Annual or Periodic Information Reports for corporations and other registered entities (we'll use the term "annual reports" to mean both) serve multiple functions for state filing offices. Primarily, they help the state keep the public record current, ensuring that the basic information that appears for a given company, like principal address and names and addresses of directors, managers and others principals, are accurate. They also help keep the record clear of defunct companies that didn't formally dissolve - in most cases, failure to file these regularly required reports will result in the company being taken off the record of active entities.
Requirements to file annual reports go back decades, but in recent years there have been several changes to the process and information needed. Let's take a look at eight annual report compliance filing updates you may have missed.
1. Online Filing Systems
The COVID pandemic and consequent implementation of remote work seems to have accelerated the development of online filing systems, although they were already prevalent prior to 2020. Filing online can be more convenient and online filings are often processed more quickly. This can be helpful to a company needing to show good standing for a transaction or financial closing. Currently, every state offers online filing for annual reports with two exceptions: Pennsylvania, which requires a decennial information report, does not have an online system for filing these and Illinois does not allow online filing for corporations with property or business outside of Illinois.
2. Online Filing System Security
Of course, with every benefit comes a risk. Some states, worried about the possibility of bad actors or inadvertent errors causing unauthorized changes to a company’s records, have added levels of security to prevent this from happening. In certain states, such as Massachusetts, Michigan, and Rhode Island, a special pin number or code is mailed to the entity. This code must be entered in order to file the annual report online. While the security may lessen the incidence of incorrect filings, it can be burdensome, especially if the letter containing the special code was misplaced.
3. Gender Diversity
Some states are now requiring that corporate boards of publicly held companies meet gender diversity requirements, which must be indicated on the annual report filings. California, Illinois, New York are three key states that currently have requirements on their annual reports related to gender diversity.
California: Requires that all publicly held domestic California corporations, or foreign corporations whose principal office is located in California, must have at least one female director on their Board of Directors. Publicly held companies file a “Publicly Traded Corporate Disclosure Statement” in addition to the Statement of Information, where the number of female directors is indicated.
Illinois: The law in Illinois is like California’s in one way. It also applies to publicly held corporations, either domestic to Illinois or with their principal office in Illinois. However, there is no specific requirement to have at least one woman. Instead, they must file, in addition to the standard annual report, the Female and Minority Directors Report, which spells out specifics regarding the make-up of the board, the members’ qualifications and the process for identifying and evaluating director nominees. A description of the policies for promoting diversity must also be included.
New York: New York has included a new reporting requirement for all corporations on its biennial statement. On the statement they must indicate how many directors constitute the board and how many of those directors are women. However, there is no current requirement to have at least one woman.
4. Benefit Corporations
A fairly new type of entity, the Benefit Corporation, can have additional reporting requirements, over and above the standard annual report required for all corporations in a state. This is the requirement to file a “Benefit Report” which describes the pursuit of the public benefit pursued by the corporation and assesses the performance of the corporation in pursuing that benefit, as well as other specific details.
Not all states with benefit corporation laws require the filing of the annual benefit report, but many do.
In Arizona, Arkansas, District of Columbia, Indiana, Minnesota, Nebraska, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and South Carolina, the report is submitted to the state filing office at the same time it’s presented to shareholders, usually within 120 days of the fiscal year end. In Massachusetts and Utah, the report must accompany the corporation’s annual report.
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In addition to these changes, there are few state-specific changes worthy of mention:
Usually, California corporations and LLCs can file a “Statement of No Change” indicating that everything required to be disclosed on the annual (corporations) or biennial (LLCs) report is the same as the previous one filed. However, beginning January 1, 2022, companies cannot file a Statement of No Change for their next report, due to the addition of a new question, which asks whether any officer or director has an outstanding final judgment issued by the Division of Labor Standards Enforcement or a court of law, for which no appeal is pending, for the violation of any wage order or provision of the Labor Code. Once the corporation or LLC has met its requirements by filing this new periodic report, they can return to filing “Statements of No Change” when appropriate.
The State of Illinois created a new form, the “Interim Statement of Changes” to take the place of an amended annual report. The Interim Statement of Changes can be used to report changes to the information that appears on an annual report, such as the corporate name or address, as well as changes in name and address for the officers and directors and changes in its status as a minority-owned or woman-owned business.
7. Rhode Island
The state of Rhode Island has changed the due dates for its annual reports beginning this year. Previously due by March 1, the due date for filing annual reports for domestic and foreign corporations, both business and non-profit, and domestic and foreign LLCs, is now May 1st.
8. New Jersey
This is not really a new requirement, but the wording of New Jersey’s annual report reminder notice causes confusion every year and is worth mentioning. The NJ annual report is due during the anniversary month of the date of formation or qualification for corporations, LLCs, LPs, LLPs and nonprofit corporations. The NJ Division of Revenue and Enterprise Services has informed us that they send a notification indicating the filing is due the day prior to the beginning of the anniversary month, but the entity is able to file any time during its anniversary month.
As you can see, annual report requirements are always changing, and can be hard to stay on top of if you have entities in multiple states. To ensure your business remains in compliance, you may want to work with an experienced service company that can assist you with your filings.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.