Alerts

Some States Switch Things Up

Are you familiar with the annual report filing requirements for your entity? You might be surprised to learn that several states recently changed their statutes.

Connecticut altered the annual report filing deadline for domestic and foreign LLCs. Previously, the report was due on the last day of the LLC’s registration month. Now the annual report must be filed between January 1 and March 31. In addition, Indiana added a biennial filing requirement for domestic and foreign LPs and LLPs. Previously, no reports were required.

Finally, Maryland has streamlined its annual report filing process. Previously, all entities in the state were required to file both an annual report and a personal property tax return. However, beginning in 2018, only certain entities are required to include a personal property tax return with their annual report filing. The tax return must be included if (1) the entity owns, leases, or uses personal property located in Maryland; or (2) the entity maintains a trader’s license with a local unit of government in Maryland.

Are you tired of keeping track of ever-changing annual report filing requirements? Sign up for our Annual Report Management Service (ARMS), and let us manage your filings! ARMS is an auxiliary service offered to companies which name us as registered agent. We can help take the pain out of annual report compliance.

Modifications Effective in
Several Jurisdictions

The New Year brings corporate changes in several jurisdictions. The Washington Secretary of State launched a new filing system for corporate documents. It also changed the way it assigns filing dates. Filings are now given the date they are processed. Ensuring a specific filing date under the new system requires same day expedited processing.

In Louisiana, mandatory online filing of certain business documents for parishes with a population over 100,000 went into effect January 1, 2018. Entities domiciled in smaller rural parishes are excluded from this mandate.

Finally, the Tennessee Uniform Limited Partnership Act of 2017 became effective January 1, 2018. It governs LPs, LLLPs, and foreign LLPs created on or after January 1, 2018, and existing LPs formed under the Tennessee Revised Uniform Limited Partnership Act of 2001 that elect to be governed by the new act. The new law contains many substantive changes including altering the presumed term of a limited partnership from fifty years to perpetual duration and authorizing any lawful purpose for limited partnerships, regardless of whether for profit.

For more details or assistance with these new procedures, please contact our Corporate team.

Tax Lien Database Changes

Georgia and Illinois switch things up

Effective January 1, 2018, both Georgia and Illinois adopted new legislation and launched statewide databases for housing state tax liens. State tax liens will be limited to those filed by the state Department of Revenue. The Department of Revenue will be able to file these liens electronically, and taxpayers will be able to make online payments. Though guidelines for these databases seem to indicate that all existing liens (currently filed with the county recorder) will be duplicated within these databases, our industry experience reminds us that sometimes these migrations are not executed perfectly resulting in effective liens that do not get picked up by the centralized database. In light of this understanding, Capitol Services will search both the centralized databases and the county recorder for state tax liens in Georgia and Illinois. We also recognize the value of continuing to search the land records for other state liens filed by agencies other than the Department of Revenue, such as city, town, and other municipalities or government agencies levying liens.

NASS Adopts Remote Notary Standards

The National Association of Secretaries of State adopted remote notary standards drafted by a task force chaired by Kentucky Secretary of State Alison Lundergan Grimes. Secretary of State Grimes has led the task force since it was convened in April, 2016, and the Notary Public Administrators have been active participants in the effort. The electronic notarization standards are designed to support transactional security, the privacy of the document signers, and the traditional assurances of the notarial act. Currently, only four states have authorized remote notarization: Montana, Nevada, Texas, and Virginia. Although Florida also allows webcam notarization, the practice is limited to certain law enforcement and correctional officers. However, many states are considering remote notarization in 2018.

Remote notarization, also known as online notarization or webcam notarization, differs from electronic notarization in that remote authorization allows the signer to personally appear before the Notary at the time of notarization using audio-visual technology over the internet. Electronic notarization, or eNotarization, is a nearly identical process to paper notarization, except the document being notarized is in digital form and the Notary signs with an electronic signature.

Delaware Extraordinary Circumstances

The Delaware Secretary of State may declare an event an “extraordinary condition”.

When an extraordinary condition has been declared, the State will allow Capitol Services to request that a corporate filing be given the file date of the date on which the State was closed (due to whatever crisis caused the closure). Capitol Services then can request that file date for up to two business days after the closure and an affidavit reflecting such is attached to the document.

Below is the relevant subsection of 8 Del. C. § 103 pertaining to this provision.

(i)(1) If:
a. Together with the actual delivery of an instrument and tender of the required taxes and fees, there is delivered to the Secretary of State a separate affidavit (which in its heading shall be designated as an “affidavit of extraordinary condition”) attesting, on the basis of personal knowledge of the affiant or a reliable source of knowledge identified in the affidavit, that an earlier effort to deliver such instrument and tender such taxes and fees was made in good faith, specifying the nature, date and time of such good faith effort and requesting that the Secretary of State establish such date and time as the filing date of such instrument; or
b. Upon the actual delivery of an instrument and tender of the required taxes and fees, the Secretary of State in the Secretary’s discretion provides a written waiver of the requirement for such an affidavit stating that it appears to the Secretary of State that an earlier effort to deliver such instrument and tender such taxes and fees was made in good faith and specifying the date and time of such effort; and
c. The Secretary of State determines that an extraordinary condition existed at such date and time, that such earlier effort was unsuccessful as a result of the existence of such extraordinary condition, and that such actual delivery and tender were made within a reasonable period (not to exceed 2 business days) after the cessation of such extraordinary condition, then the Secretary of State may establish such date and time as the filing date of such instrument. No fee shall be paid to the Secretary of State for receiving an affidavit of extraordinary condition.

