IT AIN’T OVER TILL IT’S OVER: ADMINISTRATIVE DISSOLUTION, REINSTATEMENT AND THE RELATION BACK RULE

BY ROSS CURNOW | HOPKINS & HUEBNER, P.C. | DES MOINES OFFICE

Every other year, corporations and limited liability companies are required to file a report with the Iowa Secretary of State detailing basic company information.  Commonly referred to as a biennial report, these filings not only help the Secretary of State to confirm that a business is in good standing with the various state agencies, but they also verify whether a business is, in fact, still operating.Although the process of completing and filing a biennial report is simple enough to address, hundreds of these reports go unfiled every year.  Oddly enough, a good portion of these unfiled reports are simply the result of oversight or disorganization.  Business owners or their registered agents might simply miss the notification, lose the filing information, or forget to file altogether.Whatever the case may be, failing to file a biennial report can lead to Administrative Dissolution.  Administrative Dissolution is the process whereby the Secretary of State abolishes the rights, powers and authority of a corporation or limited liability company.  This can be especially problematic for those business owners who are oblivious to the fact that their corporation or limited liability company no longer exists in the eyes of the State.Fortunately, Iowa law allows business owners to resurrect their corporations or limited liability companies and shield themselves from the imposition of any unanticipated personal liability.  Specifically, business owners may file an Application for Reinstatement along with the delinquent biennial report.  Once the Secretary of State confirms with the other State agencies that the business does not have any outstanding issues or obligations, it will fully reinstate the dissolved entity.

While reinstatement is pretty cool, the greatest benefit of reinstatement is its retroactive effect.  Under Iowa law, once reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution as if the administrative dissolution never occurred—hence, the relation back rule.  

Consequently, any liability or issues arising during the post-dissolution period are, upon reinstatement, treated as if there was no dissolution.  For a business owner, this can mean the difference between financial security and personal financial exposure.

As a business owner, having an attorney capable of navigating the administrative tape associated with biennial report season and, if necessary, the reinstatement process can make all the difference.  Just remember, dissolution isn’t necessarily the end.