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Beware! Another Corporate Scam Is In The Mail

by Joseph G. Milizio, Esq.

Many of our corporate clients have been receiving notices in the mail that are designed to resemble correspondence from a governmental agency. The document carries the heading "CORPORATE RECORDS COMPLIANCE OFFICE NOTICE OF ANNUAL MINUTES COMPLIANCE" and bears the incorporation date of the corporation, the Secretary of State "Number" and a "return no later than" date. The notice states that New York corporations are required to hold annual meetings of shareholders for election of directors and to conduct other business. It also indicates that failure to comply may possibly result in personal liability of the corporation's shareholders, directors and officers for all corporate debts and obligations. The document gives directions to complete the form with the business name and address, contact person, email address, telephone and fax numbers and the names of all officers and directors. It then states that the form is to be returned with a $120 check.

Although the information regarding corporate compliance with shareholders' meetings and the potential consequences thereof is accurate, it is NOT a governmental notice. It is a solicitation by a for-profit private company, to prepare minutes for the corporation based upon the information supplied by you on the form, all for a fee of $120! Only at the bottom, in small type, does it say "This service has not been approved or endorsed by any government agency and this offer is not being made by an agency of the government."

If you are an owner or officer of a business corporation, read your mail carefully. The only non-tax document required to be filed with the Department of State is a Biennial Statement. Not surprisingly, the foregoing notice is very similar to the form of the Biennial Statement.

So what's the problem with completing the "Corporate Records Compliance" document and paying a $120 fee? Well, aside from it being blatantly deceptive, the document that this entity prepares and returns to you based upon the information you supply may not be sufficient to adequately protect the corporation and its shareholders, officers and directors. Simply stating that certain individuals are the officers and directors of a corporation does not address other items that need to be reflected in corporate minutes. For instance, the approval of a major contract, lease, purchase or sale of assets or the borrowing of money, should be properly reflected in minutes of the shareholders and directors. Otherwise, it may be possible to "pierce the corporate veil" and subject the principals to liability. Moreover, the lack of complete minutes among shareholders and directors could result in disagreements among the parties, which often escalates to litigation.

If you require assistance with preparation of corporate minutes and the requirements thereof, please do not hesitate to contact our transactional department.

Joseph G. Milizio, Esq. is the Managing Partner of Vishnick McGovern Milizio LLP and heads the firm's Transactional (Business) and Real Estate Practice Groups. His expertise encompasses all areas of transactional law, with an emphasis in general business transactions, including acquisitions, entity and owner representation, commercial leasing and transactional real estate matters. He can be reached at 516.437.4385 Ext. 108 or via email at Jmilizio@vmmlegal.com.