The judge concluded correctly that E&V’s failure to reinstate its revoked corporate charter precluded E&V from filing this action.
E&V, a construction contractor filed a complaint against Deeper Life Bible Church (Bible Church), and several individual defendants. E&V alleged it contracted with Bible Church to build a Church building, that it performed the work, but Bible Church failed to pay the balance due. E&V sought final payment from Bible Church and the individual defendants.
Several years ago, E&V lost its corporate charter in NJ for failing to file tax returns and quarterly withholding reports. Now being formally unauthorized to do business in NJ with a revoked certificate of incorporation, E&V improperly entered into the construction contract to build the church. The church argued the revocation of the charter precluded E&V from operating its business. They filed a motion to dismiss the lawsuit. The motion was granted and the case was dismissed.
Why the Outcome?
The judge considered the question of whether E&V had authority as a corporation with a revoked charter to enter into the construction contract when it filed its complaint. According to the court, the NJ State Treasurer has the authority to revoke a certificate of incorporation under certain circumstances. N.J.S.A. 14A:4-5(5) governs the revocation and states in part that
In the event a domestic corporation fails to file an annual report for two consecutive years with the State Treasurer, the State Treasurer may issue a proclamation declaring that the certificate has been revoked and that all powers conferred by law upon it shall thereafter be inoperative and void.
The consequence of that revocation is severe, but a corporation may seek reinstatement of the revocation upon
- Payment by the corporation of all fees due to the State Treasurer and
- Certification of the Director of the Division of Taxation that no cause exists for revocation of the corporation’s certificate of incorporation or certificate of authority. N.J.S.A 14A:4-5(7).
As a result, the corporation may continue its powers and resume its business so long as it complies with the conditions of reinstatement.
In response to the motion to dismiss, E&V certified that it was “diligently working” to restore the corporation charter by preparing “delinquent corporate income tax returns and quarterly employer withholding reports,” and that it was “working with its accountant to prepare and file the missing tax returns and quarterly reports.” But E&V failed to comply with N.J.S.A. 14A:4-5(7). So the Appellate Court agreed with the judge that E&V was without a legal basis to file this lawsuit until it reinstated its charter. Of course, reinstatement generally relates back to the date of the revocation of the certificate of incorporation. But until it is reinstated, it is undisputed that the charter remains revoked.
Understanding that E&V was unable to conduct business, it then sought permission to file a second complaint to designate E&V Construction Co., Inc. as a new plaintiff.
Here again, E&V lost. E&V was not a dissolved corporation. A dissolved corporation occurs if the Secretary of State revokes a certificate of incorporation for nonpayment of taxes or for failure to file annual reports. N.J.S.A. 14A:12-1(1)(g). NJ imposes substantial restrictions on what a dissolved corporation can do. “A dissolved corporation can continue its corporate existence but shall carry on no business except for the purpose of winding up its affairs”. N.J.S.A. 14A:12-9(1). Thus, the court rejected the complaint.
To discuss your NJ business and/or corporation matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Business Law Attorney