In November 2022, Governor Wolf signed legislation providing a long-awaited update to Pennsylvania’s Business Corporation Law, often referred to as the “BCL.” These changes were effective in January 2023.
The BCL contains the statutory basis for the formation and administration of business entities, such as profit and nonprofit corporations, limited partnerships, and limited liability companies. While this legislation amended the BCL in several respects, one aspect in particular will have wide ranging implications for all of our banking, business, and nonprofit clients: the establishment of annual reporting requirements.
For our friends in other jurisdictions, this is nothing new; Pennsylvania is the last state to adopt such a requirement. Here is a snapshot:
Annual Reports
Who has to file? All entities that were formed by a filing with the Pennsylvania Department of State, and entities that were formed in another state and then registered to do business in Pennsylvania. This includes profit and non-profit corporations, limited liability companies, and limited partnerships.
What to file? The annual report must contain:
(1) entity name and jurisdiction of formation;
(2) the address of its registered office;
(3) the name of at least one governor (The person in charge);
(4) the names and titles of the principal officers;
(5) the address of its principal office, including street and number, if any, wherever located; and
(6) its entity number or similar identifier issued by the department.
We anticipate that the Department of State will be creating forms for this report, and that it may be completed on-line. Once filed, it will be a public record.
Is there a fee? Currently $7.00, which is waived for nonprofit corporations.
When to file? Starting in January 2024, the following schedule will be in effect:
July 1: All Corporations
October 1: All LLCs
December 31: All other entities
What if we don’t file? Starting in 2027, the Department of State may initiate dissolution or cancelation proceedings. Non-complying entities will not be issued subsistence certificates, and entities could lose their limited liability protection, and the rights to their names (!), all of which could pose serious issues for entities and their lenders, and cause problems when it comes time for lawyers to issue opinion letters, which are required in a wide array of transactions, especially in commercial lending.
The Department must provide notice of non-compliance. This will be sent to the entity address of record. This would be a good time to make sure your address is current with the Department of State, and that your internal organizational documents are up-to-date and in good order.
In summary, these requirements should be added to your annual calendar. While compliance should be relatively straightforward, the penalties for a failure to file could result in exposure to liability, place a borrower into default with its lender, or derail a transaction where time is of the essence.
As always, we are here to assist you; Let us know of any questions!
Brown McGarry Nimeroff provides a wide array of services for commercial creditors, business entities, and non-profits throughout Pennsylvania, New Jersey, Maryland, and Delaware. Contact Sigmund J. Fleck for more information:
Sfleck@bmnlawyers.com
267.861.5317