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How Your Standing with the Florida Division of Corporations Can Impact Your Litigation Action(s)

There are many things that may represent hurdles along the path of your lawsuit. While problems with your entity’s standing with the state’s Division of Corporations may represent a bump along your path, it does not have to be a permanent roadblock. With the help of skilled South Florida business counsel, these problems can be addressed and corrected, and you can continue your pursuit of your case in court.

There are many reasons why an entity might not be in good standing with the Division of Corporations. Administrative dissolution can occur for a variety of reasons, with some being as procedural as a failure to file an annual report. One reason why this might happen is if the entity is ceasing activity and winding down.

A case that originated in the Tampa area was an example. A fence installation business sued another business for civil theft, conversion and replevin. The defendant filed a counterclaim against the plaintiff.

The case was set for trial on Nov. 3, with a pretrial conference on Oct. 26. On the last business day before the pretrial conference, the plaintiff filed a motion arguing that the defendant was legally forbidden from pursuing its counterclaim or mounting a defense against the plaintiff’s claims. The reason? Two years earlier, the defendant had been administratively dissolved by the Division of Corporation.

The defendant argued that it could proceed in litigation as part of its “winding up” process. In the alternative, the defense asked the judge to grant a recess of a few hours so that it could file its annual reports, pay the fees, and be restored to good standing with the Division of Corporations. The trial court ruled for the plaintiff and, allowing the plaintiff to proceed at trial without the participation of the defendant, the outcome was obvious. The plaintiff succeeded on its claims and the defendant failed on its counterclaim.

The defendant, however, succeeded on its appeal. One of the key things that the appeals court highlighted in ruling for this defendant was the well-established concept that, in some specific situations, a trial court’s denial of a party’s motion for a continuance may create such a profound injustice that it “outweighs the policy of not disturbing the trial court’s ruling.”

In this case, if the trial court would have granted the defendant the very short continuance it sought, the defendant could have gotten reinstated with the Division of Corporations. A reinstated corporation is treated as if dissolution never occurred, which would have meant that the defendant could have participated in the trial fully and completely.

Further driving the point home, the appeals court quoted from a 2018 Third District Court of Appeal opinion, where that Miami-based court stated that, when an entity’s standing with the Division of Corporations is brought up, the proper tactic is for the trial court to stop the proceeding for a short while to allow the entity to achieve compliance with the Division. Only when an entity has failed “to comply within a reasonable time may sanctions such as dismissal be considered,” that court stated. In other words, an entity’s administrative dissolution does not have to be a complete impediment to pursuing, and succeeding in, civil litigation.

Your entity’s legal action will likely come with its share of twists and turns. To best safeguard your interests, talk to the experienced South Florida business attorneys at Stok Kon + Braverman. Our legal team has been providing clients with reliable representation and effective strategies for achieving positive results for many years.

Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.

More blog posts:

Uncertainty Surrounding the Identity of the Correct Landlord Allows St. Petersburg Tenant to Avoid Summary Judgment, Florida Business Lawyers Blog, Sept. 8, 2017

Dismissal as a Penalty in Your Florida Commercial Litigation Case, Florida Business Lawyers Blog, March 14, 2017