conducting business.

Once a corporation is administratively dissolved it is prohibited by statute from engaging in any activities other than those necessary to liquidate its assets and wind up its affairs. An administratively dissolved corporation that continues doing business can run into a variety of legal problems. The actions it takes may be considered void or voidable. The people who act on its behalf may be held personally liable for debts or obligations incurred, and it may be unable to bring a lawsuit or proceeding.

Counsel should be aware of the statutes and case law governing administrative dissolution, administrative revocation and reinstatement for the states in which the corporations they advise are organized and transact business.