The requirements facing US companies and they are taking place in almost every state on a yearly basis
As everyone in the governance, compliance or corporate secretary fields already knows, filing requirements for US-listed companies have increased dramatically over the past year. Undoubtedly, anyone in a senior-level role has experienced firsthand the impacts of this ever-changing regulatory environment.
What may come as a surprise, however, is that the much-discussed Sarbanes-Oxley Act is directly responsible for only a small portion of the annual filing requirements facing companies today. Corporations operating in a single jurisdiction might find the task of filing all the relevant paperwork difficult enough, but for most companies the reality is far more complicated. The fact is that few companies do business in just one state, and many larger firms have operations in all 50 states, not to mention overseas.
Apart from the challenge of filing in a timely manner in various states, filing requirements change on an almost annual basis – and this can contribute to a secretariat department filing incorrectly or missing a deadline altogether. Indeed, some of the more minor state requirements are getting overlooked because many corporate secretaries, in-house lawyers and others dealing with such matters are focused on Sox. In fact, many of these professionals are not even able to keep up with the Sox requirements, thus making the situation even worse. This is an extremely dangerous and potentially very expensive cycle to fall into.
In a recent analysis performed by Jerry Daniel of CT, it was found that in the past year no fewer than 35 states made changes to their annual reporting requirements for US-listed companies, and this does not include any of the quarterly or ad hoc filing and reporting requirements (see box on page 34, ‘Summary of changes to annual reporting requirements’). These changes range from minor fee alterations to adjustments in the rules for limited liability partnerships, online systems, tax considerations, filing dates and even the types of forms and to whom they must be sent.
Entity management is nothing new, but the task is growing more complicated and the concerns are serious. The proof can be found in the time dedicated to discussing the topic. At all of the recent major conferences and seminars dealing with compliance and governance, filing in multiple jurisdictions has been featured as a panel or session all its own – or at the very least has been part of a wider discussion.
New technology is available to help people cope with the process, but this is only part of the solution. It is vital to first understand what the filing requirements are and monitor all the changes that will affect a company. As the summary of the changes highlights, this can be a full-time job all on its own.
Part of the problem, according to Daniel, is that it can be difficult to anticipate changes, partly because a lot of them are not necessarily made with corporations in mind. Often when a new state administration takes over, the team wants to do things a new way, believing it has a better system for managing filing dates. The new secretary of state can basically change things however he or she deems necessary, and this can create problems.
For example, in one state there used to be a fixed filing date for annual reports, but a new secretary came in and decided that having all companies file on a single date created too much strain on the administrative team. In an attempt to smooth out the workload for state officials, it was decided that companies must file on the anniversary of their incorporation date.
A change in filing fees, while seemingly innocuous, can also lead to a company being delinquent. A state that had charged the same fee for many years may decide to increase it by, say, $20. This may seem like nothing in the scheme of things, but if the person filing the report is not aware of the change, the state office may refuse to process the filing – resulting in delinquent status.
Apart from improving technology offerings for companies looking to manage multiple entities, Daniel spends a significant amount of time working with the states to implement filing requirements that work for the company and the state. ‘The interests of the state and the company aren’t always aligned, and we have a lot of conversations representing the business community trying to find a mutually satisfactory outcome,’ he says.
It isn’t just the states that have a role to play, however. Respected academic institutions can help establish accepted standards, and proactive corporations are starting to interact with state regulatory bodies to get more favorable conditions. In the end, all companies are looking for is consistency, so they can spend less time monitoring and reacting to changes and more time doing business.
SUMMARY OF CHANGES TO ANNUAL REPORTING REQUIREMENTS
Alabama – change in filing forms
Arkansas – deadline change from June 1 to May 1
California – pending legislation on annual statement for publicly traded companies
Colorado – reduced annual report fee to $10 if filing online
District of Columbia – inconsistent filing dates depending on method of filing
Florida – limited partnerships must file January 1
Georgia – new web site for annual report filing
Hawaii – pending legislation for limited liability partnerships
Idaho – LLCs and LLPs must file on anniversary date
Illinois – LLPs must file annually
Iowa – LLCs and LLPs must file biennial reports
Kansas – split filings between annual report and franchise tax
Kentucky – Revised Uniform Limited Partnership Act (RULPA) requires filing between January 1 and June 1
Maine – increase in filing fee and penalty fee
Massachusetts – online filing commenced
Michigan – legislation pending to make effective on date filing is received
Minnesota – LLPs now need to file
Mississippi – extended filing deadline
Nebraska – LLCs file biennially in odd years
New Hampshire – late fee changed to flat $50
New Jersey – anniversary date filing
Oklahoma – no minimum tax
South Carolina – LLCs no longer required to file
Tennessee – duplicate reports
Texas – franchise tax changed to margin tax
Utah – reinterpreted law on due dates
Virginia – annual registration statement due October 1
West Virginia – LLCs can file online
Wisconsin – fees changed
Wyoming – authorized electronic filing
