Nevada Registered Agent Association Proposed Changes to SB 39. February 3, 2015

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1 Nevada Registered Agent Association Proposed Changes to SB 39 February 3, 2015 Submitted By: Nevada Registered Agent Association Matthew Taylor (775) Scott Scherer (775) Amend Section 3 of the bill by deleting fails to obtain in subsection 1(a)(1) (page 5, lin2 42) and replacing it with does business in this State without obtaining. Rationale: With the current process for forming a business entity, a person could form an entity and appoint a registered agent, but then have a change of heart (or finances) before filing the initial list and paying the business license fee. If they are actually conducting business, they should be subject to the penalty. If they simply take the initial steps to form the entity and then do not complete those steps and never conduct business, they should not be required to pay the business license. If the process were streamlined to require the filing of the entity, the initial list and the business license fee at one time, this would eliminate concerns with regard to initial filing. 2. Amend Section 4 by revising subsections 4 and 5 (page 7, lines 16-26). Subsections 4 and 5 should be revised to read as follows: 4. A person who continues to do business in this state after the renewal date without renewing his or her business license is subject to the fees and penalties provided in this section until the person files a notice of cancellation is filed with the Secretary of State. 5. The Secretary of State shall waive the state business license fee and any related late fee if the person provides satisfactory evidence that the person conducted no business in Nevada during the period relating to the waiver. Rationale: Many businesses, especially those that are suffering financial difficulties, shut the doors before beginning the process of dissolving the company. Some never dissolve the company and just allow it to be revoked. Dissolution requires various steps to accomplish and those steps take a significant period of time. If the entity is not

2 actually conducting business during that time, it should not be subject to fees and penalties just because it still appears on the records of the Secretary of State. 3. Delete Section 5 of the Bill. Rationale: Determining the motivation of a person applying for a new state business license will be difficult and will unnecessarily complicate the process of creating a new business entity. Attempting to reverse the filing after the fact will create significant issues with regard to whether the entity ever really existed and what the legal rights and obligations of the new entity or its owners are. Finally, trying to determine whether this would apply in situations where there are multiple owners of the entity in default and the new entity, especially where one or more of those owners is different will be extremely difficult. 4. Amend Section 6, subsection 5 to change the word accept in the first line to receive. Rationale: The word accept in connection with service of process has a certain legal connotation that is not intended. It is up to the parties to the litigation or the court to determine whether service of process has been properly made, and the statute should not tilt the playing field by implying that the registered agent agreed that service was proper. On the other hand, registered agents should not be forced to risk violation by refusing service where they believe a defect exists. Rather, it is up to the parties and the courts to decide whether there was a defect in service and whether that defect has legal consequences. Amend subsection 7 of Section 6 of the Bill to read as follows: 7. To verify and maintain the name and street address of a contact person for each represented entity: (a) The name and physical location of a contact person; and (b) If the agent is a commercial registered agent, an agency agreement or contract between the commercial registered agent and the represented entity. Rationale: The registered agent is already required to maintain certain corporate records or the name of the custodian of such records pursuant to various provisions of Title 7. See, for example, NRS with regard to corporations or NRS (2) with regard to limited liability companies. This provision would require maintenance of a name and street address for a contact person that the Secretary of State or law enforcement could obtain from the registered agent under appropriate circumstances. With regard to the proposed requirement to maintain a written agreement, not all registered agents have current, written agreements. Rather, registered agent agreements are frequently verbal rather than written and based upon the relationship of the parties and their course of dealing. 5. Delete Section 7 of the Bill. C2

3 Rationale: Other statutes already contain the appropriate penalties and this language will just confuse which penalties apply to which violations. In its place, add a new section 7. Sec. 7. NRS is hereby amended to read as follows: The Secretary of State may conduct periodic, special or any other examinations of any records required to be maintained pursuant to this chapter or any other provision of NRS pertaining to the duties of a registered agent as if the Secretary of State deems necessary or appropriate to determine whether has probable cause to believe that a violation of this chapter or any other provision of NRS pertaining to the duties of a registered agent has been violated committed. Rationale: Nevada has long safeguarded the privacy of those who do business here. Fishing expeditions should not be allowed solely because one uses a registered agent for a business. If there is reason to believe that a violation has occurred, the Secretary of State will still have the right to conduct examinations. 6. Amend Section 8 by changing may to shall in the first line and deleting subsection 2(b)(4). Rationale: If the corporation is no longer conducting business in Nevada and provides the date the corporation ceased business operations in Nevada or as a Nevada corporation, there should be no need to provide a reason for seeking relief as provided in subsection 2(b)(4). The relief should be automatic as long as the corporation has ceased conducting business in the state. 7. Amend Sections 10, 14, 19, 20, 26, 35, 37, 45, 47, 55 and 57 by changing may to shall in the first line and deleting subsection 2(b)(4) in each for the reasons stated above. 8. Amend Section 63 of the Bill by adding the following at the end of the new language on line 29 of page 57: if such process is served within three years following the date of default. Rationale: We are concerned that some business entities may be in revoked status for a substantial period of time, long after the registered agent is required to maintain records on the entity, which would be necessary to make reasonable attempts to forward the process to the contact person for the entity. 9. Add a new section to read as follows: NRS is hereby amended to read as follows: C3

