Understanding and Correcting Unauthorized Filings of Certificate of Incorporation
Entrepreneurs and business owners often choose Delaware to form their companies due to the state's well-established and forgiving legal framework. One of the key benefits is the ease with which incorrectly filed documents, such as a certificate of incorporation, can be corrected. This article explores the potential for unauthorized filings and the steps necessary to rectify them, with a focus on the state of Delaware.
What Prevents Someone from Filing a Restated Certificate of Incorporation?
Filing a restated certificate of incorporation can be a critical step in maintaining the legal standing and integrity of a company. However, doing so without proper authorization opens you up to legal issues such as charges of perjury. Perjury refers to the act of making false statements under oath, which can carry severe legal consequences.
Delaware, the most popular state for business incorporation, has mechanisms in place to address such unauthorized filings. Typically, the process involves filing a 'Certificate of Correction.' This document describes the errors in the original filing and details the corrections that are being made. Upon the Secretary of State's approval, the incorrect document is nullified, and everything is set back to its original state.
Forgiveness and Legal Remedies in Delaware
Delaware stands out for its lenient approach to correcting incorrectly filed documents, including the dissolution of a corporation. This forgiving attitude is a significant advantage for businesses operating in the state.
According to reliable sources, professionals who deal with state filings on a daily basis can attest to the existence of various scenarios where such issues arise. For instance:
A client changes their mind and wants to undo a recently filed document. A new clerk misunderstands an order and files incorrect documents. Malicious parties file fraudulent documents.Delaware addresses these situations by allowing entities or their agents to take corrective action, thereby minimizing the impact of errors and malicious acts. Contrast this with states like New York, where reversing an incorrect filing often requires a court order, adding complexity and cost to the process.
A Case Study: Unauthorized LLC Cancellation
Recently, a situation came to light where a small family business faced an unauthorized cancellation of a California limited liability company (LLC). The articles of organization had already been filed with the Secretary of State, and an operating agreement had been prepared and signed. However, the situation took a sudden turn when an unexpected document arrived, leading to the unauthorized cancellation.
The erroneous cancellation was realized only months later when the family business approached an attorney for advice. The lawyer explained that the only legal remedy was a court order, which was not a practical solution due to the time and financial constraints of the family business.
To resolve the issue, a new LLC with the same name was formed, and the operating agreement was applied to this new entity. This approach allowed the family business to continue without significant disruption.
Conclusion and Disclaimer
While the ease of filing entity-formation documents can facilitate business startups, it also poses the risk of unauthorized filings. Businesses in Delaware can rest assured that there are effective remedies to address such issues, including the filing of a Certificate of Correction.
It is important to note that this information is not a substitute for professional legal advice. If you encounter a similar situation, it is crucial to seek legal counsel to protect your interests. Misunderstandings and errors can have serious consequences, so immediate action is recommended.