I am one of 4 shareholders in CA C Corp and only one, the President, is active. He never filed tax returns or paid Franchise Tax Board since 2013 when company was formed. I just found out that he incurred a debt through a credit card processor of $18k and he signed personally although he used the company name for the order. The Corp has been suspended for a few years by the FTB.
There is a chance that the creditor can seek to set aside the protection of a corporation (sometimes known as "piercing the corporate veil") if the company was not capitalized, all corporate formalities were ignored and other factors. There is no 'cookie-cutter" universal response, but I would not assume it cannot happen.
The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
If the shareholders don't have the funds, there is a good chance this will not happen. And I think you can counterclaim against the president, but where were you all when you were supposed to having meetings? I don't think "I didn't know" is going to help.
All of Ms. Straus’ responses posted on Avvo are intended as helpful information, based solely upon the facts stated in the question, and are not to be relied upon as a full or complete legal opinion. It may not be what you wished to hear, and it does not create an attorney-client relationship. Ms. Straus has been licensed to practice law in California for 33 years. Ms. Straus regrets that she does not provide follow up free advice via email. Good luck.
You ask an interesting and complicated question about the aftermath of a corporation that is dissolved by the State for nonpayment of franchise taxes. It's unclear exactly when the corporation was dissolved, when the debt was incurred, and whether the business was conducted after the dissolution. You really need to speak with an experienced Corporate Attorney to discuss your particular facts.
The foregoing discussion does not establish an attorney-client relationship, is qualified by the limited facts presented above, and should not be relied upon as legal advice. To obtain definitive legal advice upon which one can rely necessitates retaining an attorney who is qualified in this particular area of the law.
Matters such as this must be reviewed on a case-by-case basis, as there is no generic answer to suffice. Although the creditor may attempt to pierce the corporate veil, whether he will succeed against unknowing shareholders (shareholder without knowledge as to the unfilled tax returns/franchise taxes/credit card debt) depends upon the specific facts of the case.
I strongly advise you to meet with a local, experienced business/corporate attorney for further insight.
Best of luck.
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