4 1. The Secretary of State shall collect the following fees when a filing is made under this chapter: (a) For a statement of change, $60. (b) For a statement of resignation, $100 for the first entity listed on the statement of resignation and $1 for each additional entity listed on the statement of resignation. (c) For a statement of resignation as a registered agent for an entity submitted online by a commercial registered agent, $100 for resigning as the registered agent for the first entity in a calendar quarter and $1 for resigning as registered agent for each additional entity in the calendar quarter. (cd) For a statement appointing an agent for service of process, $ The Secretary of State shall collect the following fees for copying and certifying a copy of any document filed under this chapter: (a) For copying any document, $2 per page. (b) For certifying a copy of any document, $30. Rationale: We are concerned with the process by which a registered agent is appointed and may resign. We propose that commercial registered agents be charged fees quarterly based upon all of the resignations occurring during the year for that particular registered agent regardless of when during the quarter the resignation occurs. Under the current fee structure, registered agents save up resignations to do them all at once in order to minimize fees. This leads to situations in which registered agents are still shown on the records of the Secretary of State as registered agent for an entity even after the registered agent has ceased serving in that capacity. Commercial registered agents already pay fees to register with the Secretary of State and they submit virtually all of their transactions online which reduces the cost to the Secretary of State s Office to process those transactions. 10. Add a new section to read as follows: NRS is hereby amended to read as follows: 1. A registered agent filing must state: (a) The name of the represented entity s commercial registered agent; or (b) If the entity does not have a commercial registered agent: (1) The name and address of the entity s noncommercial registered agent; or (2) The title of an office or other position with the entity if service of process is to be sent to the person holding that office or position, and the address of the business office of that person. 2. The appointment of a registered agent pursuant to paragraph (a) or (b) of subsection 1 must be accompanied by a certificate of acceptance of the appointment by the registered agent. If the certificate of acceptance is filed by any person other than the registered agent named in the certificate, the signature of the registered agent on such certificate must be notarized. C4

5 Rationale: We are extremely concerned with situations where an entity submits a filing and claims that our members have agreed to serve as registered agent. When filings come from someone other than the designated registered agent, we believe that they should be accompanied by a notarized statement of acceptance from the registered agent, so that the entity does not simply sign on behalf of the registered agent. While these situations are infrequent, they have occurred, and they have the potential to create serious consequences for a registered agent who has not, in fact, agreed to serve on behalf of an entity. Especially in light of the fact that there is a process and fee for resignation, there needs to be a better process to ensure that a registered agent has actually agreed to serve as the registered agent. 11. Add a new section to read as follows: NRS is hereby amended to read as follows: 1. A person who violates a provision of this chapter is subject to a civil penalty of not more than $500 per violation, and not more than $5,000 in the aggregate, to be recovered in a civil action brought in the district court in the county in which the person s principal place of business is located or in the district court of Carson City. The court may reduce the amount of the civil penalty imposed by the Secretary of State if the court determines that the amount of the civil penalty is disproportionate to the violation. 2. Except as otherwise provided in subsection 3, before filing a civil action to recover a civil penalty pursuant to subsection 1, if the person who allegedly violated a provision of this chapter has not been issued a written notice of a violation of this chapter within the immediately preceding 3 years, the Secretary of State must provide to the person written notice of the alleged violation and 10 business days to correct the alleged violation. The Secretary of State may provide a greater period to correct the alleged violation as the Secretary of State deems appropriate. 3. If a person who allegedly violated a provision of this chapter engaged in conduct in the course of acting as a registered agent that was intended to deceive or defraud the public or to promote illegal activities, the Secretary of State may take any or all of the following actions: (a) File a civil action pursuant to subsection 1 without providing the notice and the opportunity to correct the alleged violation required by subsection 2. (b) Deny or revoke the person s registration as a commercial registered agent. (c) Issue an order requiring the person to comply with the provisions of this chapter. (d) Refuse to accept filings for entities for which the person serves as registered agent. Rationale: Commercial registered agents represent many different entities. If the same technical violation is repeated for 500 different entities, that technical violation should not result in a penalty of $250,000 which would put most registered agents out of C5

