What a Certificate of Authority Is and How to Pursue a Georgia Breach of Contract Action Even if Your Out-Of-State Business Doesn’t Have One

For many commercial ventures — both great and small — business is a multi-state and, often, multinational venture. Even if your company doesn’t directly conduct business activities in a given state, that doesn’t automatically mean that you might not find yourself in a position where you need to sue in that state. When that state is Georgia, make sure you act swiftly to retain a skilled Atlanta commercial litigation lawyer to help you defeat efforts by the defense to derail that lawsuit.

In Georgia, as in other states, there is something known as a “Certificate of Authority to Transact Business” that shows that your non-Georgia business entity is authorized by the Secretary of State to do business in this state.

Not getting a certificate comes with various risks, which include potentially barring your business from pursuing a commercial litigation action in the Georgia courts. That is only true, though, if your business’s activity in the Peach State exceeds a certain minimum threshold.

In terms of that minimum activity threshold, consider this recent business dispute. The plaintiff was a Pennsylvania-based entity incorporated in Delaware. In the summer of 2017, that company hired a Lousiana contractor to dismantle an air separation plant in Louisiana and relocate the air separation unit to a property in Warner Robins, Georgia.

After that relocation failed to go as plan, the Delaware corporation launched a breach of contract lawsuit in the fall of 2018 in Georgia state court.

The defendants fought back by pointing to one allegedly critical deficiency: the plaintiff had never obtained a certificate of authority to conduct business in Georgia and, without that certificate, the law prohibited the plaintiff from maintaining a lawsuit in Georgia.

Minimal and Isolated Activities Versus Extensive and Substantial Activities

When a dispute like this goes before the courts, the law says that the court must assess it “on a case-by-case” basis. A 1980 case explained that, when “the activities are minimal and unsubstantial in connection with only one contract and there is displayed no intention to continue these activities after completion of the single contract, the foreign corporation does not have to” obtain a certificate. If an entity’s business “activities are extensive in scope and involve a great deal of work over a period of time, then qualification is required.”

The Court of Appeal sided with the plaintiff in this case. One of the keys was timing. Georgia law requires extensive ongoing business activities. In other words, activities that are occurring in the present tense. A “foreign corporation that merely may have contemplated potentially engaging in long-term business activities in this state at some point before the court proceeding at issue” is not a business that is engaged in extensive present activity.

The Delaware corporation’s connections with Georgia were similarly a past-tense thing. The proof presented in the litigation showed that, long before it ever filed suit, the plaintiff “had divested itself of all of its interest in the land, plant, and business activities at issue in this case.”

Additionally, the plaintiff’s activities were isolated, not ongoing, which indicated that a certificate was not required. The plaintiff had engaged in Georgia-related activity only to the extent of “coordinating the construction of the Warner Robins… plant, an isolated project that is not consistent with continuous and ongoing transaction of business in this state.”

So, the plaintiff’s Georgia business activity was an isolated thing that had ended long before it filed its complaint, meaning a certificate of authority was not required and the absence of one was not a valid basis for dismissing the entity’s breach of contract suit.

Whether you are an out-of-state entity needing to pursue a commercial litigation action in this state, or your business needs to seek a dismissal of a lawsuit because you lack sufficient minimum contacts with Georgia, you need the right Georgia legal team on your side. Look to the experienced Atlanta commercial litigation attorneys at Poole Huffman, LLC to be that kind of advocate and help you protect your business interests. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation.