What Happens to the Attorney-Client Privilege When a Corporation Dissolves?

A California corporation enjoys the same attorney-client privilege protections as individual clients. But what happens to that privilege when a corporation dissolves? Like in many areas of law, the answer depends.

The attorney-client privilege in California is governed by California Evidence Code Sections 950, et. seq. and protects confidential communications between a lawyer and its client. Separately, lawyers have a duty of confidentiality to their clients. See California Rules of Professional Conduct, Rule 1.6 and Cal. Bus. & Prof. Code Section 6068(e)(1).

When a lawyer represents a corporation as its client, the attorney-client privilege belongs to the entity itself and not to any individual officer, director, or employee. The attorney-client privilege of a corporate client normally is exercised by the corporation’s officers and directors. See Melendrez v. Superior Court, (2013) 215 Cal. App. 4th 1343, 1354.

When a corporation begins the process of dissolution, it continues to exist to wind up its affairs. See Cal. Corp. Code Sections 1805 (involuntary dissolution) and 1903. During this phase, the corporation can still assert or waive privilege. Id.

Once the winding up process is complete, in a voluntary dissolution, the corporation can file a certificate of dissolution with the Secretary of State, and thereafter the corporation will cease to have any rights, privileges or powers. Cal. Corp. Code Section 1905(b). The corporation instead could petition for a court order, and like in involuntary dissolution, a court order would cause the corporation to cease to exist “except for the purposes of further winding up if needed; and the directors or such other persons shall be discharged from their duties and liabilities, except in respect to completion of the winding up.” Cal. Corp. Code Section 1808(b).

Once the corporation no longer is in existence, the holder of the privilege is “[a] successor, assign, trustee in dissolution, or any similar representative of a firm, association, organization, partnership, business trust, corporation, or public entity that is no longer in existence.” Cal. Evid. Code Section 953(d); Melendrez, 215 Cal. App. 4th at 1354 (in which the court decided that if the corporation at issue had ceased to exist, its insurers who had been assigned claims against the corporation controlled the privilege). The Melendrez court noted that if there is no successor that can be the holder of the privilege after a corporation no longer exists, the privilege presumably would no longer exist, although it did not decide this issue. See Melendrez, 215 Cal. App. 4th at 1354, footnote 14.

While the attorney-client privilege does continue through the winding up process of a dissolution, once the corporation is no longer in existence, it might become difficult to find a holder of the privilege.

This e-Bulletin was prepared by Rachelle Cohen of Valensi Rose, PLC, a member of the Corporations Committee of the Business Law Section of the California Lawyers Association. The views expressed herein are those of the author and do not necessarily reflect the views of the Business Law Section or the California Lawyers Association.