LarryB13 (Arizona)
Posts: 4,099
Posts: 4,099
Posted:
From time to time on this forum we hear about HOA's that were administratively dissolved. Having had some experience with this subject I may be able to offer some insight into what that means.
Administrative dissolution is an action taken by the state against the HOA's corporate entity. The most common reasons for this action is failure to file annual reports and or failure to pay fees. If the HOA was never incorporated then it cannot be administratively dissolved. An incorporated HOA may also dissolve itself but this is not covered here.
When a corporation is administratively dissolved, it does not cease to exist but it is severely limited in what it may do. The board of directors remains in control and may perform those acts necessary to wind down the business of the HOA. The HOA is prohibited from "doing business" while under administrative dissolution. I would interpret this to mean that the HOA cannot levy assessments, file liens arising from debts that arose after the date of dissolution, initiate new foreclosure actions arising from debts that arose after the date of dissolution or enter into new contracts. As part of the winding down process, I believe that the HOA could still act to collect old debts.
Administrative dissolution is not necessarily permanent. Filing the missing annual reports and paying all fees owed to the state may be sufficient to reinstate the corporation. In my state, the corporation commission will reserve the name for a period of five years. If the corporation is not reinstated within five years anyone may take the association's name for their own corporation. I have found no limitations on how many years may pass before seeking reinstatement nor have I found a limitation on how long a corporation may take to wind down its affairs.
There seems to be no requirement that a dissolved corporation dispose of real estate or other property but somehow it would still be required to pay whatever taxes are due without collecting assessments from members.
I am uncertain as to whether dissolution would prevent an election of the board of directors because that could be seen as "doing business." My best guess is that if there was an election and the new board filed whatever it needed to have the corporation reinstated that no one at the corporation commission is going to dispute their authority to do so. It would be up to any dissenters to file a lawsuit in court to challenge the new board's authority.
Corporations are a creation of state legislation and subject to the law of the state where they are incorporated.
Administrative dissolution is an action taken by the state against the HOA's corporate entity. The most common reasons for this action is failure to file annual reports and or failure to pay fees. If the HOA was never incorporated then it cannot be administratively dissolved. An incorporated HOA may also dissolve itself but this is not covered here.
When a corporation is administratively dissolved, it does not cease to exist but it is severely limited in what it may do. The board of directors remains in control and may perform those acts necessary to wind down the business of the HOA. The HOA is prohibited from "doing business" while under administrative dissolution. I would interpret this to mean that the HOA cannot levy assessments, file liens arising from debts that arose after the date of dissolution, initiate new foreclosure actions arising from debts that arose after the date of dissolution or enter into new contracts. As part of the winding down process, I believe that the HOA could still act to collect old debts.
Administrative dissolution is not necessarily permanent. Filing the missing annual reports and paying all fees owed to the state may be sufficient to reinstate the corporation. In my state, the corporation commission will reserve the name for a period of five years. If the corporation is not reinstated within five years anyone may take the association's name for their own corporation. I have found no limitations on how many years may pass before seeking reinstatement nor have I found a limitation on how long a corporation may take to wind down its affairs.
There seems to be no requirement that a dissolved corporation dispose of real estate or other property but somehow it would still be required to pay whatever taxes are due without collecting assessments from members.
I am uncertain as to whether dissolution would prevent an election of the board of directors because that could be seen as "doing business." My best guess is that if there was an election and the new board filed whatever it needed to have the corporation reinstated that no one at the corporation commission is going to dispute their authority to do so. It would be up to any dissenters to file a lawsuit in court to challenge the new board's authority.
Corporations are a creation of state legislation and subject to the law of the state where they are incorporated.