IS YOUR COMPANY MOVING? Consider Updating its Service of Process Address
Anyone who owns, controls or manages a corporate entity will recall the service of process address on the initial corporate filings. The service of process address, displayed on a corporation’s certificate of incorporation or a limited liability company’s articles of organization, indicates the address to which the New York Secretary of State must send legal process (subpoenas, complaints, etc.) in the event it accepts such process on behalf of a company operating in New York State. Business entities also have the option to hire a registered agent to accept legal process if they do not maintain an office in New York or do not want the business address to become public record. While the Secretary of State (or registered agent) receives a current address at the time of the initial corporate filing, it is up to the business to report any subsequent changes of address. New York courts recently reiterated the impact of that oversight.
The First Judicial Department of New York’s Appellate Division issued a recent decision reaffirming the importance of keeping company service of process addresses updated. In Majada Inc. v E&A RE Capital Corp. (2022), the business E&A claimed that it never received service of process, consisting of the summons and complaint, because it had changed addresses and failed to update its current address with the New York Secretary of State. E&A argued such failure qualified as a reasonable excuse for its default in serving an answer to the complaint. The Court disagreed, stating, “where a defendant does not receive service of process because it failed to keep a current address on file with the Secretary of State, courts will not find a reasonable excuse for a default.” Accordingly, since E&A failed to respond to the lawsuit, the First Department held that the lower court should have granted Majada Inc.’s motion for a default judgment.
Failure to update the company address with a registered agent also led to a default judgment against multiple business entities. Among other efforts to avoid obligations owed to a minority investor, the defendant businesses in Shabtai v. HFZ Capital Group, LLC (2022) failed to update the address with their registered agent for entities they acquired almost a year prior to the lawsuit, claiming they were “too busy” managing the underlying property. The Court, citing Majada Inc., ruled, “it does not matter that the defendants were working remotely during the pandemic. Updating an address with the registered agent does not require physical presence…” This case shows that with the growing ability to conduct business online, courts are less likely to excuse failures to keep up-to-date business records.
The take away from this recent case law: maintain current corporate records. Keep current your service of process address on file with the New York Secretary of State or your registered agent (if you use one). The failure to do so is not an acceptable excuse for a default, and can lead to serious legal consequences should you ever be faced with a lawsuit. Periodically check your company’s corporate filings, stay updated on any biennial reports your company is required to file, and double check that your service of process address, in fact, matches the current company address, or at least an address that you control and frequently check.
If you would like to schedule a consultation to talk about your business filings or other New York State requirements, please feel free to contact Mary F. Ognibene at email@example.com or call her at 585-512-3520.
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