In the event that a corporation in California is dissolved, either voluntarily or involuntarily, the corporation must wind up its affairs. Under Corporation Section 2010(a) the corporation continues to exist for the following purposes:

(1)   Winding up its affairs;

(2)   Prosecuting and defending against claims and causes of action (or suits);

(3)   Dispose of and convey its property;

(4)   Collect and divide its assets;

If a corporation is winding down or is in the process of dissolving, any civil actions in which the corporation is involved, do not abate.  The corporation cannot rely on either process as a mechanism to avoid or stop any civil actions in which it is a party. Any of its undistributed assets are subject to potential recovery as are any insurance assets which can be used to satisfy specific claims.

The corporation itself is not the only party subject to post-dissolution civil litigation.   If assets are distributed to shareholders as part of the dissolution process, shareholders can be sued either (a) to the extent of the pro rata share of their claim or (b) to the extent of the corporate assets distributed to them. But shareholders will not be responsible beyond the total amount of assets that were distributed to them as part of the dissolution process.  So there is a ceiling above which a particular shareholder will not be liable in such a case.

Such civil actions against shareholders of a dissolved corporation must be filed before the earlier of expiration of the statute of limitations for that particular cause of action or four years after the effective date of the dissolution. This provision should give shareholders some expectation as to when they can be free from further liabilities related to the activities of the corporation.

The Wilson Law Firm, a Professional Corporation,  at 1120 Iron Point Rd Suite 100, Folsom, CA 95630 represents shareholders, directors and officers involved in corporate litigation.  Call The Wilson Law Firm, a Professional Corporation at the firm’s office at: (916) 608-8891 to set up an appointment to speak with Attorney Dennis Wilson or visit its website at wilsonlawfirmca.com.

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Corporation Dissolutions under Section 2000 – Part 2
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