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Question 65

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Question: Once you dissolve a Corporation, do everything right and recieve notice from the Secretary of State, that your company is dissolved, can your company or corperate offices, be sued for anything once your company no longer exsists? And is there a law on the books that states weather you can or can't be sued after the fact?
Submitted by: Susan Bolen, California 08/26/2009.

Response: Although the answer varies from state to state, the general response is "yes" a corporation can be sued after it has been dissolved within certain statutory limitations. I'll address California as you did not give the state of incorporation but list California as your state of residence. The pertinent statute is California Corporations Code section 2011, which provides in pertinent part:
      (a) (1) Causes of action against a dissolved corporation, whether arising before or after the dissolution of the corporation, may be enforced against any of the following:
  1. Against the dissolved corporation, to the extent of its undistributed assets, including, without limitation, any insurance assets held by the corporation that may be available to satisfy claims.
  2. If any of the assets of the dissolved corporation have been distributed to shareholders, against shareholders of the dissolved corporation to the extent of their pro rata share of the claim or to the extent of the corporate assets distributed to them upon dissolution of the corporation, whichever is less.
A shareholder's total liability under this section may not exceed
the total amount of assets of the dissolved corporation distributed
to the shareholder upon dissolution of the corporation.
      (2) Except as set forth in subdivision (c), all causes of action against a shareholder of a dissolved corporation arising under this section are extinguished unless the claimant commences a proceeding to enforce the cause of action against that shareholder of a
dissolved corporation prior to the earlier of the following:
  1. The expiration of the statute of limitations applicable to the cause of action.
  2. Four years after the effective date of the dissolution of the corporation.
(Emphasis Added.)
So both the corporation and the shareholders can be sued after dissolution; however, the cause of action is limited to recovery of assets still held by the corporation after dissolution or corporate assets distributed to the shareholders after dissolution. In the case of a cause of action against a shareholder, the outside statute of limitations is four years after dissolution (with a few exceptions).
Posted By: JJR 09/02/2009.


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