INVOLUNTARY DISSOLUTION OF CORPORATIONS FOR FAILURE TO PAY ANNUAL LICENSE FEES.

OFFICES AND OFFICERS ‑- STATE ‑- SECRETARY OF STATE ‑- CORPORATIONS ‑- INVOLUNTARY DISSOLUTION OF CORPORATIONS FOR FAILURE TO PAY ANNUAL LICENSE FEES. 

(1) The earliest date upon which the Secretary of State may send a notice of delinquency to a corporation failing to pay its annual license fee is the first day of delinquency; i.e., the day following the last day permitted for timely payment.

(2) The minimum amount of time which must elapse before the Secretary of State is to administratively dissolve the corporation for nonpayment of its annual license fee is a period of sixty-five days from the date of mailing the notice of delinquency referred to in RCW 23A.28.125. 

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                                                               December 13, 1983

 Honorable Ralph Munro
Secretary of State
Legislative Building
Olympia, WA 98504

 Cite as:  AGO 1983 No. 30                                                                                                                

 Dear Sir:

             By letter previously acknowledged [acknowledged] you requested our opinion on the following questions relating to the administrative dissolution of corporations:

             "1. What is the earliest time at which the state may send a notice of delinquency to a corporation failing to pay its annual fee?

             "2. What is the minimum time which must elapse before the state may administratively dissolve a corporation?

             "3. What are the specific time periods required for the notice and any subsequent dissolution, assuming the corporation does not respond to any delinquency notice?"

             We respond to the foregoing questions in the manner set forth in our analysis.

              [[Orig. Op. Page 2]]

                                                                     ANALYSIS

             The involuntary dissolution of domestic business corporations in this state for nonpayment of their annual license fees has been the subject of several legislative enactments in recent years.  Under the Washington Business Corporation Act, chapter 53, Laws of 1965, such corporations could be involuntarily dissolved only by court order.   One of the listed grounds for involuntary dissolution was failure by the corporation ". . . to pay its annual license fee when the same becomes due and payable; . . ."  See, § 96, chapter 53, Laws of 1965 (thereafter codified as RCW 23A.28.130).

             In 1969, however, the legislature deleted that ground for involuntary dissolution from RCW 23A.28.130.  The legislature also redefined the annual license fee itself as a fee for the privilege of doing business rather than, as before, a tax on the privilege of existing as a corporation. Thirdly, it established a self-executing involuntary dissolution process for nonpayment of the fee.  See, § § 1, 2 and 4 of chapter 92, Laws of 1969, 1st Ex. Sess.  Section 4 of chapter 92 (codified as RCW 23A.40.075) read, in material part, as follows:

             ". . .

             "Every domestic corporation which shall fail for three consecutive years to acquire an annual license for the privilege of doing business in this state shall cease to exist as a corporation on the third anniversary of the date it was last licensed to do business in this state . . .

             ". . ."

             That provision, in turn, was repealed some eleven years later by § 16, chapter 99, Laws of 1980 and was replaced by § 10 of the same act (RCW 23A.28.125) which read as follows:

             "(1) If a domestic corporation fails for a period of three consecutive years either to pay the annual license fee required by RCW 23A.40.060, or to file the annual report required by RCW 23A.08.480, it shall be dissolved and cease to exist on the second anniversary of the date of its first failure either to file an annual report or to pay an annual license fee.  The secretary of state shall remove the names of all corporations so dissolved from the list of active corporations.

              [[Orig. Op. Page 3]]

"(2) Prior to such dissolution the corporation's existence will not be affected nor will any of its rights, duties and obligations be impaired, except as otherwise provided in RCW 23A.44.120."

             Two years later, however, the law was changed once again.  By § 39, chapter 35, Laws of 1982, the legislature deleted subsection (1) of the 1980 version of RCW 23A.28.125,supra, and replaced it with a new subsection (1).  The deleted version had provided for a self-executing, automatic dissolution of a domestic corporation which ". . . fails for a period of three consecutive years . . . to pay the annual license fee . . ."  The 1982 version provided (in pertinent part) that:

             "A domestic corporationshall be dissolved by the secretary of state upon the conditions prescribed in this section when [inter alia]:

             "(a) The corporation has failed . . . to pay the annual license fee required by this title, and a period of nine months has expired since the last day permitted for timely . . . payment, without the corporation having . . . made payment of all required fees and penalties;

             ". . ."  (Emphasis supplied)

                         In addition, by subsection (2) of the same 1982 amendment, the legislature set forth the procedures to be followed by the Secretary of State in effectuating such a dissolution.

