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7 • 2016

Why Every Business is Required to Have a Resident Agent

All states require that business entities formed or registered to do business in the state maintain a registered agent in the state to accept service of process on behalf of the entity.[1] In this context, “process” refers to the legal documents, usually a summons and complaint, used to commence a lawsuit against the entity.[2] The states have different requirements in this regard, however, some allowing the entity or a third party to serve as registered agent, sometimes with the secretary of state as backup, with others requiring the secretary of state to be the primary agent, with the entity or a third party as an additional agent.

For example, a corporation being formed under California’s General Corporation Law must set forth in its articles of incorporation the name of the corporation’s initial agent for service of process in California.[3] Within 90 days after filing its original articles of incorporation, and annually after that during the applicable filing period, the corporation must file a statement of information designating as the corporation’s agent for service of process either a natural person residing in California (giving the person’s complete business or residence street address) or a corporation that has previously filed with the secretary of state a certificate providing specified information, including the corporation’s complete street address of its office or offices in California.[4] Similar requirements apply to a foreign corporation wishing to transact intrastate business in California. The foreign corporation must first be qualified to do business there.[5] Qualification requires, among other things, filing a certificate with the secretary of state providing certain information, including “[t]he name of an agent upon whom process directed to the corporation may be served within this state.”[6] In addition, the foreign corporation must irrevocably consent to service of process directed to it upon the agent designated in the certificate and upon the secretary of state if the designated agent is no longer authorized to act or cannot be found at the address given.[7] In either case, the statutes insure that there is an identified individual or entity upon whom process may be served to notify the corporation, foreign or domestic, that litigation has been commenced against it.[8]

The procedure is similar in Delaware. Delaware law requires that every corporation have and maintain in the state a registered agent, which can be the corporation itself, an individual resident in Delaware, or a domestic or foreign corporation or other business entity.[9] For a domestic corporation, the name and address of the corporation’s registered office and agent in Delaware must be included on its certificate of incorporation.[10] For a foreign corporation transacting business in Delaware, the corporation must file a statement setting forth, among other things, the name and address of its registered agent in the state.[11] If a domestic or foreign corporation’s registered agent is enjoined from acting as such in Delaware, the corporation must obtain and designate a new registered agent within 30 days or risk forfeiting its charter, if it is a domestic corporation, or its qualification to do business in Delaware, if it is a foreign corporation.[12] In addition, if a new registered agent is not obtained and designated, then service of process against the corporation for which the registered agent had been acting is made upon the secretary of state.[13] Likewise, if a foreign corporation transacts business in Delaware without having been qualified to do so, then the corporation is deemed to have appointed the secretary of state as its agent for the acceptance of process in a civil action.[14]

That situation is reversed in New York. There, the New York Secretary of State “shall be the agent of every domestic corporation and every authorized foreign corporation upon whom process against the corporation may be served.”[15] New York insures that this mandate is carried out by prohibiting any domestic corporation from being formed, and any 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.[16] In addition to designating the secretary of state as agent, every domestic and foreign corporation can also designate a registered agent in New York upon whom process against the corporation may also be served.[17] This is a good idea to insure that process is timely delivered to the corporation’s registered agent without having to wait for process to be forwarded by the secretary of state’s office.[18] The resident agent so designated can be 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.[19]

Regardless of where the corporation was formed, it is important that the corporation maintain current information concerning the identity and address of its registered agent[20] in the state where it was formed and in each state in which it is authorized to do business. The registered agent’s function is to accept service of process for the corporation and make sure that the process is timely forwarded to the appropriate people at the corporation who need to be apprised of the commencement of suit against the corporation. The time to respond to a summons and complaint is short and every day counts when the corporation needs to contact lawyers and begin mounting a defense to the action, without waiting for a delay in the transmission of the summons and complaint to the corporation.[21]

Historically, there has been one unavoidable drawback to registering an agent for service of process in a foreign state in that such registration has automatically subjected the foreign corporation to the general jurisdiction of the courts of that state. General jurisdiction is a form of personal jurisdiction that permits a court to hear an action against a foreign corporation simply because the corporation is found in the forum state, regardless of whether the action arises out of the corporation’s contacts with the state. By contrast, specific personal jurisdiction occurs when the action arises out of the transaction at issue in the suit, for example, when a foreign corporation is sued in the forum state for breaching a contract to deliver goods to a buyer in that state.

