Best Practices for Corporate Transactions

Navigating complex compliance and filing requirements

Please be advised that these free recorded webinar presentations have been edited from the original format (which might include a poll, product demonstration, and question-and-answer session). To set up a live demo, please complete the form to the right.

Corporate transactions can come with a host of complex compliance and filing requirements that are often necessary to complete under tight time schedules. Therefore, it’s critical that practitioners know best practices for these transactions. In this Continuing Legal Education credit-eligible program, we will highlight some meaningful points to consider when working on corporate transactions.

Join Helena Ledic, associate general counsel, Rob O’Byrne, strategic account manager, and Patrick Nolan, customer service representative, as we discuss these important topics, including:

  • Review of common corporate transaction work
  • Common challenges
  • Formations and qualifications
  • State-specific information
  • Mergers and acquisitions, and related filings

Webinar Transcript


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, "Best Practices for Corporate Transactions." My name is Annie Triboletti, and I will be your moderator.

Joining us today are Robert O'Byrne, Pat Nolan, and Helena Ledic. Rob is a team leader and strategic account manager for NLJ 250 law firm with CSC in the Manhattan office. He advises all levels within the law firm on strategy, service, legal, technology matters, day-to-day UCC, and corporate transactions.

Pat has been a customer service specialist at CSC since 2003, with over 35 years in the legal services industry. In his role, Pat provides exceptional customer service to business, legal, and financial professionals worldwide by helping form corporations, LLCs, and other business entities.

Helena is the Associate General Counsel for CSC in the Chicago office. She is a business attorney, advising senior management and law firms on strategy, business, legal, and technology matters.

And with that, let's welcome, Rob, Pat, and Helena.

Helena: Thank you very much, Annie. And before we get started, just a friendly reminder to our audience that this, of course, is not intended nor meant to be a substitute for legal advice or opinion. And if you have any specific detailed questions, it's best to consult with an attorney for those.

And then now let's get started. So let me tell you a little bit about CSC before we begin. CSC has been in existence for about 117 years. We're headquartered out of Delaware, and we have offices in four continents and, of course, throughout all of North America. But again, our headquarters are in Delaware.

And we work . . . you can see on our next slide over here is we work with more than 10,000 law firms across the United States, including virtually every single prominent law firm. We serve 180,000 corporate customers. We protect more than 65% of the best global brands, including 7 of the top 10. We work with more than 90% of the Fortune 500, and we provide solutions to more than 3,000 financial market customers.

So with that, let's talk a little bit about our presentation. Rob, Pat, and I are going to talk to you about best practices with corporate transactions. We're going to start off with things such as name availability, reservations, and registration.

Then we're going to switch gears and go into document retrieval. We'll talk about formations and qualifications. Lots of questions around qualifications. We'll end up talking about some of the common challenges that you come across in Delaware, specific things you need to know about. We'll go into amendments, dissolutions, and withdrawals, and then we'll also look at mergers and acquisitions and we'll finish up with a question and answer session.

So what we're going to do now is we'll start off with name availability, reservation, and registration, and Pat is going to get us started off with that. Pat.

Patrick: Thank you, Helena. And welcome, everybody. The first topic we're going to talk about is name availability. It's a very simple procedure, but a very important one, and it should be done at the beginning of every corporate formation. And what it is, is it's a verbal check by phone with the secretary of state or the state agency that files corporate documents to make sure that a name is available. For states that have a live database, we can do it on the live database that's provided.

If there's supposed to be some time between the formation of the entity or if you expect that there should be some time between the formation of the entity and the name availability search, it's always a good idea to reserve the name. Every state for a filing fee and short application will reserve a name for a specific period of time, which varies from 30 to 60, up to 120 days. That name can be renewed in most cases.

But there are other cases where you may not wish to reserve a name if you plan on forming the entity quickly. In some states, it takes a couple of days or a few days to file the name reservation, and once that procedure has started, you usually can't file the underlying document until you have the name reservation certificate. So if you plan to move quickly, probably not a good value to reserve your name. But if there's going to be any kind of downtime between those two, you should consider a name reservation.

The other point on the slide is not as common as name reservation, but it's more of a long-term way of protecting the name, and that is named registration. What that is . . . the caveat first is that a company has to be in existence.

And then let's just say you might have a West Coast enterprise that's incorporated in Nevada, doing business and qualified to do business up and down the West Coast, but it has plans to expand east. They don't want to qualify to do business. So we are going to talk a lot more about qualifications down the road, but they don't want to qualify to do business right away because they'd be paying taxes needlessly in jurisdictions where they're not doing business. So they may be a good candidate to consider name registration, and about 45 of the 51 U.S. jurisdictions permit name registration.

But again, the company has to exist somewhere. You have to fill out a form and attach to it a good standing certificate, which we're going to talk about in a little while, and that good standing certificate is proof that the company exists. And then that is good for a year, and you can renew it if you're still not ready to qualify or form the entity in the state where the name is registered.

Okay. Now, there's also, besides the fact that you have to check with the state to make sure the name is available, you also have to give some thought to words that are contained in your proposed name, because certain states there are prohibited words. In that second bullet point there, there's some examples, such as bank, finance, trust, insurance. Words that indicate that you possibly could be a bank or an insurance company, usually there's a red flag behind them. So it's always best to check not only to see that the name is available, but that, you know, you won't run into a roadblock with a prohibited word.

