Corporate Practice Perspectives Webinar Series: Avoiding Document Rejections

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Caitlin: Hello, everyone, and welcome to today's webinar, "Corporate Practice Perspectives Webinar Series: Avoiding Document Rejections." My name is Caitlin Alaburda, and I will be your moderator.

Joining us today are Erica Tarrant-Wilson, Ruth Wilde, and Helena Ledic. Erica is a customer service leader responsible for various business areas, including document retrieval and Federal Employer Identification Number registration as well as some corporate and Uniform Commercial Code filings. Ruth is an associate leader at CSC, where she plays a role in resolving escalated issues, training team members, coordinating schedules, and assisting both internal and external customers. She has also helped ensure smooth processing of work and supports operational efficiency. And Helena is an associate general counsel for CSC out of our Chicago office.

And with that, let's welcome Erica, Ruth, and Helena.

Helena: Thank you so much.

Erica: Good morning.

Helena: Hi, everyone. This is Helena who's speaking right now. So I just wanted to let you know what our agenda is going to be today. We're going to learn a little bit about CSC. We're going to talk about the top 10 reasons for document rejections. Erica and Ruth had so much fun coming up with these reasons that they came up with some bonus reasons. So we have some more common filing errors that we see. We'll talk a little bit about CSC's corporate filing services, and then we'll get into the Q&A portion of our presentation.

So first, a little bit about CSC. At CSC, we like to say we are the business behind business. We're the world's leading provider of business administration and compliance solutions, and we provide service and technology solutions for every phase of the business and investment life cycle. We help to form entities, maintain compliance, execute secured transactions, and support real estate, M&A, and other corporate transactions.

We're located on 5 continents, with more than 8,000 employees, and we have expertise and capabilities in more than 140 jurisdictions. And we've been privately held and managed for 125 years under common ownership. We work with more than 90% of the Fortune 500 and Best Global Brands and 10,000 different law firms. We certainly are the business behind business.

So our next screen over here is just our global footprint. You can see that we've got 70 different offices around the world, including in Americas, EMEA, and Asia-Pacific. The little star over there is our headquarters of Wilmington, Delaware. That's where Ruth happens to be located. Erica is in our Springfield office, and I'm in our Chicago office. And I think that Erica was going to start this off.

Erica: Yes. So at CSC, we have some different names that we utilize as registered agent in different jurisdictions. Usually have two or three. We also, from time to time, it's necessary to change our address. We just actually went through an address change in D.C. If a lease comes up and that office space, for example, might have to be repurposed for something else, we might have to take up residency somewhere else. So that was a recent change. But I know Ruth has a good example of this as well.

Ruth: Yeah. So for Delaware, we still see people using our old 2711 Centerville Road address, but we've been at our headquarters at 251 Little Falls Drive for almost eight years now. So it just might be a case that the documents that you have on file just does not have our updated address. So it's just important to fix that. And then even with our agent name, we do see people tend to like abbreviate it, how we refer to ourselves as CSC. But the document needs to say Corporation Service Company to match the state's record. So just to keep in mind whichever state you're filing in, to make sure the address is up to date and our agent name is spelled out correctly.

Okay. And then on to the next topic here is signer information missing. So this could be the signature, the printed name, and the title. For the signature, making sure that there is a live or conformed signature on the by line. The printed name should appear underneath the signature, and the signer should have an appropriate title.

For Delaware specifically, LLCs can list any title. The only one that's not acceptable is incorporator. But for corporations, that incorporator title is needed if you're forming a corporation. But other corporation documents can list officers, and if there's no officers, they can use director as well. But the document would have to include a statement that the corporation does not have any officers in order for the directors to execute. And then for limited partnerships, they have to have the general partner execute the document.

Delaware can be forgiving when it comes to securing the file date. But if the signature is missing altogether, they will not let you keep your file date. So it's important to make sure the document is signed. Erica, did you want to touch base on how nitpicky other states could be?

