eMinutes Blog

The Pros and Cons of Designating the Secretary of State as Resident Agent

September 14, 2016

In our first article on resident agents, we noted that some states, such as New York, require a business entity to designate the Secretary of State as its agent upon whom process against the corporation may be served in the state.[1]

This may be a somewhat worrisome concept to business owners, as service is deemed to be “complete” when process is delivered to the Secretary of State, or a deputy, or any other person authorized by the secretary to receive such service.[2] This is important because once service is complete, the clock starts ticking for the corporation to respond to the papers served on the entity by delivering them to the Secretary of State’s office.

In New York, the corporate defendant has only 20 days “after service” to file an answer to the papers commencing the lawsuit against it, which is not much time at all to hire a lawyer and get the answer together.[3] Once service is made on the Secretary of State or an underling in the Secretary’s office, the Secretary of State is required to promptly send a copy of the papers by certified mail, return receipt requested, to the corporation at its post office address on file in the department of state specified for that purpose.[4] Thus, even if the secretary of state’s office does its job and “promptly” sends the papers to the entity by U.S. mail, a few crucial days out of the 20 will already have been lost in the mailing process alone. Of course, bureaucracy being what it is, it is possible that at least another day or two will go by the wayside in the course of the Secretary of State (who is the statutory agent for service of process for more than one million domestic and authorized foreign entities that are registered with the department of state) getting around to mailing the papers to the corporation, at which point the corporation may have just two weeks or so to formulate a response to the complaint that has been filed against it.[5]

Because New York law prohibits a domestic corporation from being formed, or a foreign corporation from being authorized to do business, in New York unless its certificate of incorporation or application for authority designates the secretary of state as the corporation’s agent for service of process,[6] there is nothing that a corporation that does business in New York can do about having the secretary of state act as its designated agent for service of process in New York. But if the corporation is concerned about receiving process in a timely manner, the corporation may, at its option, also designate a registered agent in New York, who then becomes an additional agent upon whom process against the corporation may be served.[7] The registered agent so designated must be either a natural person who is a resident of or has a business address in New York, or a domestic corporation formed in New York or a foreign corporation authorized to do business in New York.[8] If the corporation designates a registered agent in New York, then the corporation may receive process more quickly, but only if the plaintiff chooses to serve the registered agent rather than the secretary of state.[9] The downside is the added expense of hiring an outside corporation to serve as the corporation’s resident agent in New York, if the corporation chooses to go that route.

The same issue—whether to take on the added expense of paying an outside corporation to serve as the corporation’s registered agent—may also occur in states that permit, but do not require, a corporation to use the secretary of state as the corporation’s agent for service of process. For example, under Connecticut law, a foreign corporation may appoint the secretary of state to act as its registered agent for service of process in the state.[10] As such, a foreign corporation must decide whether it wants to save money by appointing the secretary of state as its agent for service of process or to appoint its own registered agent. Either way, service is deemed to be effected when the process is left with whomever the corporation has chosen to be its registered agent, which may result in a delay in service if the secretary of state is appointed.[11]

The situation is a little different in West Virginia, where a corporation, domestic or foreign, may continuously maintain in the state a registered agent to act as the corporation’s agent for service of process.[12] But whether or not the corporation chooses to have a registered agent, the secretary of state is, by law, constituted the corporation’s attorney-in-fact with the authority to accept service of process on behalf of the corporation.[13] Service is made on the secretary of state by delivering to and leaving with the secretary of state the original process and one copy of the process, together with a required fee.[14] The secretary of state is then required, “immediately” after being served, to forward the copy of the process by registered or certified mail, return receipt requested, to the corporation’s registered agent, if it has one, or, if not, to an individual whose name and address or on file with the secretary of state’s office.[15] Unlike New York, however, where service is “complete” once process is delivered to the secretary of state, West Virginia law provides that “[s]ervice or acceptance of process or notice is sufficient” only when a return receipt is signed by an agent or employee of the corporation, or if the receipt is stamped by the postal service as indicating that delivery was refused, at which point the secretary of state notifies the court clerk’s office that acceptance of process was signed or refused.[16] As a result, it appears that the defendant corporation’s 20 days to answer a complaint in West Virginia does not begin to run until the corporation accepts or refuses the process that is sent to it by the secretary of state.[17] In that case, there may be no need for a foreign corporation to take on the added expense of hiring an outside corporation to act as its registered agent in West Virginia, since any delay in receiving process from the secretary of state does not reduce the corporation’s time to answer the complaint.

In sum, it probably makes little sense to pay an outside corporation to act as registered agent in West Virginia. On the other hand, it may behoove a corporation to designate a registered agent to serve as an additional agent for service of process in New York, as plaintiffs might choose to serve the registered agent directly, thereby saving the corporation any delay in receiving process that is first served on the secretary of state. In Connecticut, it makes even more sense for a foreign corporation to appoint its own registered agent, rather than the secretary of state, to accept service of process, which will avoid the possibility of any delay in service that may be caused by going through the secretary of state’s office. The situation in other states will vary by the particular law adopted in that jurisdiction.

[1] See N.Y. Bus. Corp. Law § 304.