An example of that is a name in the state of New York will say the word "bank" is prohibited. So you might want to form an entity called 123 Bank Street Holdings Corporation. Now, clearly that's not the name of a bank, but simply because it contains the word "bank," you'd have to get consent from the Department of Financial Services, and that could take quite a while to obtain. So it's always good to pay attention to those words.

Okay. So every state is different in how they view name availability. Some states, so long as there's one simple, distinguishing characteristic, such as a Roman numeral, they will let a company in with the pretty much exact same name. Other states are tougher. If the first two words are the same, like you might have Nolan Industries of Delaware, and you then may want to form Nolan Industries of California, Inc., California would probably object to that because the first two words are the same.

So the other thing to be mindful of is that even if you are told in a name check that the name is available, that's not a guarantee of anything. You would have to reserve the name. But let's even say that you reserved the name, that does not mean you're scot-free to use that name in any form or fashion. If the company is going to be marketing or selling a product or a service, it's always good to do a trademark search to make sure you wouldn't be infringing on another trade name.

Okay. Now, let's just say that we've checked the name, and the state has told us that it's not available. This is what the state will provide: the name of the conflicting corporation, of course; its state of incorporation or qualification; the date of its incorporation or qualification; the name and address of the registered agent and office; whether the state will accept a consent to use the name; and whether the state will accept the use of a fictitious name.

Why would they give you the name of the registered agent? Well, usually in a lot of cases, that's the only individual or entity that you can obtain when you're checking the name. So if the state does allow you to get a consent from the entity that's already using the name, one course of action is to approach that company through the registered agent.

We're also going to spend a little bit more time down the road on discussing the of fictitious name factor. So with that, we'll just move on to the next slide.

Okay. For those states that permit consent, most do not have a specific form. Some states have their own state form, and you would have to use that. Other states that do not, Delaware being a primary example, the consent should be on company letterhead. So Delaware is also unique in that let's say, again, if you had a company — again, I'll use the example, Nolan Industries Corporation — that's formed in Delaware, and for whatever reason, the management of that company wanted to form Nolan Industries, LLC. Those names are pretty much identical except for the corporate indicator. But Delaware will accept consent if Nolan Industries Corporation, on their letterhead, signs a letter consenting to the use of name, Nolan Industries, LLC.

Now, who signs that letter is governed by the type of entity that's giving the consent. So if it's an LLC giving the consent, it would be signed by a member, manager, or authorized person. If it's a corporation granting the consent to an LLC, any officer of the corporation would sign the consent. If it's a limited partnership giving consent, then the general partner would sign.

Helena: Thanks, Pat, for taking us through the name reservation and registration process. Now what's going to happen is we're going to go through the document retrieval process, and Rob is going to get us started off with that, talking about document retrievals.

Robert: Thanks Helena. So document retrieval is another transaction that is quite common. Most documents can be obtained that are filed with a state or county or federal agency. Some documents that are not public and cannot be retrieved are often required for closing or other financial transactions. Examples of them are bylaws, which are the internal rules of a corporation, or operating agreements, which are the internal rules of a limited liability company.

So why would you order a good standing? Probably the most common reason a good standing is ordered is it's used for a financial transaction, where we want to show a financial institution that the company is in good standing in the state that it's formed or qualified. Another reason you would obtain a good standing is to qualify to do business in another state, and Pat will talk about that a little later. The last reason you might order a good standing is just for an internal health check to make sure the entity is in good standing and its annual reports are filed with the secretary of state.

One thing to note is the name of good standings vary in each state. For example, in Delaware, it's simply called a Certificate of Good Standing and will state that your franchise tax is paid. But in New York State, it's referred to as a Certificate of Status, and Texas calls it a Certificate of Existence. So if you ever reach out to CSC, we can let you know whether the entity is in good stand- . . .what type of good standing is offered from the state.

Another thing to note is time frames vary in each state, and most states allow you to obtain it electronically. For example, in Delaware, we can obtain a good standing in a matter of minutes, but in California it takes three to five business days.

All right. The most common type of good standing is the short form good standing, but there is a long form good standing that is issued in most states. A long form certificate will list all the documents on file for an entity, but it does not give copies of that document. While the short form just lists that the entity is in good standing and taxes are paid.

One thing to note is long form good standings are a lot more expensive. For example, in Delaware, a long form cost $175, whereas a short form costs $50. Another reason is time frames greatly with long form good standings. For example, in California, a short form takes two to three business days, but a long form can take anywhere from 7 to 12 business days.

Now I'm going to turn it over to Pat, and he's going to talk about bring down letters.

Helena: Actually, Pat was going to talk to us about tax status certificates.

Robert: Oh, sorry.

Helena: Pat, you might be on mute. And it looks like Pat might be having a little bit of technical problem with his audio. Pat, if you can take it away . . . or I'm sorry, Rob, if you can talk to us about tax status certificate.

Robert: Not a problem. Yeah.

Helena: Thank you.

Robert: Tax status certificate is . . .

Patrick: I sincerely apologize.

Robert: Not a problem, Pat. I got it.

Patrick: Sorry about that, Rob. I got booted.

Robert: Tax status certificate is any certificate that's issued from a department of taxation. One thing to be aware is roadblocks with these. Unlike the good standing, it could take six to eight weeks to obtain in New York, and certain states will not give to third-party vendors without a power of attorney.

Now I'm going to turn it over to bring downs and give it to Pat.

