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

Allen Matkins
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Allen Matkins

Under the California General Corporation Law a corporation which 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of Appeal decided the case on other grounds, despite characterizing the question  as "fraught with difficulty" in an unpublished portion of its opinion. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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