6 business. Subsection 3 already gives the Secretary of State the ability to take more severe action against a registered agent who engages in fraudulent conduct or promotes illegal activities. 12. Add a new section to read as follows: NRS is hereby amended to read as follows: 1. A limited-liability company shall maintain at its registered office or principal place of business in this State a statement indicating where the list required pursuant to paragraph (a) of subsection 1 of NRS is maintained. 2. Upon the request of the Secretary of State, the limited-liability company shall: (a) Provide provide the Secretary of State with the name and contact information of the custodian of the list described in subsection 1, if different than the registered agent for such company. The information required pursuant to this paragraph shall be kept confidential by the Secretary of State. (b) Provide written notice to the Secretary of State within 10 days after any change in the custodian of the list described in subsection Upon the request of any law enforcement agency in the course of a criminal investigation, the Secretary of State may require a limited-liability company to: (a) Submit submit to the Secretary of State, within 3 business days, a copy of the list required to be maintained pursuant to paragraph (a) of subsection 1 of NRS ; or (b) Answer any interrogatory submitted by the Secretary of State that will assist in the criminal investigation. 4. If a limited-liability company fails to comply with any requirement pursuant to subsection 3, the Secretary of State may take any action necessary, including, without limitation, the suspension or revocation of the charter of the limitedliability company. 5. The Secretary of State shall not reinstate or revive a charter that was revoked or suspended pursuant to subsection 4 unless: (a) The limited-liability company complies with the requirements of subsection 3; or (b) The law enforcement agency conducting the investigation advises the Secretary of State to reinstate or revive the charter. 6. The Secretary of State may adopt regulations to administer the provisions of this section. Rationale: Nevada has long safeguarded the privacy of those who do business here. Fishing expeditions should not be allowed solely because one uses a registered agent for a business. If there is reason to believe that a violation has occurred, the Secretary of State will still have the right to conduct examinations. We support cooperation with law enforcement in pursuit of legitimate criminal investigations, but the Secretary of State should not be able to require a company to answer any interrogatory. There are well C6

7 established tools and processes for criminal investigations and filing as a business entity in Nevada should not cause one to forfeit the protections of those processes. 13. Add a new section to read as follows: NRS is hereby amended to read as follows: 1. A limited partnership shall maintain at its registered office or principal place of business in this State a statement indicating where the list required pursuant to paragraph (a) of subsection 1 ofnrs is maintained. 2. Upon the request of the Secretary of State, the limited partnership shall: (a) Provide provide the Secretary of State with the name and contact information of the custodian of the list described in subsection 1, if different than the registered agent for such limited partnership. The information required pursuant to this paragraph shall be kept confidential by the Secretary of State. (b) Provide written notice to the Secretary of State within 10 days after any change in the custodian of the list described in subsection Upon the request of any law enforcement agency in the course of a criminal investigation, the Secretary of State may require a limited partnership to: (a) Submit to the Secretary of State, within 3 business days, a copy of the list required to be maintained pursuant to paragraph (a) of subsection 1 of NRS ; or (b) Answer any interrogatory submitted by the Secretary of State that will assist in the criminal investigation. 4. If a limited partnership fails to comply with any requirement pursuant to subsection 3, the Secretary of State may take any action necessary, including, without limitation, the suspension or revocation of the right of the limited partnership to transact any business in this State. 5. The Secretary of State shall not reinstate or revive the right of a limited partnership to transact any business in this State that was revoked or suspended pursuant to subsection 4 unless: (a) The limited partnership complies with the requirements of subsection 3; or (b) The law enforcement agency conducting the investigation advises the Secretary of State to reinstate or revive the right of the limited partnership to transact business in this State. 6. The Secretary of State may adopt regulations to administer the provisions of this section. Rationale: See above. To the extent that similar provisions exist in other chapters, we would propose to amend those as well. C7