Patrick: And this time I'm here, Rob. I apologize folks for that drop there. Okay. A bring down. Well, we've talked a little bit about getting good standing certificates for a financial closing, and a prudent legal professional would order these documents, you know, well in advance in the closing to make sure that everything is set when the closing day comes. If you wait too long to get the good standing certificates and they're not in good standing, you could be shuffling to try and play catch-up and get them back in good standing to get the certificates in time for the closing.

So what may happen is if you have your certificates, and let's say they're dated June the 15th and your closing is coming up on July the 1st. The other side may say, "Well, how do we know that the company didn't fall out of good standing between June 15th and July 1st?"

And that's where the concept of a bring down comes in. And what that is, is it's a letter on the service company letterhead that we send by email electronically on the morning of the closing, and it bridges the gap between the date on the certificate of good standing and the date of the closing. So it's very common to get them for financial closings, [inaudible 00:16:29], real estate closing, things of that nature.

Now, Rob had mentioned time frames on good standing certificates. I'm going to turn this around a little bit, but sometimes a bring down certificate is used in advance of a good standing certificate. Like let's say you need to get a long form good standing certificate from California. And on their best days, as Rob mentioned, that takes like 7 to 12 days. Lately, with the way things have been going, it can even take much longer. So if you do need that long form good standing certificate but still want something up front that shows that the company is in good shape, you can order the bring down certificate in advance of the actual certificate.

Okay. Now we're going to talk a little bit about certified copies. As Rob mentioned, every document that's filed with a state agency or a federal agency can be retrieved. And you can either get plain copies of the documents that are on file, which just have a stamp on them from the original time they were filed, or a certified copy, which means that the state either rubber stamps it or attaches a separate certification page, as is the case in Delaware. It states that it's a true and correct copy as of a certain date. And those are most commonly used for financial closings. The other side wants to see the recent date on the certification page. There's no set rule on that, so you should always just check with the other side to make sure how long back they'll accept a certified copy.

Another reason to obtain it might be to . . . we're going to, again, talk about qualification, but when you talk about qualification, there are not only an application that has to be filed, but supporting documents, and sometimes that supporting document takes the shape of a certified copy.

Another reason you might order certified copies from a state, let's say your name has changed and your bank still has you under the old name and they want some proof that the name of the company has changed. You can just order a certified copy of that name change amendment. And again, we'll talk about amendments in a little while too.

All right. So we've discussed when you would order a certified copy, and what it is, again, is it's a rubber stamp copy, with the separate page in the case of Delaware State, stating that it's a true and correct copy. They take different names in different states. As Rob had mentioned with the good standing certificates, certified copies can be different things too. For example, in Delaware, it's called the certificate of incorporation. California might call it articles of incorporation. For LLCs, in New York, you'd file articles of organization, whereas in Delaware you'd file a certificate of formation. For limited partnerships, it's pretty consistent. It's usually a certificate of limited partnership or a partnership agreement.

That last little point there, restated certified copies, it's kind of not too common of a thing to talk about, but I think very, very important to pay attention to. And I like to use the example of American Telephone and Telegraph Company. It's a New York company. It was formed in 1885, and they've only had one name change, believe it or not, to AT&T Corp in 1984, but they have countless number of amendments on file. Every time they have a stock split or something like that, they usually have to file an amendment to change their authorized shares, and that's another document on file. So if you go to order a full set of certified copies for a company like that, that's been around for over 100 years, it can not only be very cumbersome to carry around to a closing, but also very costly because most states charge by the document. Now New York isn't too bad. They charge $10 per document for a certified copy or $5 for plain copies. But if you're talking hundreds of documents, that can add up.

So what a prudent corporation will do from time to time, the board of directors will elect to file a restated certificate. And what that document does is it restates and integrates into one document all the previous charter provisions.

With that, I'm going to turn it back to Rob, and he's going to tell us a little bit about legalization and authentication of documents.

Robert: Thanks, Pat. So legalization, authentication, those terms are thrown around quite loosely, but I'm going to talk about the process of those.

If you're going to use a public document or even a private document, like a power of attorney in a foreign country, there are steps that the document will have to go through to make it acceptable in that foreign country. The majority of countries are members of the Hague Convention. With those countries that are party to the Hague, the document only needs an apostille from the secretary of state. For example, if you have a Delaware good standing needed in France, the Delaware Secretary of State would just attach what's called the apostille, and the document can go directly to France, bypassing the U.S. Department of State in D.C. and the conflict of France.

Another process is called authentication, and that's for use for countries that are not party to the Hague, such as China or even Canada. Authentication is the process of verifying a document that's been certified by a secretary of state. Again, I'm going to use a Delaware good standing needed in China. The Delaware Secretary of State would have put the seal on the document, and then the document would then go to the U.S. Department of State in D.C., where it's verified, and then go to the consulate of China in D.C. Upon completion, one thing to note, roadblocks with countries that are not party to Hague, they have application processes, and also they are not timely.

So now I'm going to turn it over to Pat and . . .

Helena: Thank you, Rob.

Robert: Okay.

Helena: Oh, I was going to say thanks, Rob, for taking us through that legalization and authentication process. What we're going to do now is we're going to end up jumping into the topic of formations and qualifications.

And so one of the things that we've been talking over here a lot about corporations and LLCs, but that's not the only thing that people, the types of entities that you can form, not just in the actual formation process, but also the qualifications. So, of course, those LLCs and the business corporations are the most popular, but there are also a variety of things, such as limited partnerships, sole proprietorships. There can be closed corporations. And let's not forget for the entire charitable world, all of those not-for-profits that are out there or the non-profits.

