A foreign corporation (one formed other than in Hawaii) cannot “transact business” in Hawaii until it obtains a certificate of authority from the State of Hawaii’s Department of Commerce and Consumer Affairs. The following activities, among others, do not constitute transacting business:
- Maintaining, defending, or settling any proceeding;
- Holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs;
- Maintaining bank accounts;
- Maintaining offices or agencies for the transfer, exchange, and registration of the corporation’s own securities or maintaining trustees or depositories with respect to those securities;
- Selling through independent contractors;
- Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside Hawaii before they become contracts;
- Creating as borrower or lender, or acquiring, as borrower or lender, indebtedness, mortgages, and security interests in real or personal property;
- Securing or collecting debts or enforcing mortgages and security interests in property securing the debts;
- Owning, without more, real or personal property;
- Conducting an isolated transaction that is completed within thirty days and that is not one in the course of repeated transactions of a like nature; and
- Transacting business in interstate commerce.
The activities listed above are not exhaustive.
A foreign corporation “transacting business” in Hawaii without a certificate of authority may not maintain a proceeding in any Hawaii court until it obtains a certificate of authority.
A foreign corporation that transacts business in Hawaii without a certificate of authority is also liable to the State for the years or parts thereof during which it transacted business in Hawaii without a certificate of authority, in an amount equal to all fees that would have been imposed upon the corporation had it duly applied for and received a certificate of authority to transact business in Hawaii, plus all penalties imposed for failure to pay the fees.
The failure of a foreign corporation to obtain a certificate of authority does not impair the validity of its corporate acts or prevent it from defending any proceeding in Hawaii.
There is a second issue that needs to be examined and that is whether what is planned in Hawaii requires a particular license. Many times mainland entities such as contractors just think about whether or not to obtain a certificate of authority, but lose sight of the fact that they nevertheless need to be licensed for what they plan to undertake.
Hawaii statutes often severely penalize unlicensed activities such as prohibiting any unlicensed contractor from recovering for work done, or materials or supplies furnished in a civil action, or voiding any contract entered into by any person with an unlicensed mortgage broker or solicitor.
As you can see you should consult with a Hawaii attorney in order to determine whether you need to obtain a certificate of authority to do business in Hawaii, whether you need to be licensed, and what the legal consequences might be for unlicensed activities.
Contact us so we can guide you through this often complex and confusing process.
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