On July 31, 2023, Justice Reed of the New York County Commercial Division issued a decision in Clingerman v. Ali, 2023 NY Slip Op. 23237, holding that a dissolved corporation can still be sued and defend itself, explaining:
In the current motion, plaintiff argues that the Eurasia and Silk Road defendants had been dissolved when the parties signed the stipulation and therefore had no authority to stipulate or otherwise participate in this litigation. More specifically, plaintiff notes that the July 2, 2020, affirmation of Kamoliddon Talipov, the director and sole shareholder of the Silk Road defendants and Eurasia Capital Limited (ECL), states that Eurasia Capital Holdings JSC acquired Eurasia Mongolia, after which Eurasia Mongolia was dissolved. In addition, Silk Road Management Ltd. was struck on October 31, 2019, for failure to pay taxes. Plaintiff contends that because these defendants did not exist when they filed their answer, the answer is a nullity as it applies to them. In support, they cite Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig. (30 NY3d 377, 384 [2017] [internal quotations marks and citation omitted]), which defines capacity as a litigant’s power to appear and bring its grievance before the court. Noting that the law of the Cayman Islands governs their capacity, they cite FBME Ltd. v Mnuchin (709 Fed Appx 4, 5 [DC Cir 2017]) for the principal that a dissolved corporation lacks capacity to sue or be sued. Accordingly, plaintiff asks the court to strike the stipulation as it relates to the Silk Road defendants and Eurasia, find that the answer is not effective as to these defendants, and grant default judgment against them.
In opposition, defendants argue that the Silk Road defendants and ECL have not abandoned this action. In his current affirmation. Talipov introduces documents from May 18 and May 19, 2023, which indicate that the three businesses would be reinstated upon the payment of restoration fees and, in the case of Silk Road Finance, an additional penalty. An additional document certifies that one of the companies, Silk Road Finance, already has been restored to the Companies Register, effective June 15, 2023. Defendants note that, as a general rule, when a dissolution is annulled, the entity’s corporate status is reinstated nunc pro tunc, and contracts entered into during the period of dissolution are retroactively validated. In addition, they point out that an entity’s ability to sue and be sued is restored nunc pro tunc.
As for the fourth entity, Eurasia Mongolia, Talipov asserts that the corporation has been dissolved since 2013 due to its merger with a successor company. Further, he points out that plaintiff has had general notice of the merger due to the announcement on the Mongolia Stock Exchange website. He notes that plaintiff received personal notice of Eurasia Mongolia’s dissolution in Talipov’s July 2, 2020 affirmation in opposition to an earlier motion.
In reply, plaintiff adheres to his original arguments. He repeats that a stricken corporation may only litigate a matter related to its winding up process. In addition, he states that defendants’ argument that corporate status is retroactively restored upon the payment of taxes lack merit, because New York State’s tax laws are inapplicable here. He argues that counsel’s acceptance of service on behalf of Eurasia Mongolia waives that entity’s argument as to service.
After careful consideration, the court denies the motion for default judgment. A company’s dissolution shall not affect any remedy available to or against such corporation for any right or claim existing or any liability incurred before such dissolution. This is because defending existing lawsuits, including asserting viable defenses and affirmative claims therein, are not indicative of continued corporate operations, but merely of the winding up of existing affairs. Thus, although it is a dissolved company, Eurasia Mongolia retains the ability to defend itself, and both the agreement and the answer are valid. A contrary rule would produce anomalous results.
(Internal quotations and citations omitted).