Erica: Yeah. I mean, there's a wide range of options in different states, and some are very, very picky, and some are very lenient. Some states, you can use authorized person. Other states, you have to use the officer. The officer has to be listed on the form. Those two have to match up perfectly. So if I sign with my middle initial, then in the Officer section, I also need to include my middle initial. If there's a suffix that's applicable as well. Some states, you actually have to have a wet signature, like Maine for example. And then to bear in mind that some states with paper file options and e-file options, the signature requirements can be very different. So one that works for a paper filing may not necessarily work for an e- filing because they only have like three dropdown options for an e-filing.

And then next, we have the execution date. So again, you do have to put an execution date on most forms. It's very important to have that. Some jurisdictions actually have parameters by which the date you have to sign it. So for example, if you're a corporation in Arizona and you're qualifying to do business there, you have to fill out a certificate of disclosure, and that signature has to be within 30 days of the date it was submitted. Missouri, they have like a six-month rule. So it has to be within six months of the submission date. How about Delaware, Ruth?

Ruth: So there's no specific parameters around how far back the execution date can be. So we do get documents that at this point are still dated for December 31st, 2024, and that's fine. We might question it if it may appear to be a typo. So if it's dated April 15, 2024, we'll push back and say, "Did you mean for this to be 2025?" But as far as Delaware is concerned, they would still accept a document. But if it is dated in the future, that is a problem, and we will ask the client if they need to hold the filing until that date, or if they need to fix it to our submission date.

If you also have a Docusign on the execution block, if it's dated, then you need to make sure that date matches your execution date. So if the signature is dated April 15th, but your execution date is April 10th, they just both need to be April 10th or April 15th.

And then, going along with the dates is when we're talking about effective dates here, a lot of reasons that Delaware filings get rejected is because people list a past effective date. So for effective dates, LLCs and LPs can list a date that's 180 days out in the future, and corporations can list it for 90 days up into the future. Should you need to list a date that has passed, it needs to be accompanied with the statement "for accounting purposes only" in order for the State to accept your filing.

Helena: So Ruth, can I can I interrupt you here, because you mentioned when we prepared this, you said that this happens so often here. So can you clarify for the audience is this a back date, or is it merely a notation? Can you kind of talk a little bit about that?

Ruth: Yeah, it is just merely a notation for Delaware to accept the filing, and it has no bearing in Delaware in terms of the record. It's not going to be dated as of the date on the document. It's going to be dated as of your date of submission.

Helena: Great.

Erica: And beyond Delaware, there's really no other states where you can have a past effective date. In some states, you would probably get a rejection if you would make a notation to that effect. So Delaware is kind of unique in that, that you can notate that past effective date.

Ruth: All right. I will start this one as well. So for general partner, with Delaware limited partnerships, it has to be executed by the general partner of record. So that is actually one of the top reasons that LP filings get rejected here. It's either that it's missing entirely, or it's the wrong general partner that's executing. So when you're filling out your LP forms, just make sure the general partner is listed above the signer. And if you have changed your general partner, it's important to file an amendment to make sure that the State has an updated record of who the general partner is. Delaware LP cancellations, you can add an article to that, to indicate who the new GP is and what their address is in order for that new GP to execute the document.

Erica: And in the state of Illinois, you can have an individual or an entity signing as the general partner. However, they have to be on file with the State. If they're not, you're going to have to first file paperwork to get that change so that they are on file with the State.

Yes, it's very important that you use the proper entity name. So a lot of states require you, if you're qualifying in their state, to have a supporting document, either good standing or copies from the home state. And it's very important that that name matches that to a tee in most cases. So even if say you have a corporate name ending of Inc., let's say you omit a period on the end of Inc., some states will actually reject that for that period on the end of Inc. So it's very important any commas, punctuation, all of that matches.

We had a very interesting situation recently that I became involved in, and the application actually had a lowercase L in the beginning of the name, but it was actually an I, and the supporting documents did show an I. However, the state filed the entity with the lowercase L. And even in explaining the situation via email, when you type out a lowercase L and an uppercase I, they look pretty much the same.

So it it's very important that you review those documents to make sure that they have the right spelling, punctuation, just it matches to a tee.

