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Current Developments in the Commercial Divisions of the
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Posted: June 29, 2015

Corporation’s Payment of Back Taxes Retroactively Validated Contract Executed During Period of Delinquency

On June 2, 2015, Justice Singh of the New York County Commercial Division issued a decision in Exedus Contracting Corp. v. P.C. Consulting Mgmt. Corp., ruling that a corporation’s payment of overdue franchise taxes retroactively validated a contract it executed at a time when it “was dissolved by proclamation of the New York Department of State” for failure to pay the taxes. The Court explained that the plaintiff’s payment of the back taxes “resulted in the retroactive validation of th[e] []contract,’ thus permitting the plaintiff to sue for breach:

Once back taxes are paid, the corporation is reinstated to de jure status nunc pro tunc and its contracts entered into during the period of delinquency would be retroactively validated. By statute, the corporate powers, rights, duties and obligations are reinstated nunc pro tunc, as if such proclamation of dissolution had not been made or published.

(Citations omitted.)

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