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Business Law - Corporations, Takeovers, and Dissolutions

Q1: Jerry Yarmouth incorporated J&R Interiors, Inc., and was its president, secretary, and sole shareholder. J&R failed to file annual reports and pay annual fees, however, and was involuntarily dissolved by the state. More than a year later, Yarmouth bought a workbench in J&R's name from Equipto Division of Aurora Equipment Co. When the price was not paid, Equipto filed a suit in a Washington state court against Yarmouth, claiming that he was personally liable for payment. Yarmouth argued that he was not personally liable because he had acted as an agent for J&R. Does a corporation continue to exist after it is dissolved? If so, can it continue to conduct business? In whose favor should the court rule in this case, and why?

Q2: Alitech Corp. is a small midwestern business that owns a valuable patent. Alitech has approximately 1,000 shareholders with 100,000 authorized and outstanding shares. Block Corp. would like to have the use of the patent, but Alitech refuses to give Block a license. Block has tried to aquire Alitech by purchasing Alitech's assets, but Alitech's board of directors has refused to approve the acquisition. Alitech's shares are selling for $5 per share. Discuss how Block Corp. might proceed to gain the control and use of Alitech's patent.

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Solution Preview

Let's take a look at the facts in these scenarios.

1 -- Jerry incorporated J&R and was president, secretary, and sole shareholder. He failed to comply with the rules for the corp. and the corp. was dissolved by the state due to noncompliance. After one year, Jerry bought equipment in the name of the corp. which was dissolved and defaulted on the payment. The seller sued Jerry personally. Jerry argued that he was not liable, but that the corp (dissolved) was.

Does a corporation continue to exist after it is dissolved?

- Yes, for limited purposes. When a corporation is dissolved (either voluntarily or involuntarily), it does not stop all aspects of the corporation at the very moment that it is dissolved. The corporation does, however, cease ...

Solution Summary

This solution thoroughly explains each of the business law case scenarios presented. The liability of Jerry or J&R Interiors, Inc. is discussed in regards to the workbench that was purchased after the corporation was involuntarily dissolved by the state.

This solution also explains if Block Corporation can take over Alitech Corporation in an attempt to gain control of Alitech's valuable patent.