ANNUAL REPORTS: SIMPLE STEPS TO STAY IN GOOD STANDING

Disclaimer: Please be advised that this recorded webinar has been edited from its original format, which may have included a product demo. To set up a live demo or to request more information, please complete the form to the right. Or if you are currently not on CSC Global, there is a link to the website in the description of this video. Thank you.

Annie: Hello, everyone, and welcome to today's webinar, "Annual Reports: Simple Steps to Stay in Good Standing." My name is Annie Triboletti, and I will be your moderator.

Joining us today are Andrea Jonaitis and Kimberly Moret. Andrea is a market manager in the Corporate and Legal Solutions Group at CSC. Since joining CSC in 2017, Andrea has specialized in global subsidiary management and entity management, working with prospects to create an accurate and clear scope of services, including helping subsidiaries staying compliant as well as demonstrating CSC entity management. Kimberly is a senior customer service representative for CSC's Annual Reports Department. She's responsible for keeping her assigned clients in compliance with all states and some international jurisdictions. Kimberly currently handles approximately 350 clients and generates more than 25,000 reports per year. And with that let's welcome, Andrea and Kimberly.

Kimberly: Hello, everyone. Kimberly Moret here. Welcome to talk about annual reports.

Andrea: Hi, everyone. This is Andrea Jonaitis. Thanks so much for joining us today. We're excited to have you with us as we dive into our discussion about the steps you can take to stay in good standing.

Before we get into our agenda, I want to take a brief moment to talk a little bit about CSC as a company. I'm sure there's a great portion of our audience today that currently uses CSC, but we also recognize that there are folks that are joining us today that aren't currently using any of CSC services. So this slide includes some high-level statistics about some of the markets and clients that we serve. While most notably CSC is known for providing compliance services, such as registered agent and annual reports completion, CSC also offers a range of services across many diverse areas, including tax, we offer UCC services, digital brand services, global entity management, and global financial markets, eRecording, and a lot more.

Over 180,000 corporate legal departments are utilizing CSC services. We're also proud to say that over 90% of the Fortune 500 utilize CSC for at least one of the services that we offer, and we protect more than 65% of the 100 Best Global Brands.

To talk a little bit more about CSC as a company, we trace our roots back all the way to 1899. We're a global organization with offices in over 14 countries, with our headquarters located here in Wilmington, Delaware, where we were founded all those years ago. We're also really proud that we've been named top workplace in the state of Delaware for the last 15 years in a row.

I also want to quickly mention our mission here at CSC, and this will hopefully start to come into focus as we move through our presentation today. CSC's mission is to provide world-class service and offer solutions that integrate the services that we offer along with powerful technology tools.

Further on into today's webinar, we're going to bring these concepts together and talk a bit about the services and the technologies that we offer pertaining to annual reports that can really help our clients ensure that their entities remain in good standing. But with that being said, let's get into today's agenda.

Kimberly: Thanks, Andrea. Here's a little bit about our agenda for our call today. We're going to talk about what an annual report is, what makes up an annual report, and some definitions and key items about what an annual report really does for your business, filing and reporting deadlines, consistent filing challenges that we still, unfortunately, have due to COVID-19, filing requirements, consequences of not filing reports, business licenses versus annual reports and the differences there, what to expect coming forward in the 2022 filing year, benefits of using CSC, and then at the end five questions that you can evaluate your current process and see how CSC might be able to assist.

Andrea: Before we potentially get ahead of ourselves, let's make sure that we're all on the same page in terms of what is actually meant when we say annual report. Fundamentally, we're really talking about a filing that's due. And most often when we're talking about U.S. subsidiaries, annual reports are filings that are due at the secretary of state level that are required to maintain your good standing compliance or good standing with these states.

Annual reports can have a variety of different names. They could be identified as statement of information, which I think is common nomenclature in the state of California. It could be occupational tax report. May be referred to as an annual list. Could also be referred to as franchise tax report. That's another common name shared across many different states and jurisdictions. Regardless of the verbiage used to identify this report, the key takeaway here is that these filings are required in order to maintain the ongoing good standing compliance of your entities.

Later on in the presentation, we'll talk a little bit about what can happen if you lose that good standing, but let's transition to Kimberly to hear some insights on when these reports are actually due. Despite being named an annual report, some of these reports might not actually be due each year. Kimberly.

Kimberly: That's true, Andrea. Some reports are not always due each year. Some are due biannually, and some are even due on a 10 or a 5-year time frame. Due dates for annual reports are also depending on the jurisdiction and even the entity type.

