Jay Parkhill January 29th, 2008
At least once a year since I started practicing law I have gotten a question about and copy of an official-looking letter entitled “Annual Corporate Minutes Compliance” or something similar. It’s a total scam and it has been a pet peeve of mine for years.
There are a number of companies that bilk unsuspecting corporations in this way. These companies ask for $100-$200 and in most cases will send a rote form of “shareholder meeting minutes” that won’t be valid because they will refer to an annual meeting that likely never happened on a date arbitrarily picked by the scammer.
I was pleased to learn recently that the California Attorney General has sued some of the more egregious participants in this obnoxious practice.
For the sake of getting the facts out, here are the legal requirements in California:
1) California corporations are required to submit a list of officers and directors along with the address of the company and agent for service of process every year. The fee for this is $25, and the California Secretary of State sends a form that looks like this to do it:
Corporations can also e-file here: https://businessfilings.sos.ca.gov/. Bottom line- if it doesn’t say it is from the California Secretary of State, suspect a scam.
2) Corporations in California are required to maintain minutes of Board and shareholder actions. Corporations are also required to hold annual shareholder meetings, but no agency will suspend a corporation’s right to do business for failure to hold the meeting or adequately document it so don’t fall for that scare tactic (NB: shareholders and potentially even third parties might have claims against a corporation if it fails to keep good records and respect the rights of its constituents, but that is a completely different kettle of fish).
3) If a corporation fails to file the statement described in #1 its right to do business will be suspended. I strongly recommend staying current with filings, but if the corporation is suspended, it can be reinstated in almost all cases merely by filing the delinquent report and paying the $25 fee (for each overdue year).
This is the kind of thing no one should have to remember or think about, and it drives me crazy. So to all the business owners out there- next time you get a letter asking for money to prepare your annual minutes, check it carefully to be sure it comes from- and the check is payable to- the California Secretary of State, or ask your lawyer to take a quick look.Tags: annual minutes, Governance, legal, Tips & Tricks