March 1, 1993

CORPORATIONS MUST PROMPTLY FILE 1993 ANNUAL CORPORATE REPORTS

By now every corporation, for-profit and not-for-profit, authorized to do business in the State of Florida should have received their 1993 Corporation Annual Report Form. The form is easy to recognize. It is a legal-size document with green, red and black printing.

The Division of Corporations is required to provide the forms to each corporation pursuant to the Florida Business Corporations Act and the Florida Not-For-Profit Corporations Act. Whether a corporation is a condominium, cooperative or homeowners association, for-profit or not-for-profit, the form must be completed. Condominium and cooperative associations should take special note that filing with the Division of Land Sales does not take the place of filing a 1993 Corporate Annual Report.

The filing deadline has changed. Reports must be postmarked or received by the Division of Corporations in Tallahassee no later than May 1, 1993. A private delivery services receipt showing mailing of May 1, 1993 will result in a late filing. This new filing deadline is two months earlier than in years past. Similarly, the date for automatically dissolving a corporation for not filing an Annual Report has been moved earlier. A fine will be levied against a corporation not properly filing a report by May 1st, with the corporation being automatically dissolved on July 28, 1993.

To avoid headaches, problems, needless worries, fines, penalties and attorney's fees, file your 1993 Corporate Annual Report Form timely!

INSURANCE APPLICATIONS ARE IMPORTANT

Recently, a court's decision to invalidate an insurance policy left a corporation's directors personally liable for corporate related claims. When Sahlen & Associates, Inc. went out of business, numerous shareholders filed claims against Sahlen's directors and officers for failing to fulfill their fiduciary duty. The corporation's directors and officers' liability insurer was asked to defend the claims. Unfortunately, the corporation's president, without the knowledge of other officers and directors, allegedly made gross misrepresentations of the corporation's financial situation.

The directors and officers liability insurer sought to rescind, or cancel, their policy of insurance. The insurer stated that it relied upon the misrepresentations to its detriment when providing coverage. Because the coverage was based upon a misrepresentation, and even though the other officers and directors were not involved in making the misrepresentation, United States District Court Judge Jose A. Gonzales, Jr. declared that the corporation's $10 million officers and directors' insurance policy was invalid from the policy's inception.

It is important for insurance applications to be properly completed. In the same way that honesty in disclosing a driving record is important when applying for automobile liability coverage, financial and claims history is important to insurers for directors and officers liability coverage. While individual directors cannot be reasonably held to know everything that a corporation does, the officers and directors should make certain that their corporations have adequate insurance and that the application for insurance is accurate.

ASSOCIATION'S NOT LIABLE FOR THE TOURIST DEVELOPMENT "BED" TAX

There is a great misunderstanding among many condominium, cooperative, and homeowners associations concerning liability for the Tourist Development Tax. The Tourist Development Tax, commonly known as the "Bed Tax", is a three percent tax levied upon payments for most "transient accommodations" rented or leased for a period of six months or less. Transient accommodations are defined generally to include not only hotel and motel rooms, and trailer camps, but also single family homes, condominium units, cooperative apartments, mobile homes, beach homes and cottages. The bed tax is in addition to any sales tax that must be paid for the rental.

The misunderstanding arose when responsibility for bed tax collection was changed. The tax was collected by the State of Florida's Department of Revenue. As of January 1, 1993 county tax collectors became responsible to collect the bed taxes accruing in their counties. Associations unless they are landlords, or receive rental income from rentals of six months duration or less, do not have to pay the tax. The person or entity leasing or receiving the rental income must pay the tax.

Associations may want to notify investor owners of the owners potential tax liability. Penalties are assessed against landlords liable for bed taxes who do not pay the tax. Though a bounty for reporting tax violators has not been implemented in Palm Beach County, Mr. John T. Clark, Palm Beach County's Tax Collector, reports that reports of potential tax violators are received from disgruntled neighbors! The Tax Collector also confirmed that written leases of six months and a day will be subject to an on-site audit.

UPDATED FIRM ZIP-CODE

To speed mail delivery, the postal service has assigned the firm's West Palm Beach office an updated nine digit ZIP code. The updated ZIP Code is: 33401-5012. Please use all nine digits when mailing items to the firm.