(2) For purposes of this subsection, an “extraordinary condition” means: any emergency resulting from an attack on, invasion or occupation by foreign military forces of, or disaster, catastrophe, war or other armed conflict, revolution or insurrection, or rioting or civil commotion in, the United States or a locality in which the Secretary of State conducts its business or in which the good faith effort to deliver the instrument and tender the required taxes and fees is made, or the immediate threat of any of the foregoing; or any malfunction or outage of the electrical or telephone service to the Secretary of State’s office, or weather or other condition in or about a locality in which the Secretary of State conducts its business, as a result of which the Secretary of State’s office is not open for the purpose of the filing of instruments under this chapter or such filing cannot be effected without extraordinary effort. The Secretary of State may require such proof as it deems necessary to make the determination required under paragraph (i)(1)c. of this section, and any such determination shall be conclusive in the absence of actual fraud.

(3) If the Secretary of State establishes the filing date of an instrument pursuant to this subsection, the date and time of delivery of the affidavit of extraordinary condition or the date and time of the Secretary of State’s written waiver of such affidavit shall be endorsed on such affidavit or waiver and such affidavit or waiver, so endorsed, shall be attached to the filed instrument to which it relates. Such filed instrument shall be effective as of the date and time established as the filing date by the Secretary of State pursuant to this subsection, except as to those persons who are substantially and adversely affected by such establishment and, as to those persons, the instrument shall be effective from the date and time endorsed on the affidavit of extraordinary condition or written waiver attached thereto.

Five FAQs on UCC

What are 5 frequently asked questions pertaining to Uniform Commercial Code (UCC)?

Q: How do you describe the debtor on your financing statement when collateral is held in a trust?
A: It’s complicated! If the trust is a Registered Organization (like a Delaware statutory trust), then you follow the same rules for traditional organization debtors. Use the name as described in the public organic record. If, however, the trust is not a Registered Organization (like a common law trust), then first check to see if it is named in its organic formation documents. If it is, hooray! Follow the same rule as above. If not, the name of the settlor must be provided along with language indicating that the collateral is held in a trust.

Q: Are all UCCs effective for 5 years?
A: Almost! Wyoming has a non-uniform effective period of 10 years. In fact, we’ve just come upon the 5 year marker since that amendment was enacted. This means it’s time to start ensuring you are searching farther back for effective Wyoming financing statements. In all jurisdictions, if the transaction is a public finance or manufactured home transaction, then those financing statements have longer effective periods of up to 30 years. If the debtor is a transmitting utility, then the lien remains active until effectively terminated.

Q: What is the difference between a due diligence and an RA9 compliant search?
A: In order to have an effective financing statement, one of the requirements is that your lien is able to be found when searching by the correct name of the debtor using the standard search logic of the jurisdiction. The state’s standard search logic may include some corporate ending noise words that are ignored, but by and large is typically a strict logic providing results very close to the character string entered. Similar names or name variations may not be found in this type of search. Running an RA9 compliant search following the filing of your financing statement helps to ensure that you presented the correct name and that the state indexed that name correctly. This search-to-reflect your filing can also alert you to prior secured creditors who may have filed their financing statement(s) in advance of yours. A due-diligence search is often accomplished by using a database that allows for a “begins with” or “wildcard” search logic that enables the searcher to cast a wider net to identify other liens that may have been filed under similar names or filings mis-indexed that might still be effective.

Q: Is there a nationwide database for searches?
A: Nope. Other than a few database providers who have built resources that connect some jurisdictions, there is no one, reliable resource that allows you to search across all jurisdictions. Deciding where to search for due-diligence purposes requires the searcher to pick and choose which states, counties, towns, cities and courts are likely the jurisdictions within which applicable liens will be found. This is not easy. Because ancillary liens (like IRS liens) and court activity (like bankruptcy proceedings) can be almost anywhere – the searcher must consider the cost/benefit analysis when casting their net.

Q: Why do the filing offices continue to report terminated liens?
A: Shhhhhh! You must, immediately strike the word “terminated” from your vocabulary! It is a bad, dangerous word in the context of lien searching. Remember, the UCC is just a giant, messy bulletin board and anyone can file anything. Erroneous UCC records, and possibly some fraudulent filings, are recorded every single day. It is very important to understand that the filing office does not gauge the legal sufficiency or effectiveness of records as a basis for filing. The sufficiency and effectiveness of filings is left to the users of the filing system and the courts where such issues may be litigated. There is only one way to confirm that a lien has been “T-Worded” and it is not by review of your lien search results. Direct contact with the secured parties of record (all of them) must be made in order to get the evidence you need to confirm that a loan is no longer active. The filing offices do a great service by continuing to report liens until a year after their natural lapse date – giving you the ability to investigate what might still be an active filing.