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CALIFORNIA CORPORATE & SECURITIES LAW

Corporate Suspension By The California Secretary Of State

In California, a corporation may find its powers, rights and privileges suspended by either the Secretary of State or by the Franchise Tax Board.  Today’s post discusses the two roads to suspension by the California Secretary of State.

The most common cause for suspension is the failure to file the annual information statement required by Corporations Code Section 1502 even though a corporation must be exceedingly neglectful to find itself suspended.  Not only must the corporation have failed to file the annual statement, it must not have filed a statement in the preceding 24 months.  Cal. Corp. Code § 2205(a)  In addition, the Secretary of State must have certified the corporation for penalty pursuant to Corporations Code Section 2204(a).  Under Section 19141 of the Revenue and Taxation Code, the penalty is $250. When these conditions are all met, the Secretary of State is required to provide 60 days notice of the impending suspension.  Cal. Corp. Code § 2205(b).  If the corporation still doesn’t made things right, the Secretary of State is required to provide notice to the Franchise Tax Board and the corporation and the corporation’s powers, rights and privileges will thereupon be suspended, except for the purpose of filing an application for exempt status or amending the articles of incorporation as necessary either to perfect that application or for a new name.  Cal. Corp. Code § 2205(c).

The Secretary of State may also suspend a corporation for failing to reimburse the Secretary of State for an award made from the Victims of Corporate Fraud Compensation Fund.  Cal. Corp. Code § 2293.1.

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