The United States District Court for the Northern District of California in Virtue Global Holdings Ltd. v. Rearden LLC recently considered the issue of what happens to the attorney client privilege when the corporate client is dissolved.
The District Court found its answer in California Corporations Code section 1905(b): When a corporation ceases to exist, “the corporate powers, rights and privileges of the corporation shall cease.”
Thus, upon dissolution no entity holds the attorney-client privilege and the dissolved corporation is not entitled to assert the attorney-client privilege.
Although the District Court referred to astatute applicable to corporations, the actual entity involved in the case was a dissolved Limited Liability Company. Therefore, it would appear the applicable law should have been the California Revised Uniform Limited Liability
Company Act (RULLCA). However, the correct law, may not have changed the result. RUCLLA, under Corporations Code Section 17707.08(b)(2)(C), contains substantially similar provisions to those contained in Corporations Code Section 1905, providing that upon filing a certificate of cancellation of an LLC, the LLC’s “powers, rights, and privileges shall cease.”
So what does this mean to you? If your entity has been dissolved or canceled and sues or is sued, it is essential to revive the entity if at all possible to protect communications between the entity and its legal counsel from disclosure in the litigation. Having read the prior article, we have outlined the steps to revive a suspended corporation.
We strongly recommend that you speak with your corporate attorney as soon as possible if your dissolved corporation or limited liability company is named in a legal action in order to take steps to ameliorate the potential loss of the attorney client privilege.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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