[2] See id. § 306(b)(1); Associated Imports, Inc. v. Leon Amiel Publisher, Inc., 168 A.D.2d 354, 354, 562 N.Y.S.2d 678, 679 (1st Dep’t 1990) (“[S]ervice of process on a corporation is complete when the Secretary of State is served irrespective of whether the process subsequently reaches the corporate defendant[.]”), appeal dismissed, 77 N.Y.2d 873, 571 N.E.2d 85 (1991); Cascione v. Acme Equip. Corp., 23 A.D.2d 49, 50, 258 N.Y.S.2d 234, 236 (1st Dep’t 1965) (because service is complete when the secretary of state is served, a corporate defendant’s failure to receive the duplicate copy of the summons and complaint mailed to it by the Secretary of State, in and of itself and without excuse, does not furnish a ground for opening [a] default” entered against the corporation for failing to defend against the complaint).

[3] See N.Y. C.P.L.R. 3012(a).

[4] See N.Y. Bus. Corp. Law § 306(b)(1).

[5] Although service is complete, and the court acquires jurisdiction over the corporate defendant, once the secretary of state is served, even if the secretary of state never mails the process to the corporation, the corporation can move to open a default entered against it if it can show that it did not receive copies of the served process, through no fault of its own, from the secretary of state’s office. See, e.g., Micarelli v. Regal Apparel, Ltd., 52 A.D.2d 524, 524, 381 N.Y.S.2d 511, 512 (1st Dep’t 1976); Montulli v. Sherlo Realty, Inc., 37 Misc. 2d 655, 656, 234 N.Y.S.2d 754, 755-56 (Sup. Ct. 1962), aff’d, 18 A.D.2d 1139, 239 N.Y.S.2d 864 (4th Dep’t 1963); Cascione, 23 A.D.2d at 50, 258 N.Y.S.2d at 236.

[6] See N.Y. Bus. Corp. Law § 304(b).

[7] See id. § 305(a); People v. 525 Shinnecock Co., 31 Misc. 3d 144(A), 932 N.Y.S.2d 762 (table only), 2011 WL 2041134, at *2 (App. Term 2011) (“While Business Corporation Law § 305 permits a corporation to designate a registered agent upon whom all process may be served, such provision is optional[.]”).

[8] See N.Y. Bus. Corp. Law § 305(a).

[9] See id. § 306(a) (“Service of process on a registered agent may be made in the manner provided by law for the service of a summons, as if the registered agent was a defendant.”); cf. DeZego v. Bruhn, 99 A.D.2d 823, 823, 472 N.Y.S.2d 414, 416 (2d Dep’t 1984) (service on corporate defendant was defective where there was no allegation that the summons and complaint were served on the secretary of state or the corporation’s registered agent, as required by section 306 of the Business Corporation Law), aff’d, 67 N.Y.2d 875, 492 N.E.2d 1217 (1986). Of course, the plaintiff chooses whether to serve the registered agent or the secretary of state, so any delay occasioned by going through the secretary of state’s office may be unavoidable. Note that the plaintiff has yet another option, which is to deliver the summons and complaint directly to a director, officer, or managing or general agent of the corporation. See N.Y. C.P.L.R. 311(a)(1) (personal service upon a corporation may be made in that way, or as directed in section 306 of the Business Corporation Law); Old Republic Ins. Co. v. Pac. Fin. Servs. of Am., Inc., 301 F.3d 54, 57 (2d Cir. 2002). Again, however, it is up the plaintiff to decide whether to serve the corporation directly, or to make service upon the secretary of state or the corporation’s registered agent.

[10] See Conn. Gen. Stat. Ann. §§ 33-660(b), 33-663(a).

[11] See id. § 33-663(a).

[12] See W. Va. Code Ann. §§ 31D-5-501(2), 31D-5-504(a), 31D-15-1507(2), 31D-15-1510(a).

[13] See id. §§ 31D-15-1504(c), 31D-15-1510(d). No act by the corporation to appoint the secretary of state as its attorney-in-fact is necessary. Id.

[14] Id.

[15] Id.

[16] Id.; see also United Bankshares, Inc. v. First Niagara Bank, No. 2:15-CV-11340, 2016 WL 859241, at *2 (S.D. W. Va. Mar. 4, 2016) (“Thus, it is the refusal or acceptance of process that makes service of process sufficient pursuant to section 31D-15-1510; mail returned as ‘undeliverable’ or ‘unclaimed’ is insufficient to effect service of process.”); Syl. Pt., Crowley v. Krylon Diversified Brands, 216 W. Va. 408, 607 S.E.2d 514 (2004) (“[S]ervice of process on a corporation is insufficient when notice or process is mailed using registered or certified mail to an authorized corporation’s listed agent by the Secretary of State, is neither accepted or refused by the agent, and the mail is returned to the Secretary of State because the notice or process is undeliverable.”).

[17] See W. Va. R. Civ. P. 12(a)(1) (“A defendant shall serve an answer within 20 days after the service of the summons[.]”); cf. Lewis v. Mobile Training & Educ., Inc., No. CIV.A. 3:09-0135, 2009 WL 1252325, at *3 (S.D.W. Va. May 5, 2009) (30-day period for defendant corporation to remove case to federal court began to run when the corporation’s agent “signed a certified mail receipt and, consequently, completed service” of process on the corporation).

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