Ruth: Yeah, and the same thing for Delaware. It needs to match exactly how it is on record. But to Erica's point, sometimes there are errors that happen when it's getting indexed. So it could be a simple we just need to contact State of Delaware to fix their entity record so that it matches how the document was presented. But it could be that the document was wrong because, again, typos happen. So if those are the cases where the document itself is wrong, then we have to file a correction or an amendment to get that name fixed.

Moving on, next is the incorrect formation date. So similar to how the entity name needs to match the state records or the supporting document, the date of incorporation information also needs to match. In Delaware, if you have a conversion filing that took place, that does change to become your formation date for that entity. So, for example, if you started out as a Delaware LLC and filed a conversion to a corporation, that day that you filed that conversion is now your corporation's formation date.

And another thing to point out that Delaware pays attention to is the wording of the article. So if your document says "the certificate of formation was filed on," then it is referring to the date you submitted the filing, versus if your document says "the entity was formed on," then that implies the effective date. So maybe your document did not have an effective date, and that could very well just also be your submission date. But in the event you had a date of April 30th, that would be your formation date.

Erica: And also, if there's like a future effective date that you filed in a state, that might become your date that you need to use in your qualification state. So that's important to note as well.

Moving on, it's very important to use the correct form. Some states, Illinois for example, prime example, pretty much they have a form for every scenario. So they have a different form for each entity type, each scenario within that entity type. So your LP qualification is going to be different from your LLC, from your corp, from your nonprofit. Whereas like in Georgia, they may have a different LLC application. Then they have a corp, but the corp and the nonprofit are actually the same application. However, in Illinois, that is not the case. They're very distinct, different forms.

Forms change all the time. It's very important to use current forms. We keep up to date on all of those forms. And of note there too, say they change the forms tomorrow and you had already prepped the form, signed it, and then you send it in tomorrow, a lot of states don't have any kind of grandfather clause for those old forms. So they may reject it, and you'll have to kind of start over with a new form.

Helena: And if I can pop in onto this to mention I think it is so important to make sure that if you're working with a state that you do not typically work with or a form that you don't work with, be really careful when you're doing web searches and looking for a form. Your results could come back that might be an old form, especially nowadays with AI, where not everything is absolutely accurate over there. So you could end up having that old form. And that has personally happened to me with Illinois, with a power of attorney form, where I pulled down something off the web, and it turned out that the form had been superseded by the statute. So I really encourage people that if you are looking for those forms, again the ones that you don't typically work with or aren't familiar with, either go to the state's website or go to CSC. We've got those forms updated all the time.

So going to number nine over here that we have. Number nine, why don't you start us off, Ruth?

Ruth: Yeah. So very similar to the last reason, we receive documents that refer to the wrong section of law, and it could be simply that they chose the wrong form. Or it could be something more complex, like there are several merger sections of law and you're not sure which one's applicable to the filing that you're doing. There's also different dissolution options, and you're not sure which one applies.

A simple Google search will help you figure out if that's the specific state law for what you're doing. But I do suggest like just reaching out to your registered agent to review the document and make sure it's the right section of law for the type of filing you're doing and also if it's applicable to your entity with that state.

Another suggestion would be to preclear your document if that's an option in that jurisdiction, because especially if it's a self-drafted document, you just want to make sure it's hitting all the points, and not only for the section of law, but everything else that we've mentioned before, with the name being correct, the dates being correct. Those states can review that, just to make sure before you proceed with your filing.

Erica: Yeah. Illinois doesn't really have that same referencing the incorrect section of law. But I will agree with Ruth. Sometimes if you're very uncertain if they'll accept something, it's a merger, it's a more complex filing, it is good to preclearance that filing. And sometimes just you want to see what the fees are because Illinois can be very complex as far as calculation of fees. So preclearance is a great way to see if there would be any issues with that filing.

Okay, next we have neglecting to file your annual report. So . . .

Helena: So Erica, I'm going to stop you here. For the audience, when we were prepping this slide and going through our notes of what we wanted to talk about, I just wanted you to know that Ruth and Erica are really very calm individuals. I thought they were going to jump out of their chair with the number of things that can go wrong with this. So listen, audience, to why this matters. So Erica, take it away.

