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The Special Agreement

In the most common type of agent representation, a jurisdiction requires an entity to appoint a registered agent in its formation or qualification documents filed with the secretary of state (or equivalent office). In the second type of agent representation, a governmental agency, such as a state insurance or contractor’s board, requires an entity to appoint a registered agent in connection with registration or licensing procedures. This appointment is separate from, or in addition to, the appointment with the secretary of state.

A third, less common type of representation is the appointment of agent for service of process in connection with a special agreement. Examples of special agreements include loan/credit agreements, guaranties, leases, and employment contracts. Special agreements include the requirement to appoint a process agent in a particular jurisdiction as well as identify such agent and its address. Many special agreements include foreign parties. Requiring a local agent for service of process ensures that a U.S.-based party can serve a foreign party in the U.S. in the event of default or breach.

Special agreement representation requires a written appointment between the entity requiring representation and Capitol Services. We can help you navigate the requirements under your special agreement and provide a lender acceptance letter when necessary. For more information about special agreement representation, or any other type of agent representation, please contact our Registered Agent department.

Certification: Benefits and Limitations

A state certified UCC search has its utility. In order to confirm that you’ve filed under the correct individual or entity name, it is important to run a certified search-to-reflect, using the state’s standard search logic, to ensure that your filing appears within the results of the search. If it does not, it’s important to address the issue with the clerk’s office (if the error is of an indexing nature) or through amendment (if the error was made by the filer). Here, however, is where the benefits of a certified search might end.

Oftentimes, state certified logic is very strict – offering limited results based on findings that are close to (if not identical to) the search string entered. If you are utilizing certified results for your due diligence searching, you might be doing yourself (and your client) a disservice. A wildcard, due diligence, or broad-form search enables the searcher to cast a wide net and find more results. This searcher may be able to uncover similar names or misspellings of the correct name. More importantly, a searcher hunting with a broad-form search tool may be able to find hidden but effective UCC liens that are mis-indexed as well as hidden but effective Federal Tax liens filed by the IRS under truncated versions of the correct name.

Searchers often have a sense of false comfort when they see a seal of certification. There is certainly no guarantee that certified results are correct. The certified statement provided by the clerk’s office typically attests to the mere fact that a search string was entered into the state database on a certain day at a certain time and provided the following results set. This in no way guarantees the accuracy of the results. Beyond the commonly seen mis-indexings that may fail to reflect, programming changes made to the state database may generate results that are contrary to the state’s own published search logic. A filer who did their job correctly and filed under the correct name is safe, notwithstanding a state database glitch resulting in an incomplete, certified search report.

Use all of the tools in your search arsenal to ensure you are giving yourself the very best opportunity to find any and all activity related to your debtor. Some extra hunting during the due diligence process can stave off a bankruptcy proceeding surprise – and a major headache.

Same Great Company. Bold New Look.

We’ve got big news to share with you. To commemorate our 40th year, we are introducing a new look that is as innovative as our client solutions and a refreshed website that’s as client-focused as our people. Capitol Services wants to provide you with a web experience that not only features new and improved online support, but also reflects our company, our values, and most importantly, our people. After all, it’s our people who really make us different. The result is a user experience built just for you and designed to focus on your day-to-day business needs.

While we hope you find the new website to be a valuable additional resource, we remain committed to delivering personalized attention to every client, every day – just as we have for four decades.

EXPLORE THE WEBSITE

New Bills Enacted in Several States

A variety of bills have been enacted in the past several months. Effective April 18, 2018, Tennessee authorized the Secretary of State to accept electronic transmission of LLC documents. A few weeks later, on May 8, 2018, Utah enacted the Benefit LLC Act, which permits the formation of LLCs for general public benefit, and changed the term “certificate of good standing” to “certificate of existence.” West Virginia began recognizing foreign series LLCs on June 8, 2018. Effective July 1, 2018, filings submitted by entities registered in Illinois are not to be subject to additional expedited fees solely because they are submitted electronically.

Lastly, Arizona adopted the Uniform LLC Act, which applies to LLCs and registered foreign LLCs formed, converted, or domesticated after September 1, 2019. However, LLCs formed, converted, or domesticated prior to September 1, 2019, may elect to be subjected to the requirements. The requirements of the Uniform LLC Act will apply to all LLCs and registered foreign LLCs after September 1, 2020.

New Name Availability Rules

On June 9, 2017, House Bill 2856 was passed. This bill, entitled “Relating to names of domestic and foreign entities for transacting business in this state,” changed the language of the existing Administrative Code such that the name standards for an entity transacting business in the state changed from “identical and deceptively similar names prohibited” to “distinguishable names required.”

While it seems like a small change, the ramifications of this are huge. Texas has long been notorious for its stringent name rules, and this statutory change will make wider range of names available without conflicting with currently registered entities. The new rules published in the May 25, 2018, issue of the Texas Register indicate that a difference in one key word suffices to make a name distinguishable. Additionally, if the words are the same but in a different order, the name is considered to be distinguishable. Words that are the same but are in different languages do not conflict. If the words sound the same but have different connotations, the names are also considered distinguishable. A change in or removal/addition of a preposition is also sufficient to make two names distinguishable.

The guidelines relating to name consent have also changed. If two names are the same except for the entity ending and the companies are different types of entities, consent is now allowed. With consent, names that are the same except for a common abbreviation of a word or are the same except for the use of the singular, plural, or possessive are allowed. In names that already include a city, the addition or omission of a state to the name will be permitted if consent is granted. When two or more related filings are submitted to the Secretary of State’s office for filing together, consent will be implied.

The full text of the new rules can be found at 0525adop.pdf and go into effect on June 1, 2018.

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.