The Walking Dead: Forfeitures and Involuntary Terminations of Filing Entities

Do either of these sound familiar? 1) Your client tells you she wants to terminate her entity and she has heard that if she just ignores the notices from the Comptroller’s officer to file the franchise tax report the state will terminate her company for her. Your client called the Secretary of State’s office, and they told her she needs to file documents with the Comptroller and Secretary of State. The client asks why she should go to all that trouble when the state will terminate the entity for her if she does nothing? or 2) The client’s existence was forfeited for failure to pay franchise taxes in 2011, but the company has continued to operate and has a substantial amount of real and personal property, including intangible property such as receivables. This situation comes to your attention when you filed suit for the company to collect on a promissory note executed in favor of the company in 2010 that became due in 2016. The maker of the note is arguing that the company cannot sue on the note and that the claim is barred because it was not brought within three years after the company’s existence was forfeited. Now that the company’s “forfeited existence” has come to your attention, you and the client have many questions. Can the company collect on the note? Where does the company stand with respect to its assets, rights, and liabilities?Does anyone in the company have any personal liability for liabilities incurred in the business? Can the company reinstate even though it is beyond the three-year post-termination survival period? What effect will a reinstatement have?