We'll also see frequently professional corporations. So if you think about perhaps the medical practice that you might be using for your primary care, you know, they may be called something like, you know, Delaware Medical

Associates, something like that, and they'll have a PC after that. And I don't know if this works for in Delaware, but that PC will be for Professional Corporation. So you'll see that frequently with things like medical, dental practices, and also legal practices. And then you'll also see those PLLCs.

So the next thing that we want to talk about a little bit is those steps for formation. So Pat and Rob have taken us through this process over here, about knowing that you have to check for your name. You have to make sure that that name is available. You need to end up registering that name. And it's very important, they've touched upon this earlier, but to also talk about the trademark clearance issue. And if you are dealing with anything that could be consumer-facing or in any way that could be construed consumer-facing and might have a presence on the internet, it's really best to do that trademark clearance search over there just to make sure that you're not going to run into any conflicts with any other entities. Okay?

So I happen to know that one of my neighbors, she had an Instagram account, a teenager, and it was the name of something and she had formed it and it was a consumer product that came out. Well, that consumer product company reached out to her and offered to buy it from her. But that's just best to know about those types of issues ahead of time.

The companion to that is to make sure that your domain name registration. So if you're going to be on the internet in any way, shape, or form, anything that would be consumer-facing or certainly business to business, you need to make sure that you've got those domain names registered, so that internet presence on there, and that will prevent you from having to have one of those unusual internet names that we'll sometimes see on the side of like a truck for, you know, maybe an electrician or something like that, where that name wasn't available on the internet.

So along with that, we we've been talking about you need to prepare and file those formation documents. We've been talking about those, both for your registrations and your normal entity formations and then your qualifications. But it's also important that you're aware that, depending on your entity, that you might need things such as minute books, the bylaws, stock certificates, corporate seals, and often you can buy that as a corporate kit from a third-party vendor where things are packaged up together.

Another thing that's also very important to know is that you may need a federal tax ID. So make sure that you get the advice upon counsel of whether or not you might need to get those after you've actually been formed.

And one other thing that sometimes that we will hear from CSC is that people who are forming entities, depending upon what type of business it is, that they may need business licenses. I believe that there's something like 140,000 different licensing jurisdictions in the United States, and requirements will be different in different areas. So medical practices may need a certain variety of licenses in my area. I'm located in the Chicago area. But they may not need that in New York, where we're Pat and Rob are, versus Delaware, where we have so many other folks. So depending upon your business, you might need to be checking into those business license requirements.

So our next slide, Pat is going to take us into the registered agent representation and talk to us about why you need to have a registered agent.

Patrick: Thank you, Helena. Okay. Almost every state in the United States has a requirement for a registered agent. A couple of exceptions that come to mind are my own state of New York and the state of Pennsylvania, where you just need an address or a registered office.

Now, the duty of the registered agent, primary duty for sure is to receive and forward service of process. So you want it to be a dependable person that's, you know, always available and that knows the seriousness if they're served with litigation.

The other thing that the registered agent might be charged with is the receipt of tax notices or other things that will need to be addressed to keep the company in compliance in the state. So that's another duty of a registered agent.

From time to time, other communications. Like we mentioned earlier, we'll just say CSC was the registered agent for a company and somebody tried to get the name of our client. They may direct their letter to us. Now, we're in no position to say whether the company will give consent or not, but we would then forward that type of communication on to our client, and then it would be up to them to respond with how they felt about signing the letter of consent.

Okay. Now we're going to talk about qualification. You have an entity formed. Helena just took us through all those steps that had to be done to form the entity, and everything is in great shape, but now it's branching out. So just by virtue of the fact that you have a Delaware company that has an FEIN and, you know, might have had a license two, or did a trademark search, it's only entitled to do business in its state of formation, unless it goes through this procedure qualification. And that's the process of registering that domestic corporation by filing a separate form and paying a separate fee to that state. And once you do that, you're qualified to do business.

There may be some other ancillary requirements, like in the case of New York, there's a publication requirement for LLCs, which we might touch on again in a bit, or in some states, Kentucky comes to mind, there's a recording requirement, so you'd have to record it at the county after you've filed with the secretary of state.

So we briefly discussed fictitious or assumed names earlier. Now we're just going to discuss the two different types and when they're used.

The first type of assumed name is the good type, a voluntary assumed name. Now, that might be used where we'll say you have the company, Nolan Industries Corporation, that's a bakery, and it's making a special brand of cupcakes called vanilla swirls. Well, they don't want to form a separate corporation called Vanilla Swirls, but they want to do business under that name. So what they might do is file a voluntary assumed name that says that Nolan Industries Corporation is doing business as Vanilla Swirls in the state of New York. And once that's filed, they're good to go under that name.

That filing, in most cases — I think there are only two states that protect assumed names — those names are not protected. So as many people as want to, somebody else could come along with another corporation and file that same name, Vanilla Swirls in New York. But what it is, it's not protection of the name, but more so for protection of the public. So if somebody ate one of my vanilla swirls and got food poisoning and wanted to take me on a trip to court for the day, that's an example of when they would check the state's records on that assumed name and find out that Nolan Industries Corporation is the entity behind it.

