A corporation that has filed a notice of intent to dissolve continues its corporate existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs, including:
(Code 1981, §14-2-1405, enacted by Ga. L. 1988, p. 1070, § 1.)
Cross references.- Bringing of actions for collection of income taxes from assets of dissolved corporation, § 48-7-83.
Law reviews.- For comment on Taylor v. R.O.A. Motors, Inc., 108 Ga. App. 635, 134 S.E.2d 486 (1963), as to foreign corporation's amenability to suit after dissolution, see 15 Mercer L. Rev. 498 (1964).
COMMENT
Source: Model Act, § 14.05. This replaces provisions previously found in §§ 14-2-275,14-2-276 &14-2-293.
Section 14-2-1405 provides that beginning dissolution proceedings does not terminate the corporate existence, but simply requires the corporation thereafter to devote itself to winding up its affairs and liquidating its assets; after filing a notice of intent to dissolve, the corporation may not carry on its business except as may be appropriate for winding up.
The Code uses the term "dissolution proceedings" in the specialized sense described above and not to describe the final step in the liquidation of the corporate business. The term "dissolution proceedings," as used in Sections 14-21-1404 - 14-2-1406, and its equivalent "in dissolution," as used in Section 14-2-1407, are taken from former Sections 14-2-278 - 14-2-281, and refer to the process of winding up. Thus Article 14 dissolution proceedings do not have any of the characteristics of common law dissolution, which treated the corporate dissolution as analogous to the death of a natural person and abated lawsuits, vested equitable title to corporate property in the shareholders, imposed the fiduciary duty of trustees on directors who had custody of corporate assets, and revoked the authority of the registered agent.
Cross-References Administrative dissolution, see § 14-2-1420 et seq. Amendment of bylaws, see Article 10, Part 2. Claims against dissolved corporation, see §§ 14-2-1406 &14-2-1407. Close corporations, dissolution, see § 14-2-943. Deposit with Department of Administrative Services, see § 14-2-1440. Directors: election, see § 14-2-803; removal, see §§ 14-2-808 &14-2-809. Resignation, see § 14-2-807; standards of conduct, see §§ 14-2-830 &14-2-831; terms, see § 14-2-805. Dissolution by: board of directors and shareholders, see § 14-2-1402; incorporators or initial directors, see § 14-2-1401; shareholders of statutory close corporation, see § 14-2-933. Distribution, see § 14-2-640. Effective date of dissolution, see § 14-2-1408. Judicial dissolution, see § 14-2-1430 et seq. Judicial dissolution of statutory close corporations, see § 14-2-943. Officers: appointment, see § 14-2-840; removal, see § 14-2-843; resignation, see § 14-2-843; standards of conduct, see § 14-2-842. "Proceeding" defined, see § 14-2-140. Quorum requirements: board of directors, see § 14-2-824. Shareholders, see §§ 14-2-725 &14-2-726. Revocation of dissolution proceedings, see § 14-2-1404. Service of process on registered agent, see § 14-2-504. Voting requirements: directors, see § 14-2-824; shareholder, see §§ 14-2-725 &14-2-726.
JUDICIAL DECISIONS
Editor's notes.
- In light of the similarity of the statutory provisions, decisions under former Code 1933, § 22-1210 and former Code Section 14-2-293, which was repealed by Ga. L. 1988, p. 1070, § 1, effective July 1, 1989, are included in the annotations for this Code section.
Demand or cause of action not extinguished by dissolution.
- If defendant insurance company were dissolved, its dissolution would not operate to extinguish the demand or cause of action against it in this state. Manufacturing Lumbermen's Underwriters v. South Ga. Ry., 57 Ga. App. 699, 196 S.E. 244 (1938) (decided under former Code 1933, § 22-1210).
Dissolution did not prohibit an accounting firm from continuing a lawsuit to reclaim possession of certain corporate assets alleged to have been misappropriated. Crews v. Wahl, 238 Ga. App. 892, 520 S.E.2d 727 (1999).
Effect of dissolution.
- An administratively dissolved corporation lacked the capacity to bring a federal antitrust action because the two-year limitation period for reinstatement and for the initiation of any action by a dissolved corporation had expired. Gas Pump, Inc. v. General Cinema Beverages of N. Fla., Inc., 263 Ga. 583, 436 S.E.2d 207 (1993).
Substitution of parties refused.
- In a complicated antitrust case, when the president and sole shareholder moved to be personally substituted for the dissolved corporation, the court properly refused substitution because the shareholder's participation had been, and would have continued to be, highly disruptive of the orderly administration of the litigation. National Indep. Theatre Exhibitors, Inc. v. Buena Vista Distribution Co., 748 F.2d 602 (11th Cir. 1984), cert. denied, 471 U.S. 1056, 105 S. Ct. 2120, 85 L. Ed. 2d 484 (1985); 474 U.S. 1013, 106 S. Ct. 544, 88 L. Ed. 2d 473 (1985) (decided under former § 14-2-293).
