Document retrieval is a key foundational corporate transaction, as it’s often necessary to provide legal documents when conducting business. Any document that’s publicly filed with a state, county, or federal agency can be retrieved.
Some documents are not public and they cannot be retrieved, but are often still required for closings or other financial transactions. Examples of non-public documents are bylaws and operating agreements.
Certificate of good standing
The most common document retrieved is a certificate of good standing. A certificate of good standing verifies that a business is in compliance with the state and has met all statutory requirements.
Why do you need a certificate of good standing?
There are a number of reasons why you might need to obtain a certificate of good standing:
- The company is going into a closing or other transaction and needs to show the lender that their entity is in good standing with the state agency.
- A corporation has decided to do business outside of its home state or domestic state. In most cases, the foreign state filing or qualification process requires a certificate of good standing from the home state that is evidence of its status.
- A company simply wants to know what its current status is in a jurisdiction. A company might be conducting an internal document and compliance review and will obtain a certificate of good standing to ensure that it’s officially up to date in a given state.
Types of good standing issued by states
Certificates of good standing are issued by state officials as conclusive evidence that a corporation is in existence or authorized to transact business in the state. However, because they are issued on the state level, there is a lack of standardization. Depending on the state, it might be called a different name or include different information.
Delaware, the most popular state for entity formations, issues a certificate of good standing. However, it might also be known as certificate of existence, status certificate, or certificate of authorization. For example, New York state refers to it simply as a certificate of status, sometimes a subsisting certificate. Texas calls it a certificate of existence.
Depending on the state, a certificate of good standing may include a statement saying all taxes, fees, and penalties have been paid to the state. For example, Delaware will include in the statement when taxes were paid; if the business is not up to date on its taxes, they will not be able to obtain the good standing certificate. However, most states do not include this information by default.
Time frames also vary greatly from state to state. Many states issue electronic good standing certificates, in which case, they can be issued almost same day. Other states still require paper certificates, which will take significantly longer to obtain due to processing and shipping.
Short-form vs long-form certificates of good standing
Most states offer both short- and long-form versions of the certificate of good standing.
The short form is the basic certificate stating that an entity is in good standing and active to transact business. The long form lists the same information as a short form, but also includes a list of all documents on file. Some states may offer a long form including annual report information or office and director information. Some states will include wording that all reports have been filed on both the long- and short-form good standings.
You may ask yourself, “Why wouldn’t I then order a long form all the time?” There are two reasons why you might decide to go with the short form over the long form.
- Cost: In some states, the long form is much more expensive. For example, in Delaware, a long form costs $175, whereas a short form costs $50.
- Time: Long-form certificates might take longer to process. For example, in California, short form certificates are typically issued within 24 hours, whereas a long form may take 7-10 business days.
Other types of documents and certificates
The certificate of good standing isn’t the only certification that you should be aware of when it comes to corporate transactions.
Another type of certificate that can be obtained is a tax status certificate. Typically obtained from the Department of Taxation or Department of Revenue, the certificate or letter states that the entity is current with its tax filing requirements or lists a delinquent status, if applicable. A tax certificate might be needed for a due diligence search or for a closing.
Tax status certificates are usually issued by a separate agency. Delaware is unique in that their good standing certificate states that the franchise tax is paid. In most states, you’d have to order a separate document from a separate agency.
When trying to obtain a tax certificate, you need to be beware of road blocks. Many states consider tax filing information confidential and will not issue a tax status certificate. Other states will only issue certificates directly to the company per a written request signed by a CFO or a financial officer.
For those states where tax status certificates can be obtained, be mindful that processing times may take weeks or even months. An example is New York, where it can take up to two months, even though a letter is not required to obtain it. California, which takes 7-10 business days to issue a long form good standing certificate, issues tax status certificates the same day. The timeline can vary considerably from state to state.
Another concept that comes into play, especially when ordering a good standing certificate, is that of a bring-down letter. A bring-down letter is a follow-up to your good standing certificate.
A bring-down letter is a verbal status or a real-time online check with the state, typically conducted the morning of the closing, or the financial transaction, to make sure that the entity is still in good standing in the state. The service company can issue a letter confirming that, as of this date, this company is in good standing in the jurisdiction. That letter can be emailed or faxed to you.
