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February 1, 1995 MEMORANDUM TO CLIENTS
CORPORATE ANNUAL REPORTS MUST BE FILED! It is that time of year. The Department of State's Division of Corporation's 1995 Annual Report forms are flooding corporate mailboxes across Florida. Every corporation, whether profit or not-for-profit, should have received an Annual Report form. Unlike prior year's form revisions, the only change from last year's form is the color. For profit corporation forms are still green and white. Not-for-profit corporation forms are now blue and white. An annual report must be filed with the Department of State, using the Division of Corporations' form. The form must be properly completed and timely received in Tallahassee. A for profit corporation must pay a $200.00 fee. A not-for-profit corporation must pay a $135.00 fee. DO NOT TEAR OFF THE PERFORATED COUPON ON THE FORM. Leave the coupon on the form. Forms not properly completed or forms submitted without the fee will be returned to the corporation. Corporations which fail to file an annual report and pay the required fee will be involuntarily dissolved. A significant effect on a dissolved corporation is to expose a corporation's principals to personal liability for the corporation's debts. Dissolution may also adversely impact the corporation's and principals' tax status, and prevent the prosecution or defense of claims in court. Note, condominium and cooperative associations must file the Annual Report in addition to the Division of Land Sales' annual filing and fees. The forms should be carefully completed. Every corporation must have a "registered agent" designated for the receipt of legal papers for the corporation. The "registered agent" information should be updated with the name of counsel or another person who is designated and is available during the day to receive legal papers. Every corporation must also indicate whether it has an intangible tax liability. Questions concerning a corporation's tax status should be referred to an accountant. A current roster of the corporation's officers and directors must also be listed. The firm reminds its clients to keep an updated officers and directors roster on file with association counsel. SPECIAL ASSESSMENTS TO PAY JUDGMENTS VALID
Who paid for condominium association litigation? A simple and quick answer was that the owners always pay! A more difficult question was who paid when a court determines that the association's directors made a mistake and judgment is entered against a condominium association. Again, the simple answer was that the condominium association pays, and then assesses owners for the amount paid. A recent dispute challenged that simple answer. The Florida Supreme Court recently held in Ocean Trail Unit Owners Association, Inc. v. Mead, 19 Florida Law Weekly S568, that the Condominium Association could levy a special assessment to collect the amounts necessary to pay a judgment. The judgment resulted from a challenge to the directors' invalid purchase of real property. The Supreme Court of Florida in part based its holding on §718.115(1) Fla. Stat. (1993) which provides that the common expenses of the association include: expenses of the operation, maintenance, repair and replacement of common elements, costs of carrying out the powers and duties of the association, and any other expense designated as common expense by this chapter, the declaration, the documents creating the condominium, or the bylaws. The Supreme Court reasoned that a condominium association's ultimate responsibility is to protect the common elements. The reason why a judgment is entered against a condominium association is irrelevant. The condominium association could levy a special assessment to pay the judgment because the judgment put the association's common elements in jeopardy. The judgment was a lien against the common elements, allowing the sheriff to sell the common elements at auction to the highest bidder to pay the judgment. Thus, though a condominium association member may desire to challenge directors' action, members must pay a special assessment necessary to pay a judgment due to directors' mistakes. The ruling will provide solace to condominium association directors who have to make tough and difficult decisions. At the same time the ruling raises many questions. For example, if a judgment does not threaten common elements, or if there is a question concerning the judgment's validity such as if the judgment should be appealed, does the association have the same power to assess to pay the judgment. While this may seem counterproductive to the unit owners who are in essence paying their own judgment, the Supreme Court's holding protects the association and the common elements for all unit owners. COMMITTEE ASSIGNMENTS
After the beginning of the year, many associations re-evaluate committees. Associations are urged to create and work with committees. While some may complain that committees just become a time consuming effort, committees generally increase an association's effectiveness. Committees allow different perspectives to evaluate problems and anticipate future goals, encourage new members to be involved, breed new leadership, and facilitate communication from directors to members. As helpful as committees may be, it is generally recommended that committees be tightly structured. To protect an association, committees are usually directed not to undertake any action other than making recommendations to the Board of Directors. To insure that committees follow proper agendas and are not assuming corporate liabilities, normally committees are chaired by directors. The Florida Not-for-Profit Corporations Act does impact committee operations, unless superseded by an association's bylaws or articles of incorporation. Pursuant to §617.0825(3) Fla. Stat. (1993), committees must have at least two members, all of whom "serve at the pleasure of the Board of Directors." Also, assigning a matter to a committee for review does not transfer an individual director's obligations to the Association to act in good faith. Finally, pursuant to §617.0825(2) Fla. Stat. (1993), meetings of the committees should be noticed, run and documented in the same manner as directors' meetings. Note that the Condominium and Cooperative Act's require some committee meetings to be noticed with agendas and open as any directors' meeting.
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