Secretary of State Update -- David S. Massey Elected President of NASAA

Article Date: Thursday, November 04, 2010

David S. Massey, Director of the North Carolina Securities Division, has been elected President of the North American Securities Administrators Association (NASAA) effective at the end of September. In addition, Massey will become the state securities regulatory member on the Financial Stability Oversight Council formed under the Dodd-Frank Act to address issues of systemic risk in the U.S. economy.    

Business Entity Database
The Corporations Division began systematically updating the Business Entity Database earlier this year by commencing proceedings to administratively dissolve business entities where appropriate.  Under G.S. §§ 55-14-21 and 57C-6-03 there are five grounds on which the Secretary of State may commence a proceeding for administrative dissolution of corporations and LLCs.  Those grounds are: 

1. The business entity did not file its annual report;

2.The business entity did not pay within 60 days after penalties, fees, or other payments that were due;

3. The business entity was without a registered agent or registered office in North Carolina for 60 days or more;

4. The business entity did not notify the Secretary of State within 60 days that its registered agent or registered office had changed, that its registered agent had resigned, or that its registered office had been discontinued; and

5. The business entity’s period of duration stated in its articles expired.

The Division sent Notices of Grounds for Administrative Dissolution (“Notice”) in February and March for failure to file annual reports.  In the future there will be a monthly Notice mailing for Business Corporations which have not timely filed an annual report.  There will also be an annual Notice mailing for LLCs which have not timely filed an annual report.  Once the Notice is sent, the status on the Corporations Division website of an entity receiving a Notice of Grounds for Administrative Dissolution will change to “On Notice.” 

E-Notification
Due to the economic reality of shrinking budgets, the Corporations Division has begun to contact filers electronically for some matters.  Upon acceptance of a document, an image of the filed document is returned to the filer via e-mail; the electronic document will be in certified form, which may be saved electronically for future use.  In addition, rejected documents are also being returned to the filer via e-mail with an explanation of the reason for the rejection.  After correction, the filer can either fax or e-mail the corrected document directly to the document examiner in the Corporations Division.  For this time-saving service, please provide the Division a legible e-mail address with each filing.

New Legislation Regarding LLC 2011 Annual Reports (NCGS § 57C-2-23)
The General Assembly amended the due date for some LLCs’ first annual report. It is now due by April 15th of the year following the calendar year in which the company files its articles of organization with the Secretary of State.  Each subsequent annual report is due on April 15.

A limited liability company that was formed on or after Sept. 1, 2001 and has filed an annual report for each calendar year after the calendar year in which it was formed is not required to file any additional annual reports. 
The 2011 annual report form will include a space to indicate whether a payment is due for the 2011 annual report. The payment may not be necessary in 2011 if the entity filed an annual report in the year of creation and a report for every year thereafter.

Only downloaded annual reports from the Secretary of State’s website will be accepted for filing in the 2011 LLC annual report season for paper submissions - real time online filing is preferred, but not mandatory at this time.

New Legislation Regarding Low-Profit Limited Liability Companies (L3Cs)
Effective August 3, 2010, a new subsection was added to the Limited Liability Company Act (NCGS Chapter 57C) allowing the formation of a low-profit (L3C) limited liability company.  An L3C is defined as a low-profit limited liability company whose articles of organization state that the company is formed for both a business purpose and a charitable purpose.  Please note:  an annual report is required for this type entity.  The charitable purpose requirements are:

1. To accomplish one or more charitable or educational purposes within the meaning of section 170(c)(2)(B) of the Code, as defined in G.S. 105-228.90;

2. To operate so that no significant purpose of the company is the production of significant income or capital appreciation of property.

3. To operate so that no purpose of the company is to accomplish one or more political or legislative purposes within the meaning of section 170(c)(2)(D) of the Code, as defined in G.S. 105-228.90.

Guide to Business Entity Status Designations on the Corporations Division Website
The most used status designations are as follows:

Admin. Dissolved: The entity has been administratively dissolved.

Cancelled: The creation document has been cancelled for nonpayment of fees.

Converted: A business entity converted from one type entity to another.

Current/Active: the entity is active and has filed all annual reports, is not delinquent in any fees and has not filed a voluntary dissolution.

Multiple:
The entity is both Administratively Dissolved and Suspended by either the Department of Revenue or a Licensing
Board.

On Notice: A Notice of Grounds for Administrative Dissolution was mailed to the entity and placed of record.

Problem Report: A creation document has been submitted for filing but did not comply with the
filing requirements.  The document was returned to the filer for corrections.

Revoked: A foreign entity was administratively revoked of record.

Suspended: Can either mean that it is a professional entity and the licensing board has suspended the entity, or the Department of Revenue has suspended the entity for non-payment of taxes.  The licensing board or Department of Revenue must be contacted by the filer to cure the reason for suspension and provide proof of this to the Corporations Division in order for this status to be changed.

Withdrawn: A foreign entity withdrew from doing business in North Carolina.

Views and opinions expressed in articles published herein are the authors' only and are not to be attributed to this newsletter, the section, or the NCBA unless expressly stated. Authors are responsible for the accuracy of all citations and quotations.