7-90-802. Consequences of transacting business or conducting activities without authority.
Statute text
(1) (a) No foreign entity transacting business or conducting activities in this state without authority, nor anyone on its behalf, shall be permitted to maintain a proceeding in any court in this state for the collection of its debts until a statement of foreign entity authority for the foreign entity is filed in the records of the secretary of state.
(b) A court may stay a proceeding commenced by a foreign entity until it determines whether the foreign entity should have a statement of foreign entity authority on file with the secretary of state. If the court determines that the foreign entity should have a statement of foreign entity authority on file with the secretary of state, the court may further stay the proceeding until there is a statement of foreign entity authority on file with the secretary of state with respect to the foreign entity. If a foreign entity has a statement of foreign entity authority on file with the secretary of state, no proceeding in any court in this state to which the foreign entity is a party shall, after the effective date of such statement of foreign entity authority, be dismissed by reason of a statement of foreign entity authority not being on file with the secretary of state with respect to the foreign entity.
(2) A foreign entity that transacts business or conducts activities in this state without being authorized to do so shall be liable to this state in an amount equal to the fee as prescribed by the secretary of state from time to time, not to exceed one hundred dollars for each calendar year or part of a calendar year during which it transacted business or conducted activities in this state without being authorized to do so, plus all penalties imposed by this state pursuant to subsection (3) of this section for failure to pay such fees. No statement of foreign entity authority shall be filed until payment of the amounts due under this subsection (2) and subsection (3) of this section is made.
(3) A foreign entity that transacts business or conducts activities in this state without having a statement of foreign entity authority on file in the records of the secretary of state shall be subject to a civil penalty, payable to this state, not to exceed five thousand dollars.
(4) The amounts due to this state under the provisions of subsection (2) of this section and the civil penalties set forth in subsection (3) of this section may be recovered in an action brought by the attorney general in the district court in and for the city and county of Denver. Upon a finding by the court that a foreign entity or any of its managers or agents on its behalf has transacted business or conducted activities in this state in violation of this part 8, the court may issue, in addition to or in lieu of the imposition of a civil penalty, an injunction restraining the further transaction of business or conducting of activities by the foreign entity and the managers and agents, and the further exercise of any rights and privileges of an entity in this state until all amounts plus any interest and court costs that the court may assess have been paid, and until the foreign entity has otherwise complied with this part 8.
(5) Notwithstanding subsection (1) of this section, the transaction of business or conducting of activities in this state by a foreign entity without having a statement of foreign entity authority on file in the records of the secretary of state does not impair the validity of the acts of the foreign entity or prevent it from defending any proceeding in this state.
History
Source: L. 2003: Entire part added, p. 2306, 217, effective July 1, 2004. L. 2004: (1), (2), and (4) amended, p. 1492, 237, effective July 1. L. 2005: (1) amended, p. 1211, 18, effective October 1.
Annotations
ANNOTATION
Annotations
Law reviews. For article, "1959 Amendments to the Colorado Corporation Code", see 36 Dicta 489 (1959). For article, "One Year Review of Corporations, Partnership and Agency", see 37 Dicta 11 (1960).
Annotator's note. Since 7-90-802 is similar to 7-115-102 as it existed prior the 2003 repeal and reenactment of article 115 of title 7 and former 7-115-102 is similar to 7-9-103 as it existed prior to the 1993 recodification of the "Colorado Business Corporation Act", articles 101 to 117 of title 7, cases construing those provisions and their predecessors have been included in the annotations to this section.
The general assembly has power to prescribe the terms and conditions upon which foreign corporations may do business within the state and require a compliance with such terms and conditions such as this section as a condition precedent to their invoking the jurisdiction of its courts. Int'l Trust Co. v. A. Leschen & Sons Rope Co., 41 Colo. 299, 92 P. 727 (1907).
Civil suits. A foreign corporation not properly qualified to transact business in Colorado can remove the statutory prohibition against maintaining a civil action by taking steps necessary for qualification at any time. Roldan Corp. v. District Court, 716 P.2d 120 (Colo. 1986).
Until a foreign corporation complies with this section, it has no capacity to sue. King Copper Co. v. Dreher, 68 Colo. 554, 191 P. 98 (1920).
And failure to comply can be invoked as defense. Officer of a foreign corporation, being sued by the corporation, was not estopped from invoking the defense that the corporation had not complied with this section. King Copper Co. v. Dreher, 68 Colo. 554, 191 P. 98 (1920).