The most common that we do see is usually either the fiscal year end due date or the anniversary date. The fiscal year end means that the end of your fiscal year, the report might be due either two and a half or three and a half months after the fiscal year end. So therefore, with the calendar year end, a lot of your annual reports might be due by March 15th or April 15th. When they're due on the anniversary month, that's going to be something where it falls at the end of the month of the anniversary of its registration in that state. Some are due on the actual anniversary, so those dates will vary based on when you have registered again in that state, but it would be the actual date. Some of those states are going to be like Louisiana or Massachusetts, but only for LLCs and LPs, whereas corporation are due on the fiscal year end.

Then some are chosen just by the jurisdiction. So some might have an annual due date of May 1st, for example, like Florida, where every entity type is due at the exact same time. And then Delaware, which is usually the most common annual report, those are usually due by March 1st for corporations, June 1st for LLCs and LPs, and then June 30th for foreign corporations. So sometimes you can see where the state itself will have varying due dates based on the entity type as well.

Let's now talk on some challenges that are still going on by COVID-19. Unfortunately, we are still dealing with some things presenting through to COVID again with this current pandemic. Some states are still going through closures for unknown lengths of time, and that can be an issue when it comes to filing reports. Some of the states also have reduced staff because of COVID and/or have delayed turnaround times because of reduced staff. And sometimes it just boils down to the evidence itself being returned slowly. Some states are still extending annual report due dates, which does cause confusion. CSC can certainly help with that as we do keep up to date with all of our jurisdictions and the current due dates and extensions. A lot of these jurisdictions have limited hours also, which affects how you submit your documents when it comes to originals.

Some states have refused to accept hand-delivered documents and have been forced to do more online filings and/or only have documents submitted via courier, meaning that the documents are literally just dropped to the dropbox somewhere by FedEx or regular mail. We also have some limitations that we found in regarding to eSignatures. And a lot of these states have opened up more of accepted signature options, like DocuSign, scanned documents, or even conformed signatures. So we look forward to 2022 offering some more options as far as how to get your documents submitted so that we can avoid more things that have to do with COVID-19.

All right. Next, let's talk about if I didn't file my report, now what? When you do not file your annual report or biannual report, there's a lot of different things that can happen, and some might happen sooner than others. Every jurisdiction has a certain time frame of when it will go to loss of good standing, which is usually the first step in the progression, all the way down to possible revocation and other things that we'll soon talk about.

Loss of good standing again is the first one, and this can happen from immediately the day after the due date, or sometimes states will have a grace period of several months before this will change the status. This basically means that you cannot obtain what's called a good standing certificate in the state that you need it in. So if you had to pull it for a closing or just to prove to a bank that you're in good standing in this specific jurisdiction, then this is one thing that will definitely hinder it if you did not file your annual report.

The next step, of course, is revocation, and that means that your entity will no longer be able to do business in that state as you've been revoked for failure to file your annual report. Sometimes this might happen with just one report. Some states will give you a more generous grace period of several years before you'll actually be revoked. 

When you do become revoked in a jurisdiction, the loss of your entity name is the first repercussion of that revocation, and that can happen almost immediately from revocation. And then, again, sometimes there are grace periods to that name protection. 

The inability to get a good standing certificate, which I had mentioned before, which usually happens right with the loss of good standing, inability to bring a lawsuit, you'll not be able to bring a lawsuit against an entity that's not in good standing. So that's pretty crucial. Compromised ability to do business. This, again, goes back to what I was saying about delays in closings or bank accounts, things like that that come from being not in good standing or revoked in a jurisdiction.

Certain things that come along with the revocation are penalties, fees, and interest that can occur. So if you do get revoked and you have to reinstate, this is where the penalties and fees will come into play. You'll have to sometimes even obtain what's called tax clearance through the department of revenue in relation to the reinstatement. And then that's where the penalties, fees, and interest can really start to accrue because they will go against the tax record in addition to just this secretary of state filing. 

And then again, the inability to open a bank account. You would not be able to do that if there was a loss of good standing.

Now, I'll send it back to Andrea to talk about international entities.

Andrea: Great. Thanks, Kimberly. So far in our discussion, we've mostly been referring to U.S. subsidiaries, but annual reports can pertain to companies with a global presence as well. Managing compliance, reports, and good standing can become much more nuanced and challenging if you have a broad global footprint.

We've kind of broken this down into a couple of areas here. U.S. territories, like Guam, Northern Mariana Islands, Puerto Rico, and U.S. Virgin Islands, they all have annual reports or equivalent filings. There's a critical difference that's more prevalent in jurisdictions outside of the United States, and that's the penalties incurred for missing filings. Kimberly highlighted some of the repercussions of missing these filings. And these can become even more severe when we're talking about business outside of the United States, to the point where there could be not just civil, but even criminal proceedings in some cases for falling out of compliance or good standing with those entities that are domestic outside of the United States.

