Just because you entered into a valid contract with a company does not mean that your contract is secure. According to Crain’s New York Business, more companies are going out of business than ever before. Many are doing so without any notice. Bankruptcy filings alone have tripled in the last year. You contact the company up one day, and they are gone. Before you decide to pack it in and think there is no recourse, here are a few tips:
1. Determine the form of business ownership for the company. If the business had been established as a sole proprietorship or partnership, the partners remain personally liable. As a result, you may commence a lawsuit against them personally. If the business had been a corporation, to reach the personal assets of the owners, you have to “pierce the corporate veil.” This legal cause of action allows you potentially obtain a judgment from the personal assets of the corporate owners.
2. For any credit card transactions, contact the credit card company and ask for a refund for any goods or services not rendered. Usually, the credit card company limits the time in which a dispute must be made to 60-90 days from the date of the charge. If you paid in cash, or check, you can file a claim in bankruptcy court, if the company has filed for bankruptcy. However, this will be a lengthy process, and you may receive pennies on the dollar, if that much.
3. Look to the dissolved companies industry professional groups. A variety of organizations have plans requiring its members to reserve funds.
4. Read over your any business insurance policies regarding coverage for business losses.
5. Search the status of any class action lawsuits.
6. Contact the city, state, and federal government. There are numerous regulatory agencies that may provide assistance in obtaining recovery for losses.
7. Be aware that a company may dissolve and reorganize under another name to avoid debts. Under the “Alter Ego” doctrine, the courts may impose liability on the shareholders of the new company for the debts of the dissolved company.
