BRIEFLY SPEAKING: TOP 10 REASONS FOR DOCUMENT REJECTIONS
Completing corporate filings can be time-consuming and cumbersome—especially given the state and jurisdiction differences in filing rules. Plus, with different jurisdictions come more chances to submit a filing incorrectly.LEARN MORE
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In this 30-minute webinar, our corporate filings experts will cover the top 10 most common mistakes made in corporate filings, tips on how to avoid rejections, and how CSC can help.
Caitlin: Hello, everyone, and welcome to today's webinar, "Briefly Speaking: Top 10 Reasons for Document Rejections." My name is Caitlin Alaburda, and I will be your moderator.
Joining us today are Helena Ledic, Ruth Wilde, and Lizz Kitchen. Helena is an associate general counsel for CSC in the Chicago office. She is a business attorney with experience in negotiating commercial contracts, corporate governance, compliance, security, and privacy. Ruth is a workflow coordinator at CSC. Some of her responsibilities include training, coordinating schedules, processing work, and assisting both internal and external customers with inquiries. Lizz is a Wilmington-based service team leader with five years of industry experience with CSC. In her role, she leads a team of almost 20 corporate filers working in various states. In addition, she also assists with new hire training, implementing new processes, and contributing to new filing software within the company.
And with that, let's welcome Helena, Ruth, and Lizz.
Helena: Thank you very much, Caitlin. This is Helena speaking here. In today's session, which is "Briefly Speaking: The Top 10 Reasons for Document Rejections," the agenda that we're going to cover is first we're going to go into what is CSC, about CSC. We're going to look at the 10 reasons for document rejections. We got so excited with our 10 reasons that we came up with a few more reasons, and we're calling them the bonus reasons. And then we'll go into the Q&A portion of our presentation.
But first, a little bit about CSC. We like to say that we're the business behind business. We provide solutions for every phase of the business life cycle. We help to form entities, maintain compliance, execute secure transaction work, and support real estate, M&A, and other corporate transactions. We help manage, promote, and secure our clients' valuable brand assets against threats in the online world, and we offer a single tax and risk management platform. We work with more than 10,000 different law firms, 3,000 financial market customers, 180,000 corporate customers, and we serve 90% of the Fortune 500.
And with that, Lizz and Ruth are going to take us through the top 10 reasons for document rejections although you already got a preview to some of them.
Lizz: The first reason that we have is the agent address or name listed incorrectly. This matters because CSC has different names and addresses in each state. To fix this, double check that our name and address is current and correct. In most states, CSC's legal name is Corporation Service Company. In other states, such as Maryland or Nebraska, our name is CSC Lawyers Incorporating Service Company. CSC also moves locations frequently, and we tend to have filings with our old address listed. Double checking that our name and address is listed correctly on all filings will reduce rejections, ensure efficient delivery of service of process, and will also ensure any future changes in CSC's agent addresses will properly flow to your entity.
Ruth: Another common reason for filings to get rejected is because the signer information is incomplete or incorrect. This is important because most forms do require the signer's name, title, and execution date to be completed.
For Delaware specifically, an execution block must have the signer's signature, printed name, and title, and on some forms the execution date is required. LLCs most commonly used authorized person for the title, but any title will suffice as long as it's not incorporator. On the other hand, the only title acceptable for forming a corporation is incorporator. For all other court filings, it should be an officer that executes the document. There is an exception, and that's if the corporation truly does not have any officers and they don't have any filings on record that list officers, then an officer or a director can sign, but a statement then must be added to the document that states the corporation has no officers. For LP filings, they must have the general partner execute.
Lizz, how does it work for other states?
Lizz: In most states, other than Delaware, for a corporation, an officer must sign, but some will allow directors to sign. The vast majority prefer an officer though. The rules are much more varied for LLCs, with some states requiring a manager or member to sign, while other states will accept authorized person. LPs will require a general partner to sign. More to come on that later.