The other example is a forced fictitious name or assumed name. That's the bad kind. That usually happens when you haven't done your due diligence at the beginning of the procedure. You didn't check the name or reserve the name, and when you go to file your qualification papers, you find out that the name's not available.

Now, the states want you to be in their state. They want you to come in and pay them taxes and pay them filing fees for annual reports, etc. So there's ways around everything. And one of the ways is this forced fictitious name. And that could be as simple as, in my state of New York, that you just say in line one of your application the true name of the corporation is Nolan Industries Corporation. The name which it will do business in, in New York is Nolan Industries of Delaware or Nolan Industries of Brooklyn, or something to that effect, some distinguishing characteristic that allows the state to accept it.

Other cases, state of New Jersey comes to mind, you need a board resolution. The board of directors for a corporation would have to sign a resolution, and a copy of that would have to be provided to the secretary of state.

In more cases, there's a separate form that would have to be filed. So you might just have to file your application for authority to get you qualified and say in that what your fictitious name is, or on top of that, then file a separate certificate of assumed name to complete the process.

Okay. At this point, Rob is going to take us on a little trip discussing annual reports.

Robert: Thanks, Pat. Annual reports are the documents that most states require you to file to keep your entity in good standing with the state. The annual report is just a yearly update, and you can usually update your current officers and directors if you're a corporation and your managers, if you're an LLC.

One thing to note is not all states have annual reports. For example, New York State has a biannual report, which is due every two years. In Delaware, for LLCs, only has a franchise tax that is due.

One thing to note is it's very important to keep updated the address on file with your registered agent. From our experience, if there's one thing that can halt or slow down a successful closing, it's where we can't obtain a good standing is due to the fact that the annual report has not been filed.

Most annual reports are filed electronically. All Delaware annual reports must be filed electronically as well as Connecticut, New Jersey, Nevada, Oregon, and Virginia. A majority of states have now moved on to an electronic process and do not file paper copies.

Helena: Thanks, Rob, for taking us through that. And now what we've included over here is a business entity comparison chart. One thing I do want to let you know is we've gotten a couple of questions into the chat. You can download this presentation, but then we also have a couple of separate charts that are freestanding documents that you can download, and I believe this business entity comparison chart is one of those. And what we've done is we've put together the different types of entities that are out there and just giving you a really quick, little rough snapshot of what's going on with them.

So, for example, with LLCs, we've got the C corporations, the S corporations, some partnerships in there and sole proprietorships, and then we run through things such as who, in fact, owns that business. So for the LLCs, it's a member. But if you're talking partnerships, then you're talking partners over there.

The question that will come through is that personal liability for business debts. LLC will not have any of that personal liability for the members.

So then we'll also go through there and lay things out on this grid for you, this chart on the restrictions on the type of business that you can have, the number of owners, and then who should happen to make management decisions.

And again, that's available for you to go through those so that you can end up downloading those if you want to, for everyone listening in the audience.

The next thing, what I want to do is what we're going to do is we're now going to switch gears and we're going to go through talking about some of the common challenges that are out there. And then we'll be talking specifically about Delaware because there are so many formations in Delaware. And then because so many folks that are on the phone are in New York state, we're also going to be talking a little specifics about New York. So Pat is going to get us started off with looking at some of the common challenges with formations.

Patrick: Thank you, Helena. Okay. We've discussed your formation, and that is your domestic state. The state where you incorporated is also called your home state or your domestic state. When you go to branch out and you get qualified to do business, that's considered your foreign state.

Now, we discussed that earlier a little bit about a supporting document. In most cases, almost every state where you qualify to do business will want some proof of your corporate existence from your home state or your domestic state, and that takes the shape of either a good standing certificate, which most states ask for, or a certified copy of your charter documents.

We're also going to discuss Delaware and New York best practices and the cutoff times for those states. Delaware offers a plethora of different options for expedited service. And Rob's going to walk us through that in a little bit.

We'll also talk about filing dates. A filing date is the date, obviously, that a document is filed. Now, that's not to be confused with an effective date. A lot of times, especially for mergers or maybe for dissolutions, most states will allow you to put in your document an effective date. So you could pre-file it and it won't take effect until that effective date. It's very common at the end of your fiscal year, or let's just say you got a calendar fiscal year and you want to get your companies cleaned up so they're not paying taxes in the new year, but you don't want to wait until the last minute when the holidays are around and everything is going bananas. So you would file the document, we'll say in early December. Filing date might be December 15th, but the document would have a clause that says the effective date is December 31st, and that way you're there for the full year.

Every state that you make a filing in will provide you evidence. Proof of filing is another way of saying it. In most states, it's a file-stamped copy of the document or a certified copy, or in some cases, like a receipt. New York state issues 8.5 by 11-inch piece of paper called a filing receipt. That is the official evidence from New York. But because most people just think it's a bill because it's got the filing fees amounts you paid on it, it's prudent to get a certified copy. If you use our company, we would automatically get you a certified copy because it's only an additional $10.

Another thing to maybe be mindful of, especially for big transactions like mergers, is pre-clearance. Now, what that is, most states permit it, not all do, but you would submit a document in advance that's not signed and ask the state to pre-clear it. They'll do it. You know, they charge you . . . there'll be a filing fee to do that, but they will write back and then tell you that either your document is acceptable for filing or what issues there are that you have to correct before they'll accept the executed copy. In the case of Delaware, we'll say if you're doing it for a merger and the outgoing company in the merger — I know we're jumping ahead here — but it has to pay taxes. They'll also say what taxes would have to be paid to get the company so that the document would be filed successfully after the pre-clearance.