             That 1982 provision, in turn, was thereafter amended, a year later, by § 1, chapter 32, Laws of 1983 which precipitated your present opinion request.  For ease in comparing the resulting, current, version of the law with the 1982 version, we here set forth that 1983 amendatory provision in bill form as follows:

            "(1) A domestic corporation shall be administratively dissolved by the secretary of state upon the conditions prescribed in this section when:

             "(a) The corporation has failed to file ((or complete)) the annual report required by this title or to pay the annual license fee required by this title, and a period of ((nine months))sixty days has expired since the last day permitted for timely filing or payment, without the  [[Orig. Op. Page 4]] corporation having filed or made payment of all required fees and penalties;

             ". . .

             "(2) Prior to dissolving a corporation under subsection (1)((a)) of this section the secretary of state shall give the corporation written notice of the corporation's delinquency or omission ((no later than the end of the sixth month of delinquency,)) by first class mail, postage prepaid, addressed to the corporation's registered ((office, or, if there is no registered office, to the)) agent. . .  Notice is deemed to have been given five days after the date deposited in the United States mail correctly addressed with correct postage affixed.  The notice ((shall identify the delinquency or omission and)) shall inform the corporation that the corporation shall be ((involuntarily)) administratively dissolved at the expiration of ((the ninth month of delinquency or omission)) sixty days following the date the notice is deemed to be given, unless the corporation corrects the delinquency or omission((.  If the ninth month expires and no correction of the delinquency or omission has been made, the secretary of state shall issue a certificate of involuntary dissolution))within the sixty-day period.

             ". . ."

             Against this backdrop we now turn to your questions.

             Question (1):

             Your first question, repeated for ease of reference asks:

             "What is the earliest time at which the state may send a notice of delinquency to a corporation failing to pay its annual fee?"

             As was true under the 1982 version of the statute, the current text of RCW 23A.28.125(2) does not require any particular minimum time period to elapse following the due date for payment‑-before the Secretary of State may send a notice of delinquency to a corporation based upon its failure to have paid the annual license fee.  There is, however, no basis or justification under the law for sending out a notice of prospective involuntary dissolution on  [[Orig. Op. Page 5]] that ground until the delinquency has occurred.

             It is therefore our opinion, in direct answer to your first question, that the earliest date upon which the Secretary of State may send a notice of delinquency to a corporation failing to pay its annual license fee is the first day of delinquency.  This is the same as, in the words of RCW 23A.28.125(1), supra, the day following ". . . the last day permitted for timely . . . payment, without the corporation having . . . made payment of all required fees and penalties; . . ."

             Question (2):

             Your second question asks:

             "What is the minimum time which must elapse before the state may administratively dissolve a corporation?"

             As amended by sec. 1, chapter 32, Laws of 1983, supra, the current version of RCW 23A.28.125(2) now says:

             ". . . The notice shall inform the corporation that the corporation shall be administratively dissolved at the expiration of sixty days following the date the notice is deemed to be given, unless the corporation corrects the delinquency or omission within the sixty-day period."

             In addition, the same 1983 version of the statute provides that:

             ". . . Notice is deemed to have been given five days after the date deposited in the United States mail correctly addressed with correct postage affixed. . . ."

             It thus follows that the minimum amount of time which must elapse before the Secretary of State is to administratively dissolve a corporation for nonpayment of its annual license fee is a period of sixty-five days from the date of mailing the notice referred to in the statute.  And, as we earlier concluded in response to your first question, the notice itself is not to be so transmitted until at least the day after the last day permitted for timely payment.

              [[Orig. Op. Page 6]]

            Question (3):

             Your third question, also repeated for ease of reference, asks:

             "What are the specific time periods required for the notice and any subsequent dissolution, assuming the corporation does not respond to any delinquency notice?"

             Based upon our answers to your first two questions, above, we would respond as follows:  Once the notice required by RCW 23A.28.125(2), supra, has been mailed, and sixty-five days have elapsed without action by the corporation correcting the delinquency, the corporation ". . . shall be administratively dissolved by the Secretary of State . . ."  Clearly, at this point, the function is purely a ministerial one involving no exercise of administrative discretion.

             This completes our consideration of your questions.  We trust that the foregoing will be of assistance to you.

 Very truly yours,
KENNETH O. EIKENBERRY
Attorney General 

CHARLES R. HOSTNIK
Assistant Attorney General