Based on these loopholes in the tax return, the SDAT will issue a proclamation in which the articles of association of a company that has not filed a return “will be annulled, annulled and forfeited, and the powers conferred on the company by law will be declared null, void and void.” Corp. & Assoc. Art. §§ 3-503(d). This effectively means that when a company`s charter expires, the corporation is dissolved by operation of law and ceases to exist as a legal entity. Kroop & Kurland, P.A. v. Lambros, 118 Md.App. 651 (1998). As a legal non-entity, any act of a company during the expiry of its articles of association is considered null and void. Tri-County Unlimited, Inc. v.

Kids First Swim School Inc., Md.App. 191. 613 (2010). This includes bringing an action against a natural or legal person. A company cannot maintain an action to enforce its rights once it is considered a legal non-entity. Atlantic Mill & Lumber Realty Co. v. Keefer, 179 MD 496 (1941). This document has been prepared by Tydings for informational purposes only and does not constitute legal advice. *A charter may also be confiscated due to, among other things, non-payment of taxes. The lessons of this case are clear.

If your business is a Maryland business, it`s extremely important that you keep the company`s charter in good condition. While you may think that ease of resuscitation protects you, as Dual discovered, this is not the case in some circumstances. If you`re a Maryland company filing a lawsuit, even if your attorney isn`t asking for it, make sure your corporate charter is in good condition. If you`re sued by a Maryland company, ask your attorney to check if the plaintiff`s charter is in good condition — you never know when, like Lockheed, you might get lucky. For more information on corporate charters, please contact Mark Dopkin at 410.752.9735 or by email, and for more information on commercial disputes, contact Dan Katz at 410.752.9725 or by email. On October 1, 2001, the President and sole shareholder of Dual, Incorporated (“Dual”) commenced a lawsuit against Lockheed Martin Corporation (“Lockheed”) for the termination of contracts between Dual and Lockheed and Dual and the U.S. Air Force. When the lawsuit was filed, Dual`s corporate charter was forfeited. After relaunching its corporate charter, Dual filed an amended complaint in October 2002. Lockheed applied for dismissal on the ground that the contested acts had taken place in May and June 1999, which meant that the three-year limitation period had expired by June 2002 at the latest. Lockheed argued that although the original complaint was filed on time because Dual`s charter had expired, the filing was void. As the amended complaint was lodged after June 2002, the appeal was therefore time-barred.

The Court of First Instance accepted and dismissed the appeal. The Maryland Court of Appeals reviewed the decision and upheld the verdict. A company can reinstate its charter by correcting its tax reporting deficiencies and then filing articles of revival with the SDAT. Corp. & Assoc. Art. §§ 3-507. The reinstatement of the Charter of the Corporation returns all assets and rights to the Corporation, except for assets or rights that were sold or disposed of when the Charter had expired.

Corp. & Assoc. Art. §§ 3-512. Even if a company effectively becomes a legal person again upon reinstatement of its articles of association, restitutio in integrum will not constitute a valid complaint filed during the expired Charter period. Tri-County Unlimited, 191 Md.App. at 621. A claim filed during the period in which a company is a legal non-entity is considered legally void and its submission does not expire the limitation period for the claim. ID at 622. The court ruled that the original appeal was void because it had been filed by an unorganized organization and, although it was filed within the three-year limitation period, it was not time-barred. It found that with the expiry of the Dual Charter, the company lost all its entrepreneurial powers, including standing to bring an action. However, Dual argued that the claims in its amended appeal, filed after the resumption of its articles, should relate to the date of filing of the original appeal.

While it states that “the reactivation of a corporate charter may retroactively confirm a company`s ability to sue in certain circumstances,” resuscitation does not restore rights lost during the period in which the charter expired. The right to bring an action expired upon expiry of the limitation period during the limitation period. The Court stated clearly and unequivocally that “if a company`s claim is time-barred by the applicable limitation period, that claim will not be revived thereafter if the company`s charter is reinstated.” A Maryland business must file its Personal Declaration of Ownership (Form 1) and pay a $300 fee by April 15 of each year to maintain its charter in good condition. If the tax return is not filed and the fees are not paid, the company is not in good standing, and over time, the State Department of Assessments and Taxation will begin the process of reporting the forfeited company`s charter, making the company a legal non-entity. * All powers of the company, including standing to bring an action, become null and void. However, if the forfeiture is due to the non-filing of the annual return, the charter may be reinstated and the status of the corporation restored by filing the return(s) for each year, paying fees and penalties, and submitting articles of revival.