It’s been our experience that the most successful financial closings are those that are planned early and where the documents are obtained early. If you have certificates of good standing for a closing that are dated a week in advance of the closing, that’s where a bring-down letter comes into play, since a good standing certificate is only as good as the moment it is issued. The bring-down is insurance for when the other party asks: “How do we know something didn’t change since you ordered these good standings a week ago?”
A bring-down might be obtained for:
- Financial closings
- Due diligence search
- Property transactions
- Reconfirm filing of a document
- Merger and acquisition
- Sales of assets
Certification of documents
You can either get plain copies or they can be certified by the state. A certified copy is a document obtained from the secretary of state, certified by either a rubber stamp or a certificate page stating the document is a true, complete, and correct copy of the original document on file in their office.
Certified copies are most often used for initial documents. Again, like with a good standing, they’re called different things. In Delaware, it’s called a certificate of incorporation. If you’re forming an LLC in Delaware, it’s called a certificate of formation. In New York, an LLC files articles of organization. These copies are virtually the same thing, and collectively we call them chartered documents.
Why order a certified copy?
- A company may want to trace its history or obtain a certified copy of their original filings. Perhaps their minute book is not reflecting the appropriate documents. If you’re looking at your minute book and realize a document is missing, a certified copy or a plain copy could be obtained to update the minute book.
- Some states require certified copies for foreign qualifications.
- Many financial transactions, such as closings, require certified copies as supporting documents.
- A company may want to show evidence of name, stock, or officer and director changes. Some states may require this information or the company itself may want this documentation.
A restated certified copy is a document that restates and integrates into one document all the previous charter provisions. A restated certificate is usually done for a company that’s been in existence for a considerable time and has filed hundreds of documents, including amendments whenever they do stock splits or make changes to their authorized shares. This applies to both private and publicly traded corporations.
For example, family businesses need to file amendments as new generations enter the business and are issued shares. While publicly-traded companies such as Bank of New York Mellon Corporation (one of their predecessor companies was the Bank of New York which was co-founded in 1784 and went public in 1792) may have dozens of amendments on file in its long history.
For a large corporation, a restated certified copy is not only cost-effective, but also makes it easier to carry documents to a financial closing, since it is acceptable in most cases. However, one should always check to make sure a financial lender will accept the last restated on file, plus any subsequent amendments, in lieu of going back to the beginning.
Obtaining restated certified copies can be cost and time effective as only once certified document needs to be ordered instead of dozens at $50 each (or more).
Legalization and authorization
If you’re doing business exclusively in the United States, the process for document retrieval and certification is fairly straightforward. Every state accepts every other state’s certificate of good standing.
However, for foreign affairs, if you’re going to be using a public document similar to a good standing or even a private document such as a power of attorney, there are steps that the document will have to go through to make it acceptable for use.
- Authentication: The process of certifying signatures on a document as being true and correct. It refers to the U.S. Department of State’s official certification, as well as the general process (which may involve notary, county, and state certification).
- Legalization: The act of certifying documents that have been properly signed and notarized for use in a foreign country. This usually occurs at a foreign embassy or consulate.
- Apostille: A certificate issued by a federal or state official certifying that a document is authentic for use in a foreign country. Only countries that are a member of the 1961 Hague Convention (abolishing the requirement of legalization of foreign public documents) will issue or recognize an apostille.
Authentication is the process of verifying a document that’s been certified by a local secretary of state. If a document is needed for a country that requires authentication, the first step is to obtain a certified copy of a document from a state’s secretary of state. That document would then be authenticated by the U.S. Department of State in Washington. Afterwards, that document may still go through a review process for legalization at a foreign country’s consulate or embassy. Countries which require legalizations include Canada and China.
For countries that are part of the Hague Convention, an apostille—a specialized certificate—can save both time, money, and frustration. To send documents to Hague Convention countries, a secretary of state only needs to affix an apostille to a certified document and then the document can be sent directly to the foreign country without first going to an embassy or consulate.
Two countries to remember that are not party to The Hague Convention are Canada and China.
Documents must first be sent to their embassies or consulates to be authenticated.
It is important to allow for extra time if you are doing any kind of foreign work as authentications and legalizations may slow the transaction process. Certainly, when you’re dealing with countries that are not part of The Hague Convention, you can have some considerable delays.
Need help with document retrieval?
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