A corporation is a legal entity that is separate and distinct from its owners. The corporate identity is created when incorporation papers are filed and approved by the state of California. When the corporation is dissolved, it no longer exists as an entity. This can make it difficult to make claims against the corporation after it has gone through the formal dissolution process. The corporate form generally protects owners and investors and limits their losses to the money that they invested into the business. As a result, someone trying to collect a judgment against a company that has closed usually cannot go after its owners.
If you have a judgment against an active corporation, you can enforce the judgment by going after business assets. When the corporation decides to dissolve, it is also possible to make a claim and try to obtain money as part of the process of the business winding up its affairs. Once the corporation has dissolved, however, it becomes more difficult to try to collect on a judgment. While it is challenging, however, it is not always impossible to collect a judgment against a dissolved corporation. Your ability to collect will depend upon the specific circumstances. An experienced San Diego business lawyer at Sepahi Law Group, APC can review your situation, advise you of your options and assist you in taking all available steps to collect a judgment against a dissolved corporation.
How to Collect a Judgment Against a Dissolved Corporation
In California, causes of action against a dissolved corporation can be enforced against:
- The dissolved corporation, if it has undistributed assets available to satisfy claims.
- Shareholders, if assets of the dissolved corporation have been distributed to the shareholders.
The California Corporations Code section 2011 makes clear that insurance assets belonging to the dissolved corporation can be used to satisfy outstanding claims. When corporate assets are distributed to shareholders as a part of the process of dissolving the corporation, it is possible to bring an action against the shareholders when trying to collect a judgment against a dissolved corporation. However, the potential liability of shareholders is limited. The shareholders total liability cannot exceed the amount of corporate assets that the shareholder received as part of the dissolution process.
There is a limited period of time in which you may try to enforce a judgment against a dissolved corporation. In general, any lawsuit against a shareholder to try to recover assets received during the dissolution process has to be filed within four years of the time that the corporation was dissolved. The lawsuit must also be brought within the statute of limitations that applies to the underlying legal action. It is important to act within the time limit to try to enforce the judgment or any efforts to collect your funds may be time-barred.
An experienced San Diego business lawyer can assist with the process of exploring options to collect a judgment against a dissolved corporation. Do not hesitate to contact Sepahi Law Group, APC for help taking the necessary legal steps to get the money you deserve.