Tip of the Week: Don't Forget Good Standing!
By David Feldman at 9 March, 2010, 3:14 pm
Sometimes when corporations enter into important transactions the parties neglect to confirm that the corporation is current and in “good standing” in its jurisdiction of incorporation. Too many times this is assumed, or reliance is made on a certificate of good standing that is not current.
A corporation that is not in good standing might not be legally able to enter into binding agreements. Usually failure to be in good standing results from not paying franchise or other taxes, or filing required reports, and usually this failure can be remedied by paying the delinquent taxes or filing the delinquent reports. But sometimes a state will simply de-certify a corporation and it’s a much more laborious process to resurrect the company.
Another thing that I have seen happen when things are not checked carefully enough. Some states, even the venerable Delaware, make mistakes. They might not have inputted the name of your corporation correctly originally when you submitted your certificate of incorporation. When you pull a good standing certificate, this is verified. We even had a situation where a snowstorm closed the Delaware state offices and a deal needed to close and no good standing was available! This shows you the importance of the item and the need to plan in advance to get it.
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