Erica: Okay. I can't stress enough, I think would Ruth agree, how important it is to keep up to date on filing your annual reports when they're due. Every state is a little bit different as far as the time frames with which they're due. Generally speaking though, the day after they're due, you will go in a not in good standing status, but they won't revoke you in all states for a while. Like the state of Illinois, corporations, for example, it's kind of a convoluted, but it's your fifth month, the second Friday of the month when they get revoked. LLCs are 180 days. LPs are 120, but LLPs are the day after it was due. So it's very different. And you may think you have more time than what you have.

Why it's really critical is you can have penalties and interest that keep accruing over time. State of Illinois, they have pretty high fees. And if you have a lot of franchise taxes to begin with, your penalties and interest can be very high. I mean, it's been nothing for me to see checks that have been in the neighborhood of $1 million, $2 million. We recently had one that was sent to the state with $6 million in fees. So that kind of chokes you up in and of itself.

And you want to make sure, too, that your name doesn't get compromised. So if you let it go too long, your annual reports are due, then you can lose your name. So that's really important.

And then there's other states too, like New Jersey, for example, you'll be in good standing your first year, and you'll be able to get a good standing. It'll notate that your annual report is due for the past year, but they won't actually revoke your entity for two years. So again, every state is very different.

Ruth: Yeah, and just to piggyback off that, for Delaware, the deadlines do not change. So if you just can keep that to memory of March 1st your corp annual reports are due. And if they happen to be a quarterly company, they have a quarterly schedule for when the quarterly payments are due. June 1st is for LLC and LP taxes, but also your double and triple LP annual reports. June 30th is foreign corp annual reports. And then you can go two years before you go into a void status for corporations and three years before you go to canceled status for LLCs and LPs.

But once those statuses hit, the penalty and interest, at least for Delaware, does stop accruing. But if a corporation is void for more than five years, they do only owe one report, which is the year they went void. But it is three times the current tax rate. So those can get kind of hefty, depending on your tax assessment. So it's important to maintain your good standing just to avoid those repercussions. And like Erica mentioned, your name is up for grabs. So you would not be able to use the same name and would be forced to do a forced DBA name.

There are cases where the State may reject your report due to insufficient, inconsistent, or questionable information on your annual report. So if a company has a drop in assets, if they reported zero assets for multiple years, or the same number of assets for multiple years, the State would ask for their U.S. 1120 to be able to verify those assets reported. And then when it comes to issued shares, if the company is reporting assets but still saying they've issued no shares, or if one year they reported a million issued shares and the next they're trying to say they have zero issued shares, those are things that Delaware will question and either ask for an amended annual report or ask for notarized documentation that explains what happens to all those shares.

So just apart from keeping the entity in good standing with all those requirements, you also need to file current due taxes and reports if you're trying to terminate the company. So that's something that people tend to forget when they're submitting their dissolutions, conversions, mergers, that if you're in 2025, you have to also submit the 2025 annual report and the additional 2025 taxes. Same goes if you just formed your company a couple of days ago, you still will owe taxes for those three days. The nice thing with corporations, though, is that they will prorate your taxes if you're not a minimum tax company.

So all of these complexities are a good reason to stay on top of your entities' deadlines, just to ensure they remain in good standing and you can avoid all of those pitfalls.

Helena: And before I jump into this slide, I just want to let the audience know if you do have any questions, feel free to pop them into the Q&A. We'll be answering a few questions at the end, and, of course, we'll end up following up with everybody if we aren't able to get to your question.

But let me get to now we have three bonus reasons of common filing errors over here that we've come up with. And the first one that we wanted to talk about was restricted words. So when someone is trying to form an entity using a restricted word, every state has got rules around this, and they're very commonly around words such as bank or trust or finance, insurance. Where states have got either outright prohibitions against using those words in entities or what might be the case is you might be able to use that word, but you're going to have to get the permission from the secretary of state's office and then also from whatever entity at the state regulates that kind of word, so, for example, bank, financial regulation or something like that.