We've mentioned New York. This is in there because it's been in the statutes for quite a long time now, but every LLC, whether foreign or domestic, and every limited partnership, whether foreign or domestic, has to publish. You're given 120 days to publish, and it can get quite costly. What triggers it is that every document you file in New York — and we'll talk about this on the next slide, I believe — you have to say what the county location is, and that triggers the venue for publication. Now, if it's New York County, Manhattan County, you're going to get . . . well, the "New York Law Journal" is one of your papers, which on its own is over $1,000. And then if you get "The New York Times" or the news, you could be looking at up to $3,000 in publication costs. So if you're a small startup company with limited funding at the beginning, it's just something to definitely be aware of.

So now I'm going to turn it back to Rob, and he's going to tell some of the Delaware best practices.

Robert: Thanks. Thanks, Pat. So for Delaware's best practice, this is some of the most common errors that we do see. The execution date is left blank, inconsistent entity names in the filing where periods or commas are missing, document not signed, or inconsistent use of registered agent name or address.

One thing to note about Delaware is you get five business days to correct a document. So if you submitted a document today and it was rejected by the Secretary of State, you would get five business days to correct the document and you would get today's file date.

One thing to note is Delaware is very pro-business, and it is open to 11:00 p.m. Eastern Standard time each day, except on holidays, and they do offer a plethora of services. For example, they have same-day service for $100, $200, two-hour service for $500, one-hour service for $1,000, and they have a 30-minute service for $1,500. But even if you submitted a document on a routine service, it's going to come back in three to five business days.

Now Pat is going to talk about New York best practices.

Patrick: Thank you, Rob. Okay. Again, these are documents and the majority of reasons why the state may reject them. And unlike Delaware, whereas Rob mentioned, if you submit a document and it's rejected, you have five business days to get the document back in there and still retain the original date, New York and most other states, or at least half the other states will not honor that date. So you're starting the whole procedure early.

So it's especially important for you, if you, you know, want a document filed the first time around, to make sure you don't have these errors in the document. And that is, again, that county that I mentioned. A lot of times they don't ask you for the address of the business in New York, but they do want the county. And as I mentioned, that determines the venue for publication.

Another thing I think I mentioned earlier that the Secretary of State is the agent for all corporations, all business entities in New York. You don't have to designate a registered agent. You can, if you'd like, but you do not have to. But what you do have to do is give the Secretary of State an address to which he or she can forward service of process, and that address must be in the United States.

Another thing we see that, you know, would cause a document to be rejected is that the name and capacity of the signer is not on the document. So a lot of times in haste, you know, the officer will sign the document, they'll forget to put in the date in the execution paragraph, or the name and title has to be submitted underneath it, so John Smith, Vice President. That's an example.

Another thing that happens more than you'd believe is in New York, and as I mentioned earlier in most states, when you go to qualify, you have to attach a good standing certificate to your application for authority. So you have to make sure . . . you want look and make sure that that good standing certificate lists . . . Well, the good standing certificate will have the correct date. It's very rare that you'll see a state make a mistake on the date of formation on a good standing certificate. But you have to make sure it agrees with the date of qualification that you have put in the application for authority.

Another thing pretty unique to New York is the concept of a backer. Every document filed in New York State has to have either a separate backer or at the very bottom of the document, a lot of the State's fill-in-the blank forms have it pre-printed at the bottom, but you have to fill in the title of the document, the sections of the law, the name of the company, and the filer. Now, if you use a service company, even though that service company may physically be filing the document for you, they're usually not listed. It should not be listed as the filer. It's either the company itself, or it's very common that we'll see the law firm that prepared the document to list their name on the filer section of the backer.

Helena: Thanks very much, Pat and Rob, for taking us through some of the nuances with Delaware and then New York.

And that brings us to this slide of talking a little bit about why do entities, why do companies, why do people choose Delaware so frequently? And that's something that a lot of people, they always just hear Delaware, but they don't really know why.

And the first thing that I want to talk about is the Division of Corporations. I think that you've heard from Pat and Rob about how other states can be slower. You know, Pat mentioned the time frames of being able to get back a good standing certificate from California, that there are states that there may be roadblocks with tax issues and so on. The Division of Corporations in Delaware moves really very quickly. Prompt, friendly service. They explain to you what the issue is. If there's a rejection, they let you know. They give you those five days to be able to correct something.

And back on that other slide that we were looking at, there were so many different filing options. And, of course, the quicker you're filing, the more expedited, the greater your fee is. But for those entities that do need something done very quickly, they have that option. They may not be able to get that in other states.

So that is one side of why so many companies, so many entities like choosing Delaware, the Division of Corporations. But then there is also the Delaware business statute and then the Court of Chancery.

And so one of the things to know about with the Delaware statute is that it's meant to be very flexible. The Delaware statute has been copied in many states. In some of them, it's been copied entirely, or certainly virtually every state, I believe has taken bits and pieces from Delaware of different entities and broadened the rule. And it allows for the most flexibility for the entity and for those shareholders over there. It's meant to be very pro, friendly. It's been simplified with the drafting, and it maximizes that flexibility. And there's a bias against regulation.