Ruth: In conjunction with the last reason, execution dates must be filled in. An execution date can be dated in the past or the date of submission, but it cannot be dated in the future. If your document has a future execution, your customer service professional will be in touch to verify if we're to hold the filing for said date or if it should be corrected to the date of submission. Please note if your signature is dated, it should also match the date of execution. For example, if your execution date is filled in as December 25th, 2021, but you date your signature as December 30th, 2021, this would be inconsistent and unacceptable. So you just want to make sure that both dates match.
The next reason is listing a past effective date. The reason this is important is because there are no states that will back-date a filing. And this is one of the common reasons Delaware filings do get rejected because the document will list a date that's already passed.
The effective date should be a future date, or it can simply state "upon filing." But should you need to list a date that has passed, you can add the phrase for accounting purposes only" after that date, just for it to be acceptable. But just remember it does not put your filing on record as of that date.
Lizz: While Delaware will accept past effective dates on filings for accounting purposes only, other states will not. Past effective dates listed on filings even by one day will be cause for rejection. Most states will, however, accept future effective dates up to 90 days in the future.
Ruth: And just to piggyback off of what Lizz said here, Delaware corporations can list a date up to 90 days in the future, but LLCs and LPs can list a date up to 180 days in the future.
So for this next slide, Lizz alluded to this reason a few slides back when we talked about the signer information missing. One of the top reason LP filings get rejected is because the general partner's name is missing from the execution or the wrong general partner is listed. When filling out your LP forms, the general partner record should be listed in the execution. If the general partner record has since changed, make sure you are filing an amendment to have that updated so that the new general partner can execute future documents. Delaware LP cancellations are the only exception to the rule, where you can add an article setting forth the new general partner's name and address so that this new general partner can execute.
Lizz: Our next reason is that the entity name is listed incorrectly. This matters because many states require supporting documentation for filing, so the information has to match exactly. This can be fixed by comparing the information on the form with the information on your supporting document. In Delaware, examiners at the state will compare forms with the information that is already on file at the state. The entity name must match the state site down to the punctuation.
Many foreign filings or filings completed outside of an entity's home state will require supporting documentation in the form of a certificate of good standing or a certified copy of the filing from the home state. The foreign state will then compare the completed form with those supporting documents, making it of utmost importance that the information on the form matches exactly.
Similar to the name of the entity matching, the records of the state or the supporting documents, the date of incorporation or formation must also match the records of the state or the supporting documents. In Delaware, if, for an example, an LLC filed a conversion to a corporation, that conversion date is now the corporation's formation date. Make extra sure you are comparing the information on the form with the information that is listed on the supporting document or the information that is already on file with the state.
Ruth: One of the other reasons that we see common errors is using the incorrect form. States can update their forms with varying frequency, so it's important to make sure the form you're using is up to date and it matches the type of filing that you're doing. I can't tell you how many times we receive an LLC cancellation for a corporation.
As important as it is to fill in the blanks of the document, it's equally important to read the heading and articles of the document just to make sure you grab the right form. So if the top of the form reads LLC cancellation, but you're trying to dissolve ABC Corp, that should be a clue that this document does not match what you need. Additionally, you should be visiting the state site or CSC site to ensure you have the most up-to-date version of the form. While the internet is your friend most times, this is not the time. You're welcome to self-draft a form if needed, but the state forms provided should not be altered. If you're unsure about the form you selected, please reach out to your customer service professional to assist.
Lizz: Very similar to the last reason, we receive documents that refer to the wrong section of law. This could be the simple fact that the wrong form was selected as mentioned previously, or it could be something more complex, like there are several [merger 00:11:23] sections of law and you're not sure which one the document should comply with. Google can be your friend here, and you can look up the specific state's law to verify it's accurate. But CSC is your friend too, and we're here to review and make sure the right section of law is referenced.
