Staying Up to Date in the SCC Database
December 11, 2019
The State Corporation Commission (SCC) of Virginia is the statutory regulatory authority of business in the Commonwealth. Businesses based out of Virginia, such as domestic LLCs, corporations, or partnerships, and out-of-state (foreign) businesses doing business in Virginia are required to register their business through the SCC. Subsumed within the simple initial registration processes are various steps, including choosing a unique business name, submitting the required Articles of Organization or Incorporation for the entity, and paying an initial registration fee. However, your responsibilities don’t end there.
While self-help forms are available through the SCC database and numerous online providers will charter your Virginia business for a small fee, leaving business formation and follow up to a non-attorney business provider can spell danger for Virginia business owners. Failure to report changes to a business’ registered agent, address, or charter documents may result in extensive liability to a variety of parties.
Business Information Required by the Virginia SCC
One of the most common business entities in Virginia is the Limited Liability Company (LLC). LLCs consist of one or more owners who share in the profits and losses of a business but are generally protected from personal liability through this distinctive legal entity. Forming an LLC in Virginia requires little more than submitting the Articles of Organization with a small filing fee. Once done, Virginia LLC owners seldom think about the purpose of, or even remember, the information initially required by the Commonwealth, including:
- The legal name of the company
- Authorized number of common stock shares and initial directors (for corporations)
- The name and address of the registered agent
- The designation of the registered agent, e.g., an attorney, trust, or member of the LLC
- The address of the company’s principal office, and
- The name and signatures of the initial organizers
However, the information on file with the Virginia SCC serves an important purpose and is considered the legally correct and up to date information about your business. In Virginia, a business’ registered agent and its principal office are the designated locations whereby the company can receive legal notices and service of process. This means important tax notifications, SCC documents, or lawsuits sent to the business’ SCC address of record may be valid even if you never receive actual notice. Almost all Virginia businesses undergo changes to their office address, stock structure, management teams, and registered agents as they grow, but few businesses remember to report these changes to the SCC.
Personal Consequences of Outdated SCC Filings in Virginia
Keeping your information up to date in the Virginia SCC database serves to protect both the business entity and the interests of former registered agents, members, partners, and corporate directors. For example, a director who resigned from a Virginia corporation years ago may be unwittingly served with extensive business litigation if amended articles of organization were never filed. This may not result in liability, but it also does not absolve the former director from answering the lawsuit. Registered agents are permitted to resign but may face unnecessary liability, confusion, and expense if served with a business lawsuit post-resignation. Former Virginia business owners and agents should not assume they’ve been properly removed from the SCC database. Instead, speak with a qualified Virginia corporate attorney at McClanahan Powers, PLLC, to ensure you’re protected from future liability.
Professional Consequences of Outdated SCC Filings in Virginia
Lawsuits are an unfortunate reality of business ownership. Virginia law dictates how a registered business entity must be served with a lawsuit, and Virginia Code § 8.01-299 permits plaintiffs to legally serve a lawsuit on a domestic entity’s registered agent as dictated by the SCC database. If this information is outdated, it’s unlikely you’ll receive timely notice of a lawsuit. Further, your business may be liable for outdated member information if a former officer is harmed thereby or if a default judgment is entered against the entity.
Defendants named in a lawsuit are required to answer a complaint within 21 days of legal service. Defendants who fail to answer are typically notified of their default at the same address where process was served or the registered business address. Failure to respond to this notice of default, even if you never received it, may result in a default judgment in the amount claimed by the plaintiff. Plaintiffs typically make an extra effort to locate a liable defendant after a default judgment is entered, but moving to set aside a default judgment in Virginia requires:
- Fraud on the court
- an illegal judgment, or
- proof of settlement
Simply failing to update your information with the SCC is not a valid ground to vacate a default judgment in Virginia. Out-of-state entities are especially susceptible to this form of liability.
Annual Corporate Filings in Virginia
Active domestic and foreign corporations, including nonstock corporations, are also required to file an annual report with the Virginia SCC. This includes paying an annual fee based on the number of shares the corporation is authorized to issue. Failure to make your annual filing and/or amend your filings to reflect changes to your stock structure may result in shareholder litigation and public prosecution. Proactively protecting your Virginia business from liability begins with staying up to date in the SCC database. The Virginia SCC permits Articles of Amendment to be filed as necessary for as little as $25. Entities can be converted for as little as $100, and corporate termination paperwork filed for $10. These forms are available online, and Virginia courts seldom excuse this type of business negligence.
Understanding a Virginia SCC Inactive Status – Meaning & Consequences for Virginia Businesses
Failure to make your annual filings, update your information as requested, respond to SCC requests, or pay you annual fees often results in revocation of a Virginia business’ active status. There are five types of inactive business statuses in Virginia, each with its own administrative meaning. You will have to reinstate, revive, or recharter your business depending on the status to continue operating the business legally.
- Canceled: Failure to pay annual filing fees or submit annual reports will result in the cancellation of your business. You may continue to operate your business while it’s cancelled provided you immediately submit a request for reinstatement and pay any applicable fees or file any missed paperwork. The reinstatement will be backdated to the date of cancellation as if the business hadn’t been cancelled, including any pending personal liability against otherwise protected members. Cancellation is generally reserved for missed submissions that are easily remedied.
- Revoked: This is similar to cancellation but means that a company, such as an LLC, no longer meets the legal requirements for running a business in Virginia. Unlike a cancellation, revocation cannot be automatically cured and backdated by paying a fee. Instead, the business must remedy the defect, i.e, hold missed meetings or reinstate their insurance policy, before applying for revival.
- Terminated: An entity may be involuntarily terminated by the SCC if it finds the business has exceeded/abused its legal authority, failed to abide by the agency and office requirements of a Virginia business, and/or been convicted of a crime. This typically occurs after cancellation/revocation but before an entity is purged. It requires an SCC hearing during which the entity’s officers may be heard. Termination typically results in an automatic liquidation of business assets.
- Withdrawn: A business is withdrawn if the action was voluntarily, i.e., an owner filed the initial paperwork and decided against registering a business with the SCC or voluntarily dissolved the company. Provided the company meets all legal requirements within 5 years, a withdrawn business can be reinstated.
- Purged: A business is “purged” for the SCC database when its been in one of the above inactive statuses for more than five years. The SCC does not have legislative authority to reinstate or restore a purged entity. Formation of an entirely new company is necessary if a business has been “purged” from the SCC database.
Leaving a business in an inactive status can result in the complete loss of your right to legal operation and even your right to continue operating the business in Virginia. Contact an experienced Virginia corporate attorney immediately if you received a warning letter from the Virginia SCC or your business is listed as cancelled, revoked, terminated, withdrawn, or purged on the database.
Call Us Today to Speak to a Virginia Business Lawyer
Whether you’re a domestic stock corporation, foreign nonstock corporation, limited liability company, or general partnership, review your public SCC profile for potential liability pitfalls with the help of an experienced Virginia business attorney at McClanahan Powers, PLLC. Our experienced team can amend your current SCC filings and conduct an annual review of your business thereafter, potentially saving your business from substantial future liability. Speak with one of Virginia’s premier business entity attorneys today by calling (703) 520-1326 or contacting us online.