And then that brings us then to the Court of Chancery. And so many times people, they hear about the Delaware courts. Well, the Delaware courts are very unique, the Chancery Court, is that it hears no other cases other than business dispute cases. It doesn't hear domestic relations. It doesn't hear cases criminal, or your conventional torts of, you know, your personal injury type of cases. So it allows those Delaware Chancery Court judges, those chancellors over there to really delve into the Delaware law. And they take great pride in expediting the docket, that there are no delays. They hear things very timely. When they set a trial date, it's very infrequently moved, unlike when you hear things in other states and other jurisdictions. So that's a lot of the reason why that's there.

And the Delaware case law gives certainty to corporations. It helps them make their business decisions when they're looking at things and most other states and also the federal courts end up looking at Delaware of how they have ruled on particular issues that those other jurisdictions haven't.

So that's a little bit of a nutshell over there of why Delaware is chosen. It's not just the service issues, but it's also the statutory law and then the case law that's in there.

So with that, we're now going to move into the topic of amendments, dissolutions, and withdrawals, and Pat is going to get us started off with that.

Patrick: Thank you very much, Helena. Okay. In most cases, when you make any kind of a change to your charter provisions, you have to file an amendment in your domestic state. The most common example of that is if you decide to change your name for whatever business reason. So you would file a certificate of amendment alerting the state that you're changing from ABC Corporation to XYZ Corporation. By virtue of doing that in your domestic state, you're not done. If you're qualified to do business in 49 states or 2 states, each one of those states, you have to make a separate filing. The State of Delaware or no domestic state will notify any other states on your behalf. So in most cases, what the document is called is a application for an amended certificate of authority. So if you are going to change your name, it's always best, as we discussed earlier, to check that name and possibly reserve it to make sure that it's available for your use consistently across every state where you're doing business.

This slide goes on to give other reasons for filing an amendment. Again, the most common is corporate name. If you want to increase your shares, if you're a corporation and you started out small with perhaps 200 shares, no par stock in New York, which is the maximum you can have to pay minimum fees, but decide now things are booming and you want to go public, so you want to have like maybe two classes of stock, a million voting and a million nonvoting, you'd have to file an amendment and spell out everything in that of how the shares would be different.

Other things you might have to file an amendment for is it was very common back in the old days to file a certificate of incorporation and put in it a limited duration. Matter of fact, some states didn't allow you to have perpetual duration. They may say that you could only be around for 50 years. So if you want to extend your duration and become perpetual, you would have to file an amendment to do that.

General partners, if you have a limited partnership and that company, that limited partnership wants to add partners, you'd have to file an amendment to add the general partners.

Now we're just going to spend a minute or two talking about dissolutions and withdrawals and the different types. Again, like the story before, there's the good type of dissolution and the bad type of dissolution.

A good type of dissolution is a voluntary dissolution. You have a company. It's a, you know, maybe a lot of money, hopefully, but at some point you want to wrap it up. It's no longer doing business. It doesn't want to continue to pay taxes. So that's an example of where you would want to do a voluntary dissolution.

The involuntary or the bad type is where, hopefully, you're still making a lot of money, but you fail to file your annual report or did something else and the state involuntarily dissolves you. So that is an example of an involuntary dissolution.

If you're qualified to do business in a state and you didn't file your annual reports, the term given to that is a revocation. So you could be in good standing in Delaware and have paid your annual reports each year and if you are qualified but forget to maintain their compliance, you could be revoked.

Now, one thing to note on, well, involuntary dissolution or revocation is you can always, in some form or fashion, reinstate that entity. Sometimes it's as simple as just filing an annual report, the one that you failed to file, and you're back in good standing. Other times you might have to file a reinstatement application, or you may have to accompany it with a tax clearance. Or in some states where they don't allow you to reinstate, you have to requalify.

Now, articles of dissolution, as we said, is a document that's filed to terminate the existence of your company. It's sometimes as simple as just filing a piece of paper and you're out. In other cases, there may be very lengthy tax clearance requirements. Not to pick on the state of Pennsylvania, but they come to mind as they sometimes can take up to two years to issue the required clearances. You have to get a clearance from the Department of Labor, which is relatively quick, sometimes two to six months, but sometimes getting the Department of Revenue clearance can take up to two years. Delaware, as we've noted before, you just file a certificate, you've paid your taxes, you're done.

Okay. Now, you dissolve in your domestic state and you withdraw in your foreign state, like the old SAT questions. But withdrawal is the legal process by which a corporation relinquishes its authority to do business. It usually takes the form of filing an application for withdrawal, and, as we mentioned, you'd have to get the tax clearance in some states.

I'm just going to spend a brief minute or two discussing mergers and acquisitions. Before I do that, though, I want to just go back a bit. When we were discussing withdrawals, I forgot to mention something that I think is a very important topic, and that's a way of doing a shortcut withdrawal.

I'm going to use my home state of New York as an example, but let's just say that you have a Delaware company and it's doing business in New York. So you're incorporated in Delaware. You have an application for authority on file in New York. If you cease your operations in New York but you want to stay in existence in Delaware, you have to file what's called a certificate of surrender. And with that, you have attached to it a tax consent. And to get that tax consent, you have to file a final return, and it can sometimes take as long as two to four months to get that consent that needs to be attached to the surrender to get you withdrawn.

On the other hand, if the company overall is shutting down its operations and you first file your certificate of dissolution in Delaware, you can avoid getting that certificate of consent and still get the company terminated in New York by simply getting a certificate from Delaware that states that the company has been dissolved there, and you file that in New York in lieu of filing the certificate of surrender with the tax consent, and you're out in like 24 to 48 hours. So not every state allows you to terminate in that shortcut fashion, but I just wanted to make sure I remembered to state that to you.

