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Thursday, February 17, 2011

Collecting A Corporate Debt From A Director

Many Virginia corporations fail to file their annual reports, pay the annual registration fee or maintain a registered office, causing the State Corporation Commission to terminate the corporation. After such termination directors, officers and agents, acting on behalf of the corporation may be held personally liable for the acts of the corporation. Unlike the Delaware statute, Virginia Code §13.1-754 provides for personal liability during the termination period, even if the corporation is later reinstated.

ADVICE: Do not assume that a corporation is valid! Check with the State Corporation Commission. Holding owners of a corporation liable for its debts can be difficult but not impossible. If you are an officer or director of a corporation, you may want to check the status of the corporation, so you are not exposed.

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The above is not meant to replace legal counsel. If you would like to speak to one of Gross & Romanick's lawyers, please contact us by calling 703-273-1400 or by filling out our online Information Request Form.

Wednesday, February 9, 2011

Performance Bonds

Companies in the construction industry should understand performance bonds. Performance bonds differ in many ways from payment bonds. While payment bonds are designed to assure compensation to subcontractors and suppliers, performance bonds seek to secure completion of the project or award of damages to the owner for default by the general contractor.

Performance Bonds Defined

The parties to a performance bond consist of the following: (1) the principal (usually the general contractor), (2) the obligee (the owner), and (3) the surety. In some cases, a performance bond is required of a subcontractor, in which case the principal is the subcontractor and the obligee is the general contractor. Performance bonds are primarily designed to afford significant protection to the owner, while subcontractors and suppliers typically have no rights under such bonds.

Claims are brought by the obligee, when the principal has defaulted on its contract with the obligee - the obligee declares the principal to be in default and notifies the surety. Only then is surety required to act, since premature actions by the surety can result in litigation with the principal.

Actions upon Default

In the event of default by the principal, the surety has several options. It can permit the owner to finish the project and compensate the owner for damages. Or, the surety can finish the project through a new contractor. Or, it can finance the general contractor so the defaulting obligee can complete the contract. The choice depends upon the situation and the players.

Statute of Limitations

While the federal Miller Act states no specific time period within which suit must be brought against a surety, there are federal, state and local time limitations applicable to performance bonds. Virginia Code Section 11-59 requires actions against sureties on performance bonds be filed within one year after completion of the contract, including the expiration of all warranties and guarantees. If the action is for a breach of warranty or defect, then all cases must be filed within one year of discovery of the defect or breach of warranty.

Conclusion

In conclusion, individuals in the construction industry should keep in mind that the rules and principles, which govern the operation of these bonds, are sometimes peculiar to the bonds themselves and the statutes under which they are provided. Therefore, it is important to have a good understanding of the terms of your bond, any applicable statutes, your contract and the facts.

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The above is not meant to replace legal counsel. If you'd like to speak with one of our lawyers, please contact Gross & Romanick by calling 703-273-1400 or by filling out our online information request form.

Thursday, February 3, 2011

What Creditors Can't Seize

A fellow being chased by creditors would be smart to give his fiancee' an expensive engagement ring. She'll be thrilled, and he'll be making a safe investment, since Virginia law specifically exempts wedding and engagement rings from attachment by creditors. Lawmakers have decided that, for public policy reasons, people should keep such property in the family. Better not divorce!

A religious couple might consider investing in a Guttenberg Bible, since the law also exempts the family Bible.

Animal lovers can rest easy, too. Creditors can't take the family pet, whether it's a dog, cat, squirrel or snake. As long as the debtor does not raise the animal for sale purposes, the creditor cannot take it.

Someone facing bankruptcy might not be in the frame of mind to dwell on mortality, but it's an opportune time to purchase a burial plot. The law also exempts this property as a matter of policy. Who said you can't take it with you!!

Investigate Credit Worthiness

* Call other creditors of applicant
* Call industry contacts
* Check with landlords and credit references
* Obtain a Credit Bureau Report
* Review Dun & Bradstreet Reports
* Study court records for information about: Judgments, pending litigation, title to real estate, liens on realty, and UCC financing statements
* Hire an investigator or attorney Have your CPA review financial records

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The above is not meant to replace legal counsel. If you'd like to speak to one of Gross & Romanick's lawyers, contact us by calling 703-273-1400 or by filling out our online information request form here.