The U.S. Supreme Court has long held that designating an agent for service of process in return for the privilege of doing local business in a state constitutes consent to be sued in the state generally.[22] But that rule was called into question by a pair of recent decisions by the Supreme Court holding that a court in the forum state may assert general jurisdiction over a foreign corporation only when the corporation is “at home” in that state,[23] which the Court has indicated is essentially only the case in the state or states where the corporation was formed and, if different, has its principal place of business.[24] Some jurisdictions, such as Delaware, have read the newer cases as effectively overruling the older ones, meaning that a Delaware court cannot hear a claim against a foreign corporation for no reason other than that the corporation registered an agent for service of process in Delaware; instead, the court will have personal jurisdiction over the foreign corporation only with regard to a claim arising out of a transaction that is the subject of the action.[25] Other courts, even within the same federal district, have disagreed with each other as to the effect of the recent Supreme Court cases on general jurisdiction.[26]

That is an issue that will eventually have to be resolved by the Supreme Court. But while it is an important issue with far-reaching consequences for a court’s ability to exercise general jurisdiction over a foreign corporation, it does not affect the practical importance of a corporation going ahead and registering an agent in every state where it is qualified to do business for the reason stated above, that is, receiving timely notification of all lawsuits against the corporation.

[1] See Genuine Parts Co. v. Cepec, 137 A.3d 123, 143 (Del. 2016).

[2] See generally Black’s Law Dictionary, “process” (10th ed. 2014) (“[a] summons or writ, esp. to appear or respond in court”).

[3] Cal. Corp. Code § 202(c). If the agent is a natural person, the articles of incorporation must also set forth the person’s street address in California; the street address for a corporate agent is not included in the articles of incorporation, but is provided to the secretary of state in a separate certificate filed by the corporate agent. See id. §§ 202(c), 1502(b), 1505(a).

[4] See id. §§ 1502(b), 1505. A corporation wishing to be designated as agent for service of process for another business entity using this procedure must already be authorized to engage in business, and be in good standing, in California. See id. § 1505(c). There is no requirement that the corporation being registered as agent for service of process be related to the entity for which it will act as resident agent. The relationship between the corporation and its resident agent is “purely contractual.” 1 R. Franklin Balotti & Jesse A. Finkelstein, Balotti and Finkelstein’s Delaware Law of Corporations and Business Organizations § 3.7 (3d ed., 2016 Supp.).

[5] See Cal. Corp. Code § 2105(a).

[6] See id. § 2105(a)(5). Like a California domestic corporation, a foreign corporation must also file an annual statement of information including information about the designated agent for service of process. See id. § 2117(b).

[7] See id. § 2105(a)(6)(A).

[8] See also Cal. Civ. Proc. Code § 416.10(a) (providing for a summons to be served on a corporation by delivering a copy of the summons and complaint to the person designated as agent for service of process as provided in the General Corporation Law).

[9] See Del. Code Ann. tit. 8, § 132(a).

[10] See id. § 102(a)(2).

[11] See id. § 371(b)(2).

[12] See id. § 132(f)(4); Carson Indus., Inc. v. Am. Tech. Network, Corp., No. 14-CV-01769 NC, 2016 WL 1569978, at *4 (N.D. Cal. Apr. 19, 2016) (a Delaware corporation or limited liability company can become “forfeit” if it fails to keep a Delaware registered agent).

[13] See Del. Code Ann. tit. 8, §§ 132(f)(4), 321.

[14] See id. § 382(a).

[15] N.Y. Bus. Corp. Law § 304(a).

[16] See id. § 304(b).

[17] See id. § 305(a).

[18] See id. § 306(b)(1) (once process is served on the secretary of state, at which time service is complete, the secretary must “promptly” send a copy by certified mail, return receipt requested, to the corporation at its post office address on file in the department of state).

[19] See id. § 305(a).

[20] All states provide a procedure for notifying the secretary of state of the resignation of the existing agent and the designation of a new agent for service of process. See, e.g., Cal. Corp. Code § § 1503, 1504.

[21] In federal court, for example, the defendant only has 21 days to respond after being served with the summons and complaint. See Fed. R. Civ. P. 12(a)(1)(A)(i).

[22] See Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165 (1939).

[23] Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011).

[24] See Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014).

[25] See Genuine Parts, 137 A.3d 123.

[26] Compare Display Works, LLC v. Bartley, No. CV 16-583, 2016 WL 1644451 (D.N.J. Apr. 25, 2016) (registering an agent for service of process in a state does not constitute consent to be sued in the state for any reason), with Senju Pharm. Co. v. Metrics, Inc., 96 F. Supp. 3d 428 (D.N.J. 2015) (Daimler did not overrule existing cases holding that general jurisdiction is established through consent to service of process in a foreign state).