Effect of Non-Use of Corporate Charter (Section 21, Revised Corporation Code)

Summary

Attorney Marie Chris Bataan's video script explores the consequences for corporations that fail to formally organize or commence business within five years of receiving their certificate of incorporation. As per Section 21 of the Revised Corporation Code, such corporations risk having their certificate revoked, losing their corporate status and powers. The script also discusses the implications for corporations that become inactive for five consecutive years, facing potential delinquent status and a two-year window to resume operations and comply with SEC requirements to avoid revocation.

Takeaways

• 📜 The video discusses the consequences for corporations that fail to formally organize after obtaining a certificate of incorporation.
• 🕒 According to Section 21 of the revised corporation code, a corporation has five years to formally organize and commence business from the date of incorporation.
• 📝 If a corporation does not start its business within the five-year period, its certificate of incorporation is considered revoked the day after the period ends.
• 🏢 Formal organization involves filing bylaws, electing a board of directors, establishing a principal office, and other activities to transact legitimate business.
• ❌ A revoked certificate of incorporation means the state withdraws the corporation's legal personality and powers granted at the time of incorporation.
• 📅 The five-year period starts from the date the certificate of incorporation was issued, and non-compliance results in automatic revocation.
• 🔄 However, if a corporation has commenced business but then becomes inactive for five consecutive years, it may be placed under delinquent status by the commission.
• 🚫 Delinquent corporations are given a two-year period to resume operations and comply with the commission's requirements to avoid revocation.
• 📋 Compliance includes meeting all prescribed requirements set by the Securities and Exchange Commission to maintain the corporation's status.
• 🛑 Failure to comply within the two-year period results in the revocation of the corporation's certificate of incorporation.
• 🏛 Creating a corporation is a privilege, and maintaining its status requires substantial compliance with the state's and the commission's regulations.

Q & A

What is the main focus of Attorney Marie Chris Bataan's YouTube channel?

The main focus of Attorney Marie Chris Bataan's YouTube channel is to simplify the law by discussing concepts and principles of law in under 10 minutes.

What happens to a corporation that fails to formally organize after receiving a certificate of incorporation?

If a corporation fails to formally organize and commence its business within five years from the date of incorporation, its certificate of incorporation is deemed revoked as of the day following the end of the five-year period.

What are some activities that constitute the formal organization or commencement of a corporation's business?

Formal organization or commencement of a corporation's business includes filing the bylaws with the Securities and Exchange Commission, electing their board of directors, establishing a principal office or principal place of business, and any other activity that enables the corporation to transact legitimate business or accomplish its purpose.

What does it mean when a corporation's certificate of incorporation is revoked?

When a corporation's certificate of incorporation is revoked, it means that the state is stripping the corporation of its legal personality and the powers it was granted when the certificate was issued.

Can a corporation become a de facto corporation if its certificate of incorporation is revoked?

No, a corporation cannot become a de facto corporation if its certificate of incorporation is revoked because a de facto corporation requires a valid certificate of incorporation.

What is the consequence for a corporation that has commenced its business but becomes inoperative for at least five consecutive years?

If a corporation has commenced its business but becomes inoperative for at least five consecutive years, the Securities and Exchange Commission may place the corporation under delinquent status after due notice and hearing.

What is the status of a corporation that has been placed under delinquent status by the Securities and Exchange Commission?

A corporation that has been placed under delinquent status is referred to as a delinquent corporation and must comply with the requirements prescribed by the Securities and Exchange Commission to continue its operations.

How long does a delinquent corporation have to resume operations and comply with the requirements set by the Securities and Exchange Commission?

A delinquent corporation has a period of two years to resume operations and comply with all requirements prescribed by the Securities and Exchange Commission.

What happens if a delinquent corporation fails to comply with the requirements and resume operations within the two-year period?

If a delinquent corporation fails to comply with the requirements and resume operations within the two-year period, its certificate of incorporation will be revoked.

What is the significance of the five-year period mentioned in the script for a corporation's operations?

The five-year period is significant because it is the time frame within which a corporation must formally organize and commence its business after receiving its certificate of incorporation. Failure to do so results in the revocation of the certificate.

Why is it important for a corporation to comply with the requirements set by the Securities and Exchange Commission?

It is important for a corporation to comply with the requirements set by the Securities and Exchange Commission to maintain its corporate status and privileges granted by the state, as failure to comply can lead to the revocation of the corporation's certificate of incorporation.