Mechanism 03
Special exceptions on a forfeited charter
Can a Texas corporation whose charter is forfeited for franchise tax still sue or defend a lawsuit?
No. Under Tex. Tax Code § 171.252, forfeiture of a corporate privilege denies the corporation the right to sue or defend in a Texas court, and its directors and officers become personally liable for certain debts. Attach a Certificate of Account Status from the Comptroller to special exceptions and the entity's answer and counterclaim go with it — leaving only the individual guarantors to be excepted to separately.
By John P. Henry · Tex. Tax Code § 171.252 · Reviewed 2026-08-02
The authority
If the corporate privileges of a corporation are forfeited under this subchapter … the corporation shall be denied the right to sue or defend in a court of this state.Tex. Tax Code § 171.252
Tex. Tax Code § 171.252
When it applies
Any Texas entity opponent — most often a defunct operating company still nominally defending a collection suit. The first thing to do in any commercial case is pull the opposing entity's franchise tax status. It is free, it takes two minutes, and it is checked far less often than it should be.
How it is proved up
- The Comptroller's Certificate of Account Status, and the Secretary of State's filing history showing the forfeiture date, attached to the exceptions.
- Match the forfeiture date against the date the answer was filed. Whether the pleading was filed before or after the forfeiture changes the relief.
- Except separately to the individual guarantors — want of privity as to the entity's contracts, want of individual damages — so the case narrows on both fronts at the same hearing.
- Pair with a motion in limine on any oral representation the guarantors will want to describe at trial.
What defeats it
- Revival. The entity can pay the tax, obtain a certificate of revivor and cure the forfeiture, so the mechanism buys leverage and time rather than an automatic dismissal.
- The relief is not identical to a default; the court may abate to allow revival rather than strike.
- It reaches the entity only. Individual defendants are unaffected and need their own exceptions.
Where I have used it
Retail tenant and two personal guarantors, County Court at Law No. 4, Williamson County. Paired with a motion in limine excluding any representation about what other tenants in the center would do after the lease was signed.
Questions
How do I check whether a Texas company's charter is forfeited?
Request a Certificate of Account Status from the Texas Comptroller and check the Secretary of State's filing history. Both are public and both are quick. Franchise-tax forfeiture and SOS involuntary termination are different events with different consequences, so check for both.
What happens to a lawsuit filed by a corporation that later forfeits its charter?
Its right to prosecute the suit is denied while the forfeiture stands. Courts commonly abate to permit revival rather than dismiss outright, which is why the mechanism is best used early, when the delay itself has settlement value.
Are officers personally liable when a Texas corporation forfeits its charter?
Tex. Tax Code § 171.255 imposes personal liability on directors and officers for debts of the corporation created or incurred after the date the report or tax was due and before the privileges are revived, subject to the statute's exceptions.