And every state is different with this. For example, in Florida, the word "Disney" cannot be used by any entity unless it's associated with the Walt Disney World, with those associated companies. So it's not like I could open up a T-shirt shop in Orlando and call it Helena's Disney T-shirts. That wouldn't be allowed over there.

So I know that Ruth wanted to talk a little bit more about this. But Ruth, what else do you want to add in?

Ruth: Just to say that, for Delaware, the most common one we see is "bank." And anytime you use "bank" in the name, they will require you to submit a Bank Commissioner form. And then the State sends that to the Bank Commissioner's Office, and they will decide if they approve or deny use of the name. If the Bank Commissioner does not approve the name, then you have to select a new name and your original file date will be lost.

But outside of "bank," the only other unique one that's happened to me is using "university" in the name. And the only reason it had to go to the Department of Education was because that company or entity was a degree granting institution. So they had to send it to the Department of Education for approval. But outside of that, there's not any other restrictions we've come across.

Erica: And every state is little bit different. Just to provide a couple of examples, Alaska prohibited words are things like "borough," "city," "village," "municipality." So you can't use those at all. Alabama, "engineering," if you use the word "engineering" in your name, you have to have a licensed engineer provide his professional license to the State to be able to use that word in your entity name. So it does vastly vary from state to state. But usually, they do have some either restricted words or prohibited words that you can't use at all.

Next is your name availability. So before we file anything, we always check with the secretary of state to see if the name is available. If it's a formation and that name is already being used, you can't use the name at all. If it's a qualification in that state, you can do a forced fictitious name. Illinois is a no-consent state, so it doesn't matter if you have consent. You still can't use the name. Things like "the," "and" versus ampersand, plural, those usually do not make a name distinguishable from another state that they have on file with the secretary of state. Ruth do you have anything to add?

Ruth: Yeah, so that's interesting about the plural because Delaware does allow that. So if you add an "s" to the name, it makes a difference. But the same with the "and," those do not make a difference. Punctuation does not make a difference. Spacing does not make a difference. And we do allow consent if it's two different entity types. So corp can give consent to an LLC. But a stop corporation cannot give consent to nonprofit corporation because, at the end of the day, they're both corporations.

There are certain corporate indicators that can be overridden. So like the word "fund" between alternative entities, like an LLC and an LP, that would be okay. You just can't reserve the name, but you can submit it for filing and the State will override the conflict. But if it's fund between an LLC and a corporation, that's a case where they're going to have to obtain name consent.

And like Erica mentioned, for the cases of a qualification or a renewal where your name might already be taken, you could do a forced DBA name.

Okay, so this next one here is document legibility. Bottom line, various states can reject documents for it not being legible, and that could be because it was handwritten, the signatures aren't dark enough, there are scan lines, or it's a photograph of the document. And so just a little funny story here, we once got a photo of a document, but in the corner of that photo there was someone's foot there. We said, "I don't think you want that on record with the State. So please provide us a PDF version of the document."

So if possible, forms should be completed on a computer. You can print out the document if you need to, to sign the document, scan it back in, but just watch out for any scan lines or smudge marks.

Helena: Or images of body parts.

Erica: The same with the State of Illinois. Sometimes we will get documents that they're pictures of the actual document. PDF is always best, because although sometimes we can use them, a lot of times they're too dark to use and the State will reject them because they're too dark of a copy and they just won't scan well in their system.

Helena: Well, everyone, we've gotten through our top 10 reasons. We gave you three more great bonus reasons. And what we would like to do now is go into the Q&A portion. So again, feel free to put some questions into the widgets.

But before we get to the questions, what I do want to let you know is that CSC has got our corporate filing services, and one of our features that we have that's available is the CSCNavigator. And that helps you streamline your filings and your compliance requirements by including a compliance calendar for your entities' jurisdictions. It automatically uploads your evidence, we've talked about evidence already today, for your corporate filings and for your service of process. And it also includes a corporate tracker. So that's something that you can use to help manage your entities and help avoid some of those rejections that we've been talking about.