Canada is kind of an interesting part of the world to talk about, and the requirements differ based on the domestic jurisdiction of a Canadian entity. An extra-provincial registration is an entity with a domestic jurisdiction that is outside of Canada. For example, it could be a U.S. entity, an entity domestic to the United States that is registered to do business in a province of Canada, or perhaps an entity that's formed at the federal level in Canada. Those extra-provincial registrations likely require that a registered agent be appointed and that annual reports be filed appropriately. Entities that are actually formed in and domestic to Canada commonly have additional corporate secretarial requirements beyond basic registered agent and annual reports. This could include things like annual general meeting requirements, Canadian residency requirements for some of your board members. So there are additional requirements for those entities that are domestic inside of Canada.

On top of corporate secretarial services to maintain other entities domestic outside of the United States, the compliance requirements really vary drastically by country and by entity type. But the penalties for missing these deadlines remains just as severe. Not only can missed filings worldwide cause months of additional work, they can also have serious legal consequences for your business and much higher financial penalties than we would typically see here in the United States.

Kimberly: All right. Let's take it back to the domestic side and talk about business licenses. Business license requirements, business licenses have requirements at state, federal, county, and civil level. Some filings are required in up to 160,000 different jurisdictions. Some of these licensing authority examples might include Department of Health, Department of Insurance, City of Newark. So those are going to come down to all different types of licensings that might have different specific requirements. So say a restaurant might need to have a liquor license. Doctor's offices will definitely be working with the Department of Health to ensure that they have all the different licenses that meet the requirement of whatever type of doctor's offices they may have. Basically, it just boils down to all of these business licenses are usually very specific to the nature of the business of the company or the purpose specifically that that company does perform and then the different license requirements that they'll need to obtain in order to perform such business.

Then it goes into annual report requirements. These are typically required for companies that are registered to do business with the secretary of state. And therefore, like we said before, annual reports are not always annual. They can be biannual, decennial, sometimes even due every five years when it comes to entity types such as non-for-profit companies. But these are generally always filed with the secretary of state or the equivalent within the state. So it's usually more of a high-level type filing requirement. Annual report requirements are sometimes referenced by other state agencies when filing documents for real estate or business licenses.

Entities file annual reports to maintain their good standing as we've talked about in previous slides. Basically, when you're talking about the annual reports, you think that the annual report requirements are always going to be more high level. They're going to require the officer or director, member management information, addresses and updates. When you think about a business license filing requirement, it's always going to be way more specific to the agency or the purpose or nature of business as we've discussed before.

All right. What to expect in 2022. More legislation changes are coming. Legislation changes are usually always coming. This means what you can or cannot expect on requirements of a report down to websites changing or updating, adding features, and/or filing options, things like that that are always changing with legislation. Usually, it's for the better and for the ease of the process, but not always.

States routinely change their process for notifications. We find that more and more states now going to zero notification and/or moving to more of an electronic type of notification. So emails are being asked during the filing process or somewhere along the registration, when you sign up to a specific state to handle a report or filing of a document. 

In times of economic uncertainty, many states are moving to electronic notifications, as I just said, or removing notices completely. So this is very common, and it's definitely challenging when you don't know that the state has completely removed the notifications, so then therefore it's on your own side to keep track of when these reports are due.

More legal departments will streamline corporate governance by using a registered agent for both annual report filings and entity management. 

As we said before, more states are accepting alternative signature options, such electronic signatures, and, again, with DocuSign or conformed signatures. And this really eases the process of filing documents in general, even when paper documents are still required.

Andrea: I'm really excited to transition our conversation now to talk about some of the benefits of partnering with CSC. Earlier on in our discussion, I mentioned CSC's mission, which is to provide world-class service and offer solutions that integrate the services that we offer along with powerful technology tools.

CSC is really unique in that we're not just a service company and not just a software company, but really a pairing of the two. CSC provides 24/7 access to CSCNavigator, the technology platform that complements the services that we complete for our clients. Later in our webinar, we'll take a look at a demonstration of the CSCNavigator platform and how data, documents, and information from CSC's registered agent and annual reports services will flow automatically into that technology. That technology is a software as a service platform, where our clients can log in securely and have complete visibility to what I really describe as their entity portfolio, things like the names of the companies, entity types, where they're formed and qualified, other critical information, like the dates of registration and status updates periodically that are coming directly from the secretary of state databases. 

This technology also provides clients with access to what we call a good standing calendar, which gives automated visibility in terms of when your annual report filings or other secretary of state requirements are coming due. Kimberly shared with us the challenges of trying to understand these different due dates when there are so many rules that can govern when they're actually due. Is it fiscal year end? Is it entity type plus the state? With all of those different nuances, the good standing calendar will remove all of that complexity from knowing and understanding the rules. All of those rules, so to speak, are built into the technology platform to give you a clear and clean insight into when those annual filings are coming due.

