Tuesday, September 8, 2009

Do you know if your association has been administratively dissolved?

Sometimes new boards take over with no continuity from a prior board or a prior manager and things fall through the cracks. One of these forgotten items can be the association's annual corporate report and fee.

The annual corporate report must be filed with the Division of Corporations each year in order to maintain an "active" corporate existence. This report must be filed each year whether there are changes in the officers, registered agent and other information or not. The annual corporate report is not a financial statement; it is a document that the Division of Corporations uses to confirm their corporate records.

The annual corporate report must be filed by May 1st each year. The fee which must accompany the report for not-for-profit corporations (community associations) is $61.25. If paying by check or money order the payment voucher or check or money order must be mailed and postmarked on or before May 1st.

If your association fails to timely file its annual corporate and pay the report filing fee, after some time your corporation will be administratively dissolved resulting in the following:

1. Foreclosing lenders are not required to join the association as defendants in their foreclosure actions (this means the association will be unaware of these actions to their detriment);

2. The members of the association will not enjoy the typical protections from liability afforded under a corporate existence; and

3. A director, officer or agent of a dissolved corporation who knows that the corporation has been administratively dissolved but still continues to act in its name is personally liable for the debts, obligations and liabilities of the corporation.

Sometimes associations function for years without knowing that their corporate existence has been dissolved. Reinstating the corporate entity can cost thousands of dollars at that point. There is no reason to ever get into this predicament. Make sure your board tasks someone (either an officer or the property manager) to ensure that the corporate annual report is filed and the filing fee paid each year on time.

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