But now we'll just talk about the different types of mergers. There's usually two major types, a full-blown merger, and that's where the two parties are totally unrelated and in order for them to come together and result in a new company, you need not only the approval of the directors of each corporation but also the approval of the shareholders of each corporation.

Another type of merger is a parent-subsidiary merger, and that's more common, and we see at the end of the year when a company's doing like corporate housecleaning. It's common for a parent company to have several subsidiaries whereby they own 90% or better of their shares. And when they outlive their usefulness, there's no real shareholder approval needed because the parent company owns all the shares. So you would just file a simple certificate of ownership, and then the subsidiary is gone and off the taxpayer records.

Other names you might hear common are a parent-subsidiary merger upstream merger, and that's where the parent survives the merger. Or a downstream merger, that's a lot rarer, but that's where the subsidiary survives and the parent merges into it usually for tax reasons.

So one thing to note about mergers is that it takes a lot of planning. There's usually a lot more that goes into that than forming a company or even filing a certificate of dissolution. I mean, first, if it's a full-blown merger, you have to get both sides to agree on everything you need, not only the directors, but the shareholders. You might also be having to file amendments, and we'll discuss that in the next slide. But there's a lot of timing and planning that needs to go into it.

So if you anticipate a merger, the sooner you start it and plan out all that, the better you are.

As I mentioned, there's a lot that can happen in a merger. Let's say you have a company that is qualified in 20 West Coast states and it's merging with a company that's qualified in 20 East Coast states. Now, they get together and merge, but they want to . . . Sorry. They want to continue to get together and do business across the country where each company was located. So what has to happen there?

Well, the West Coast states company that's being merged out of existence, that company has to withdraw from all those states, and then the East Coast company that's the survivor, if it's going to do business in those West Coast states, it would have to qualify to do business in there. You might also see that maybe the two companies, when they come together, decide they want to combine their name and there's a name change as a result. So that's another filing that can take place. Sometimes it can take place in the merger. So there could be name availability searches. Pretty much all the things we've talked about today can be involved in a merger.

Okay. So just to wrap up on it, there's also post-merger filings that would have to be done. We mentioned that when the company that merged out of existence is gone, by filing that certificate of merger in the domestic state, you have to withdraw it from all the states it was doing business in. You might have to get tax clearances in order to do that. But in some cases, even if the state . . . if the company is not withdrawing from the state and is already qualified there, that state wants to know that you filed a merger in your domestic state. Illinois is a good example of that. You have to send them a certified copy of the merger and then file a different form, VCA form to let them know what might have changed in your financial structure because that's how they base all their taxes.

Helena: Thanks, Pat, for taking us through that. And one of the things that we have the materials here is we've got the "Mergers and Acquisitions: Transaction Continuum." We've broken it down by a few different categories — Due Diligence, Negotiation, Closing, Post-closing, and the very important, Risk Management.

So you can see that some of the different steps are on here. You know, there could be bleed-off into different areas. But just a couple of things to point out to you, folks, that depending on what it is that you're working on with your entities, you might need things like UCC searches. You might need to do as the negotiation process to have an escrow set up or to take care of things such as independent director services to get those lined up. And then as you're going through things, such as the post-closing, you may need to do things such as motor vehicle registrations, where all of your vehicles need to be titled in the new entity's name. So those are just some of the different things that you have over there in that continuum to think about, that might prompt some questions or some planning ahead of time.

The next thing that we're going to cover is a little bit of our additional resources, and Rob is going to get us started with that.

Robert: Thanks, Helena. So we do offer free access for CSC Global, which has a cluster of international corporate forms, UCC forms. So in this example, if you were going to be forming an entity in Florida, you would click on this, you search, and it would bring you to a procedural summary and access to the actual form. The procedural summary breaks down costs, who can sign the doc, and any nuances in that state. The thing about this is these are any changes in statutes in the state are updated in real time.

Helena: Right. And that's a great point to bring up, Rob, is that those are updated real-time on there. CSC monitors those every day. And if by chance you're using Google for your searches, it might be best to actually double-check on the state's website, not that you're pulling up an older form just in case.

Some of the other resources that we have available to you is anyone can download for free our "Doing Business Outside Your State Guide," and that will constitute the different types of activities that you may be doing that will cause you to have to get qualified outside of your home state. So that is available to everyone. It's updated annually. So it's best to check back and look for the latest copy. So that's something that you can do.

The other thing is that if you go to the cscglobal.com website, you'll find that there are all kinds of blog postings, educational materials about all of our different services.

Specifically what's new in 2020 is that we have a paralegal resources page that contains some white papers, and then we also have what we call the "Briefly Speaking" paralegal series. And while we marketed it with the paralegal name, it's available to anyone to listen to, attorneys, students, anyone out there, and it breaks down a few different areas of transactions and processes, things such as UCC searches, UCC filings. It talks about legalization authentication. And they're all designed to be about 20 to 30 minutes long with a little bit of extra information, a little bit deeper than we were able to dig into today.

And then, of course, with our partner, Lexis, we've published a few books, again our doing business outside your state, that qualification. And then we also published some specific books that are out there, specific states. Texas comes to mind, Delaware, Illinois, and so on. So we've got some specific books out there in partnership with Lexis.