The failure of a foreign corporation to comply with this section goes to its capacity to sue, and is a matter of defense to be pleaded by the defendant in bar of the action. Ill. Sewing Mach. Co. v. Harrison, 43 Colo. 362, 96 P. 177 (1908); Zelinger v. Uvalde Rock Asphalt Co., 316 F.2d 47 (10th Cir. 1963).
However, this section prohibits the prosecution of an action until the prescribed certificate has been obtained by a foreign corporation. The prohibition is, therefore, only provisional and may be removed at any time under the terms of the section itself. Int'l Trust Co. v. A. Leschen & Sons Rope Co., 41 Colo. 299, 92 P. 727 (1907).
And so the purpose of this section is fully accomplished by actual compliance with its requirements subsequent to the commencement of an action. Int'l Trust Co. v. A. Leschen & Sons Rope Co., 41 Colo. 299, 92 P. 727 (1907).
If an application under 7-115-101 is filed before trial, the failure to file until after the six-year deadline for filing application for finding of reasonable diligence pursuant to 37-92-301 does not divest the water court of jurisdiction. Municipal Subdist., N. Colo. Water Conservancy Dist. v. Getty Oil Exploration Co., 997 P.2d 557 (Colo. 2000).
Corporation must defend lawsuits. Although a foreign corporation which does not obtain a certificate of authority has no right to transact business in Colorado, such corporation maintains its corporate identity with respect to its contracts and other acts, and it cannot refuse to defend lawsuits in Colorado courts. Nat'l Ass'n of Credit Mgt. v. Burke, 645 P.2d 1323 (Colo. App. 1982).
A foreign corporation's omission to allege in its complaint that it has complied with this section can relate only to its capacity to sue and is not one of the facts necessary to constitute its cause of action. Page Woven Wire Fence Co. v. Joslin, 38 Colo. 162, 88 P. 142 (1906).
And a foreign corporation which has never done any business in Colorado may sue without paying any fees to the state pursuant to this section. Desserich v. Merle & Heaney Mfg. Co. 48 Colo. 370, 109 P. 949 (1910).
As this section is intended to govern intrastate commerce and does not apply to interstate commerce or to the right of a foreign corporation to institute and defend suits in the federal courts. Butler Bros. Shoe Co. v. United States Rubber Co., 156 F. 1 (8th Cir. 1907); Herman Bros. Co. v. Nasiacos, 46 Colo. 208, 103 P. 301 (1909).
Business not sufficiently intrastate to bring corporation within the scope of this section. Cement Asbestos Prods. Co. v. Hartford Accident & Indem. Co., 592 F.2d 1144 (10th Cir. 1979).
Question of transaction of business involves factual matters. The question whether the plaintiff is transacting business in Colorado for the purposes of this section involves factual matters. Viva, Ltd. v. United States, 490 F. Supp. 1002 (D. Colo. 1980).
But no compulsion if solely in interstate commerce. A foreign corporation may not be compelled to qualify in this state if it is engaged solely in interstate commerce. Cement Asbestos Prods. Co. v. Hartford Accident & Indem. Co., 592 F.2d 1144 (10th Cir. 1979); Viva, Ltd. v. United States, 490 F. Supp. 1002 (D. Colo. 1980).
Also, there is nothing in this section which prohibits foreign corporations from acquiring personal property in Colorado. And having acquired it, they have the right to protect it from unlawful interference; if this were not true, persons might appropriate such property to their own use without fear of punishment. Craig v. A. Leschen & Sons Rope Co., 38 Colo. 115, 87 P. 1143 (1906).
Limitation on right of foreign corporations to bring lawsuits held inapplicable. Where foreign corporation sued in the Colorado federal court to quiet title to property against which a federal tax lien had been imposed based upon assessments against an individual taxpayer claimed to have an interest in the corporation and its property, the state limitation on right of foreign corporations to bring lawsuits did not apply. Viva, Ltd. v. United States, 490 F. Supp. 1002 (D. Colo. 1980).
Liability not extended to corporation's officers, stockholders, or incorporators. In the absence of definite statutory authority therefor, officers, stockholders, incorporators, or other persons contracting for or on behalf of a noncomplying foreign corporation cannot be held liable on its contracts as partners. Nat'l Ass'n of Credit Mgt. v. Burke, 645 P.2d 1323 (Colo. App. 1982).
Liens. The assertion and filing of a lien is not a "proceeding in court" within the meaning of this statute. Filing a lien qualifies as a "corporate act" within the meaning of the statute. Bob Blake Builders, Inc. v. Gramling, 18 P.3d 859 (Colo. App. 2001).
Applied in Miller v. Williams, 27 Colo. 34, 59 P. 740 (1899); Kephart v. People ex rel. Am. Sav. Bank, 28 Colo. 73, 62 P. 946 (1900).