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Current Developments in the Commercial Divisions of the
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Posted: August 29, 2016

When Corporate Dissolution is Annulled it Retroactively Validates Contracts

On August 19, 2016, Justice Kornreich of the New York County Commercial Division issued a decision in 115 W. 27th St. Associates LLC v. Perez, 2016 NY Slip Op. 31588(U), holding that a corporate officer that conducted business in the name of the corporation after it was dissolved was shielded from liability by annulling the dissolution, explaining:

Under New York law, it is well settled that one who signs a contract on behalf of a dissolved corporate entity is personally liable under the contract unless the contract was necessary to wind up the company’s affairs. As a result, a person who purports to act on behalf of a dissolved corporation is personally responsible for the obligations incurred.

However, as a general rule, when a dissolution is annulled, the entity’s corporate status is reinstated nunc pro tunc, and contracts entered into during the period of dissolution are retroactively validated. Moreover, an individual who has no actual knowledge of the dissolution, and thus has not fraudulently represented the corporate status of the dissolved entity, will not be held personally liable for the obligations undertaken by the entity while it was dissolved.

(Internal quotations and citations omitted).

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