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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: February 26, 2019

Dissolved Corporation Can Bring Claim as Part of its Winding Up

On February 8, 2019, Justice Borrok of the New York County Commercial Division issued a decision in A&B Deli Inc. v. 251 Sixth Ave., LLC, 2019 NY Slip Op. 30289(U), holding that a dissolved corporation could bring a claim as part of its winding up, explaining:

The Defendant argues that the action must be dismissed because the Plaintiff lacks legal capacity to commence this action because the Plaintiff was dissolved on February 10, 2017. The Court does not agree. Although it is true that, once dissolved, a corporation does not have the legal capacity to commence an action unless it is necessary to wind up the corporation’s affairs, in the course of winding up its affairs, a dissolved corporation may prosecute an action to recover damages sustained prior to its dissolution. Although the BCL does not provide a specific time limit pursuant to which a corporation must wind up its affairs, winding up a corporations affairs should proceed within a reasonable timeframe. Simply put, the Plaintiff commenced this action in 2018 and began its dissolution in 2017. The action appears to be a winding up of the Plaintiffs affairs to recover overbilled real estate tax escalation. Accordingly, the Plaintiff has the legal capacity to bring this action.

(Internal quotations and citations omitted).

Corporations and similar business entities are created by law and thus their ability (or inability) to sue or take other actions is set by law. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding whether a business entity has the power to bring suit or take other actions.

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