Section 12.80 of the Business Corporation Act of 1983, 805 ILCS 5/12.80, is often called the “Survival Statute.” The Survival Statute not only sets a five-year limit for filing claims against or on behalf of a dissolved corporation, but also limits the dissolved corporation’s rights and liabilities. Once the five-year “survival period” ends, the corporation no longer exists and can no longer be subject to any claim.
The Survival Statute was discussed in Riley Acquisitions, Inc. v. Drexler, 408 Ill. App. 3d 397 (1st Dist. 2011) — a case that involved two closely-held corporations that were dissolved after the corporations’ owners ended their marriage. Before the corporations were dissolved, the then-married owners signed personal guarantees to secure loans to the corporations.
At issue in Riley Acquisitions was whether the individual guarantors were liable for the dissolved corporations’ unsatisfied loan obligations. The court explained that the dissolved corporations — not the individual owners — were the principal debtors, and the survival period expired before the plaintiff filed its lawsuit. Thus, under the Survival Statute, the dissolved corporations were not liable. Because “the liability of a guarantor is limited by and is no greater than that of the principal debtor” and also because the guarantees did not expressly provide for continuing liability in this situation, application of the Survival Statute meant that the individual guarantors were absolved of liability as well.
The Survival Statute makes clear that corporations, their owners and their counterparties should be aware of their rights and potential liabilities for the five years following a corporation’s dissolution, and should be prepared to forfeit their rights with respect to the dissolved corporation after those five years pass.
Contributing Author Amanda M.H. Wolfman
(This is for informational purposes and is not legal advice.)