In distress warrant proceedings, if distress warrant was issued and levied on corporate properties prior to the order of the superior court dissolving the corporation, the suit did not abate, but the corporate existence continued to the extent that the action still could be prosecuted against and defended by and in the name of the corporation. Evans v. Fort Valley Motor Co., 52 Ga. App. 237, 183 S.E. 96 (1935) (decided under former Code 1933, § 22-1210).
Former Code 1933, § 22-1210 (see now O.C.G.A. § 14-2-1405) applied to foreign corporations. Taylor v. R.O.A. Motors, Inc., 108 Ga. App. 635, 134 S.E.2d 486 (1963) (decided under former Code 1933, § 22-1210).
Former Code 1933, § 22-1210 (see now O.C.G.A. § 14-2-1405) did not apply to foreign insurance corporations which have been dissolved and are in liquidation. Short v. State, 235 Ga. 394, 219 S.E.2d 728 (1975) (decided under former Code 1933, § 22-1210).
Protective scheme for collection of claims against foreign corporations.
- The statute providing for prosecution of pending suits after the dissolution of a foreign corporation is part of the general scheme of Georgia law to protect Georgia citizens in the collection of just claims against foreign corporations which are dissolved and which have their principal assets in another state. Manufacturing Lumbermen's Underwriters v. South Ga. Ry., 57 Ga. App. 699, 196 S.E. 244 (1938) (decided under former Code 1933, § 22-1210).
Ability to pursue litigation.
- Trial court erred in denying the seller's motion to dismiss the dissolved corporation's renewal action, as that action was filed more than two years after the dissolved corporation was dissolved and applicable statutory law only gave the dissolved corporation two years from the time of dissolution to file suit, regardless of whether that suit was an original action or was a renewal action filed after the original action had been voluntarily dismissed. Deere & Co. v. JPS Dev., Inc., 264 Ga. App. 672, 592 S.E.2d 175 (2003).
Continued existence of corporation.
- Corporation continued to exist as a corporate entity because an attorney hired by the debtor to represent the corporation in the sale of real property, who was unaware of the bankruptcy and tendered the sale proceeds to the debtor, did not owe a fiduciary duty to the bankruptcy trustee or other corporate shareholders; dissolution of the corporation did not allow disregard of the entity under O.C.G.A. § 14-2-1405. Anderson v. Patel (In re Kataria), Bankr. (Bankr. N.D. Ga. Apr. 5, 2006).
Cited in Southern Land, Timber & Pulp Corp. v. United States, 322 F. Supp. 788 (N.D. Ga. 1970); Jones v. Citizens & S. Nat'l Bank, 231 Ga. 765, 204 S.E.2d 116 (1974); Rosing v. Dwoskin Decorating Co., 141 Ga. App. 617, 234 S.E.2d 128 (1977); Boxwood Corp. v. Berry, 144 Ga. App. 351, 241 S.E.2d 297 (1977); Robert B. Vance & Assocs. v. Baronet Corp., 487 F. Supp. 790 (N.D. Ga. 1979); Gas Pump, Inc. v. General Cinema Beverages of N. Fla., Inc., 982 F.2d 478 (11th Cir. 1993); Exclusive Properties, Inc. v. Jones, 218 Ga. App. 229, 460 S.E.2d 562 (1995).
RESEARCH REFERENCES
ALR.
- Power of corporation after expiration or forfeiture of its charter; effects of dissolution, 97 A.L.R. 477.
Dissolution of corporate lessee as affecting lease and rights and liabilities incident thereto, 147 A.L.R. 360.
Dissolved corporation's power to participate in arbitration proceedings, 71 A.L.R.2d 1121.
Similarity of ownership or control as basis for charging corporation acquiring assets of another with liability for former owner's debts, 49 A.L.R.3d 881.
Products liability: liability of successor corporation for injury or damage caused by product issued by predecessor, 66 A.L.R.3d 824.
Availability of and time for bringing action against former director, officer, or stockholder in dissolved corporation for personal injuries incurred after final dissolution, 20 A.L.R.4th 414.
Negligence, inattention, or professional incompetence of attorney in handling client's affairs in matters involving formation or dissolution of business organization as ground for disciplinary action - modern cases, 63 A.L.R.4th 656.
Liability of shareholders, directors, and officers where corporate business is continued after its dissolution, 72 A.L.R.4th 419.