The tracker grid not only tells you the due dates, but it also serves as a centralized tool to help your team track and organize details, such as who's handling those filings, the status of the completion, notes, comments, payment amounts, check numbers, or any other items that you might want to be able to track or understand about these different filings.

Our clients can receive notifications in advance of these deadlines so that they can be sure to have adequate notice and stay on top of the filings. With that said, it's incredibly popular for clients to choose to leave the management of those reports and complexities to CSC. There are so many other responsibilities that you have in running your business, you can rely on CSC to quickly and accurately complete these reports on your organization's behalf automatically.

Notably, anytime CSC completes a filing for a customer, whether it's the completion of annual reports or even any other actions, like formations or dissolutions, name change, a DBA registration or renewal, a copy of that filing and the evidence that's received from the state that the filing was completed will flow automatically into the CSCNavigator technology. Those documents are uploaded and indexed by entity, and they're stored in the software tool forever so that you can have perpetual access to the filing in the secured and encrypted environment.

There's a lot of great benefits to the CSCNavigator software that we include with registered agent services. But it's important to note that CSC also offers an award-winning entity management solution. We have a number of organizations that will say, "I love that I can log in to your Navigator platform and get great visibility and transparency into my entity portfolio, but I want to go beyond that. I have custom data that I want to be able to track and report, or I want to start tracking officers or directors, or members and managers. I want to build organizational structure charts. Not only am I interested in having access to the documents that CSC files for me, but being able to upload my own documents into the system." Within our technology platform that we call CSC Entity Management, these capabilities, as well as other features, are made available to our clients. 

Within that platform that we call CSC Entity Management, these capabilities, as well as many other features, are made available to our clients so that you can click a button and get a visualization around your ownership charts based on your legal structure, or you could track officers or directors. You can create your online minute books or digital minute books inside of the platform. 

It also supports the creation of an unlimited number of custom data fields. So if there's information that you want to track beyond the basic data that CSC manages as your registered agent or annual report provider, you can leverage that customization capability inside of CSC's Entity Management tool. 

All of the data in the platform is completely searchable, it's sortable, and it's reportable so that you can generate strategic reports for auditing, tracking, or decision-making purposes. And probably the greatest strength of all, when we talk about our entity management platform, is that it's not a standalone database. It's built right on top of the basic platform that contains all of the data and documents that CSC automatically manages for you. So all of that incredible vetted data from CSC as a registered agent or annual report partner forms the foundation upon which your other data and document management can be built.

We talked a bit about the CSCNavigator technology that comes along with having CSC as your registered agent. We talked a bit about Entity Management, which is an upgrade that clients can take advantage of to go beyond having some of the basics that we maintain. 

We haven't spoken really about the benefits of having CSC as a partner in the actual completion of your annual reports for your entities. Kimberly, this is what you do day in and day out. Can you please share with our audience a little bit about the specifics of CSC's annual report services and some of the benefits that our clients can gain by utilizing CSC for that service?

Kimberly: Thank you, Andrea. Here are some of the benefits of using CSC for the annual report preparation and filing services. 

CSC will create an audit of all of your entity portfolio in every state, every jurisdiction, every entity type for you, and they will also determine the last filed annual report included within this audit that they will present to you at the onset of the services. This will determine where we pick up the next steps and proceed with filing the documents. 

You gain peace of mind and confidence in data integrity when you're working with a dedicated annual report specialist such as myself. We track the deadlines, prepare, and submit all of the documents for you.

We also offer many invoice options to fit your workflow. This can be from as they're filed to a monthly or summarized options for invoicing.

Okay. Let's talk about five questions that can evaluate your own process.

What assurances do you have that your organizations are in good standing and not at risk for paying penalties? So think about your current processes. What do you do to avoid filing late or paying penalties with your current process?

What is the process for transitioning annual report filings when the current person changes roles? Do you have a process? Is there no process? Is anyone even monitoring it now for you? 

What is your backup plan to file a report on time if the state's website goes down on a due date? Do you file early? Do you file close to the due date window? This is where CSC can certainly help in making sure that we're filing your documents and reports on time.

How do you keep track of PINs or access IDs that the states send out via postcard or letter, or even with the past annual report copy? CSC can manage this data for you as well. 

And lastly, how do you manage and keep track of the evidence of your filings? Do you keep them in a file folder? Do you keep them in an electronic file folder? Are they on someone's desk?

Here are some great options that you can analyze your current processes and see how CSC might be able to assist.