CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Updating the Public Record to Reflect Important Company Changes

By: Teri Mayor, COGENCY GLOBAL INC. on Thu, Feb 09, 2017

Company changes that require a filing.jpg

As many brides can tell you, lining up the necessary paperwork to change your name can be painful, time consuming and confusing. One young bride I know changed her name with the Department of Motor Vehicles (DMV), but didn’t realize that changing the name on the title of her car required submitting a separate form. That came to light when she had difficulty renewing her registration a year later because the title was in her former name. Unfortunately, companies often make similar faux pas when it comes to updating the public record after making a change. 

When a company makes a change, it can experience the same frustration, multiplied by the number of states it’s registered in. Every state has its own requirements and the burden of making sure those changes are reflected is on the company. The accuracy of the public record is at stake and state laws may even require notification within a certain time frame. For example, Delaware requires that the Secretary of State be notified within 30 days after a foreign corporation changes its name or principal office address. While not every state imposes a time limit, all have provisions indicating the foreign corporation should change its registration when certain changes are made.

Common Changes in the Home State That Should Be Reflected in Foreign States

Change of Name of Business Entity: If a company changes its name, it should file an amendment to change its name in every state where it is registered to do business. Name changes require a separate amendment filing --- a company cannot amend its name using an annual report. Many states will require the entity to provide an official certificate issued by the home state to show the change was made.

When a company neglects to update the records, it can cause a lot of confusion and difficulty. An entity re-registering to do business because of a name change (rather than amending the original registration) is one of the most expensive pitfalls. At that point it will have two separate registrations at the state and can be liable to pay the fees and taxes due for both registrations. At the very least it will be time consuming and problematic to clean up the public record so that it reflects the real situation.  

Change of the Principal Office: While not every state requires the listing of the principal place of business on the initial registration, for those that do, it is important to notify the state when this changes. Often this can be done either using an amendment or on the annual report.    

If a company fails to update the public record regarding its new address, it can miss important notifications. While legal process will be served on the registered agent, states often send other notices and annual report forms to the principal business address instead.

Change of Business Entity Type: This is often the most complicated change to reflect. Laws allowing entities to change or convert from one type of entity to another do not currently exist in every state. So when a change like this is made in the home state, the entity may not be able to file an amendment to change the record in a state where it is registered to do business. To reflect the change, a withdrawal or termination may be required. So, for example, if a Delaware corporation that is registered to do business in New York converts to an LLC, they will need to take the following steps to reflect that change since New York does not recognize conversions:

  1. Obtain a certificate from the Delaware Secretary of State that reflects the fact it converted to an LLC.
  1. File that certificate, observing certain protocols, like the attachment of a ‘backer’ or cover sheet, to terminate the existence of the corporation.
  1. File an Application for Authority to register the LLC to do business in NY.

Changes made to entity type can sometimes affect when an entity should file its annual report. For example, in Massachusetts a corporation files its annual report based on its fiscal year (the report must be filed on or before the third month after the end of the fiscal year) whereas an LLC files based on its registration date. In other states, like Arizona, an LLC has no annual report requirement but a corporation does. Companies that have changed their entity type should not only ensure they have reflected the change properly wherever they are doing business, but also need to be aware of potential changes in their annual reporting requirements. If they are not, they could fall out of good standing.

Why Maintaining Good Standing is Important

Corporate filing registries like the Secretary of State commonly revoke or void companies that don’t file annual reports in a timely way. This loss of good standing status can have serious repercussions, including:

  • Another company can form in the state using its name, as names of voided companies become available for use after a certain period of time.
  • The company can experience difficulties in getting financing or opening bank accounts due to the need to provide a good standing certificate.
  • The company may need to pay fines and penalties to reinstate.
  • The company can lose its ability to maintain an action in the courts of that state.

Ensuring the accuracy of the public record is an important value for the corporate registries charged with maintaining it. Businesses, banks and the general public benefit from having an easily accessible public record that accurately reflect the correct names, addresses and status of entities doing business in a given state. However, because each state maintains independent databases, it does result in a lot of paperwork for companies to ensure that their records are kept up to date.

How to Ensure Everything Is Up-to-Date (Without Losing Your Mind)

Just as a bride can use a name change service to switch from “Miss” to “Mrs.”, when an entity makes a change that requires updating the public record, it can outsource the mandatory paperwork to an experienced service company. This can be a cost effective way to save time and avoid frustration, while maintaining good standing and ensuring compliance with state requirements.

 

 This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice. 

Topics: Company Formation and Filing Considerations