Ruth: Last but not least, we come across entities that not only forget to file reports and taxes to maintain their good standing, but they also forget that the current year reports and taxes are also due if you're trying to terminate your company. In Delaware, if you formed a corporation in 2021 but you're dissolving in 2022, you owe both '21 and '22 annual reports and taxes to leave Delaware. Even if you just formed your LLC two days ago, you would owe that $300 to merge, dissolve, convert that company. For corporations at least, if you're not a minimum tax company, your taxes will be prorated for the final report. Other than that, there are no exceptions to the rule.
Lizz: Filing annual reports timely is part of compliance for most entities in most states. If annual reports are not filed on time, many states will place entities in a status of not good standing or something similar. This not good standing status may prevent future filings from being able to be completed along with causing extra fees and penalties to be charged. In Georgia, for example, on January 1st of every year each entity is placed in the status of active, owes current year AR, and no filings can be completed on that entity until the current year's annual report is filed.
Ruth: Now to some of our bonus common errors. One of the things that we see are restricted words. Many states restrict the use of words related to their learned fields. So how you can fix this is seeing if one of the words in the entity name is restricted. For Delaware, any use of "bank" in the name will require a bank commissioner form to be completed. You can submit that with your filing, and the name will be subject to review by the Commissioner.
Another example, this just happened to me once, but an entity had the word "university" in the name, and because it was a degree granting institution the name did have to get sent to the Department of Education for approval.
Lizz: States restrict a variety of words within the name of an entity as well as the entity's purpose. Common restricted words are, as Ruth has already stated, insurance, architecture, engineer, education, and medical, including any variations of those words. CSC may be able to assist in obtaining consent for some of these words, though it does vary by state. Some states, such as Nevada, will even restrict words used in the entity's purpose. So while there may not be a restricted word in the entity's name, there may be one in the purpose that would require approval. Some less common words that are restricted are Disney in Florida, Razorback in Arkansas, and Olympic in Virginia.
Our next bonus common filing error is surrounding name availability. Most states have very specific rules regarding what names can and cannot be used that are close to another entity that has already been filed. It's always a good idea to do a name availability search in the jurisdiction in which you are filing before attempting to submitting the filing. This will show any conflicts and allow you to do research on how the name of the entity may be accepted. Some states will allow consent from the conflicting entity, while others will force you to choose an alternate name for use in that state. Texas, Oklahoma, North Dakota, and Arkansas are particularly picky. And sometimes a call to the jurisdiction is warranted to find out exactly what will and will not be accepted.
Ruth: And with Delaware, if you have the same entity name but different entity types, then name consent is allowed. For example, ABC Corp can give consent to ABC LLC to use the name. There are instances where Delaware will override a name conflict. If ABC LLC exists and you're trying to form ABC Fund LLC, while fund is a corporate ending, it does make a difference between two LLCs. However, fund between two corporations will not make a difference. Keep in mind buzzwords like "the" and "if," they all get dropped when viewing names as well as spacing.
The different rules tend to be tricky, and sometimes we're not even sure if it can constitute an override, so we will just send to the state for official review and rejection.
Lizz: Our final bonus common filing error is document legibility. Various states will reject documents for not being legible for many reasons, such as handwritten answers, photographs of forms being submitted, and signatures not being dark enough. If possible, forms should be completed on a computer. Signatures can then be applied digitally or by printing the completed form, physically signing, and then scanning the document for email submission or mailing the physically signed documents depending on where you're filing. Watch out for document smudges when scanning.
Helena: Thank you, Ruth and Liz, for walking us through the top 10 reasons for document rejections along with a few more bonus reasons. To help you manage your filings and your evidence, CSC has developed CSCNavigator, and the features of CSCNavigator include a compliance calendar, which automatically creates calendar events for annual reports and other filing obligations and sends you email alerts letting you know about due dates, automatically uploading your corporate filing evidence and service of process, so it adds that into your electronic library for rapid response and future reference. And there's also a corporate tracker, which monitors your entity portfolio and secretary of state records to detect events that may require your attention. If an entity's good standing status changes or if a name change occurs, our corporate tracker sends you an email alert notifying you of the change, and that is particularly important if you're dealing with bad actors on the internet. You can find out about that immediately.