Do you know what happens if you own a New Jersey corporation, and you fail to file an annual report with the state treasurer for two consecutive years? Your certificate of incorporation can be revoked, and your company loses both its rights to continue transacting its business in New Jersey and all the powers conferred by New Jersey law. That means you lose the right to sue in New Jersey for unpaid amounts due to your company for work you performed, even if it is undisputed that you performed the work.
The New Jersey Appellate Division recently affirmed this principle in the case of E & V Constr. Co., Inc. v Deeper Life Bible Church, N.J. Super. App. Div. (May 1, 2018). In that case, E&V, a construction contractor, filed a lawsuit to recover payments from fefendant, Deeper Life Bible Church, for work E&V performed to build a church for Deeper Life Bible Church pursuant to a contract. The church argued that E&V could not pursue its lawsuit because E&V’s certificate of incorporation had been revoked for failing to file tax returns. The court found that E&V had no legal basis to file the lawsuit until it reinstated its charter.
As a further warning, it is a fourth-degree crime in New Jersey to knowingly operate under a voided corporate charter. And if you attempt to continue the business of a corporation or a limited partnership association after the corporate charter has expired, you may become personally liable for your actions. A court may also find that you did not dissolve the corporation properly and allow the creditors of the corporation to sue you personally. So, this is a very important issue to keep in mind.
Foreign corporations (i.e., corporations organized in states other than New Jersey) hoping to sue in New Jersey for payments owed to them for work performed in the state must also comply with certain statutory requirements, including obtaining a certificate of authority to perform work or transact business in the state. If your company fails to obtain the certificate of authority, or if it is revoked, you you are precluded from filing a lawsuit to seek recovery of payments that may be owed to you for work you performed until you obtain a certificate of authority.
The bottom line? If you are going to do any construction work in New Jersey, make sure your company is properly authorized to do work, has proper calendaring and accounting systems in place to ensure your company timely files its annual report, and pays all applicable taxes to avoid running afoul of these laws that could delay, if not prevent, you from collecting monies rightfully owed to you. Don’t listen to anyone who tells you that letting your company’s charter be revoked insulates you from liability. Pay your fees, file annual reports, and avoid this serious exposure.
If you have any questions about this post or any related matters, please feel free to contact our Construction Law Practice Group.