It is essential that a small business keeps its corporate records current. All small businesses that are incorporated in the State of New York receive a “corporate book”. This corporate book is comprised of the corporate seal, basic by-laws and articles of incorporation.
Under the Business Corporation Law of New York, when you incorporate in the State of New York, you designate the Secretary of State to be authorized to accept service on behalf of your corporation
Today, most small businesses do not really understand what that means. Simply put, if someone wants to sue your business, all they have to do is send a Summons and Complaint to the Secretary of State,along with a small fee, and your corporation is deemed served under the Business Corporation Law.
Within properly prepared incorporation papers is an address, which you designate, where the Secretary of State will have a copy of the summons and complaint sent.
Do you know what address the Secretary of State has on file for your corporation? Many times the attorney who you retained to incorporate your entity is listed as the designated address. Sometimes it is your place of business. Other times it is your home address.
A real problem arises when that address is no longer valid. Your attorney may have moved his office. You may have changed attorneys. You may have moved your place of business. You may have moved and have a new home address.
The Secretary of State now mails a copy of the summons and complaint to an address that is no longer valid. You never receive a copy of the summons and the next thing you know, you have a judgment against your company “on default”. You run to your attorney and tell them you were never served; you never received the summons.
You want to vacate the default judgment but unfortunately, you may be out of luck. That is because one of the criteria for vacate a default is that you must show a “reasonable excuse” for the default.
Failure to receive the summons under these circumstances does not constitute a reasonable excuse. Under the Business Corporation Law, the courts have held that the failure of a corporation to receive service of process due to the breach of the corporation’s obligation to keep a current address on file with the Secretary of State does not constitute a reasonable excuse.
Let the Law firm of Michael B Schulman & Associates, P.C. review your corporate documents to insure that they are current.