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lack may be explained by the fact that the statutory threshold is rather high and
that judicial dissolution may be sought only if the statutory conditions are met.

c. Effect of Dissolution

Once a nonprofit corporation has been dissolved, its claim to exist as an
entity distinct from its members, officers or directors continues only to the extent
provided by state law. In the case of a voluntarily dissolved corporation, state law
provides that upon adoption of a resolution of dissolution by the members or
board of directors, as applicable, the corporation must cease to conduct its affairs,
except in so far as may be necessary to “wind up” the corporation’s affairs.

The administrative dissolution of a corporation by the Secretary State causes
the existence of the corporation to immediately cease, subject only to the
corporation’s right of reinstatement. The board of directors of the administratively
dissolved corporation, however, continues to hold title to the corporation’s
property as trustees for the benefit of the corporation’s creditors and members, if
any. This provision prevents a gap in ownership of the corporation’s assets given
the likelihood that, because a corporation’s dissolution was involuntary, no
distribution plan for the corporation’s assets existed at the time of dissolution.

State law preserves any rights or remedies that a third party may have
against a corporation, if properly pursued by any such party within two years after
dissolution. In other words, when a corporation dissolves, it may still be sued by
any party to whom the corporation owes money, or is otherwise liable due to some
event that occurred prior to dissolution, within two years following dissolution. The
corporation or its members, board of directors and officers retain the authority to,
and are advised to, defend such actions.

Corporate dissolution may also create an issue as to whether individuals who
incur liability while acting on behalf of a dissolved corporation are entitled to the
protection of the corporate form. One of the principal benefits of incorporation is
the limitation on individual liability that follows from it. Individuals who continue to
act on behalf of the dissolved corporation, with or without knowledge of the
dissolution, may be personally liable for their actions. While Washington courts
have not addressed this issue in the context of a nonprofit corporation, the
Washington Supreme Court has addressed this issue regarding a for-profit
corporation. In that case, the Washington Supreme Court concluded that the
individual acting on behalf of the dissolved corporation was not personally liable for

WASHINGTON NONPROFIT HANDBOOK -292- 2018