Memo to Directors & Officers: Make Sure Your Company Pays Its Franchise Taxes!

In this Memorandum Opinion, the appellant, a director of a bankrupt company, was found liable for the amount the bankruptcy court required his company to distribute to a creditor. ¬†Strangely, this personal liability was based on Chapter 171 of the Tax Code, which provides that if a corporation forfeits its “corporate privileges” for failure to pay its franchise taxes, each director or officer of the corporation is liable for any debt of the corporation. ¬†While the appellant argued that this provision only applied to tax liabilities, the Court of Appeals affirmed the trial court’s decision and held that “[n]othing in the wording of this statute suggests that personal liability of officers and directors is limited to the tax liability.”

Yigal Bosch v. Cirro Group, Inc., No. 05-11-01625-CV