Jun 04, 2008

Corporate Compliance Scams and Flimflams

llccorp053008.jpgEven Nolo, my corporate-law publisher -- a company loaded with lawyers and staff personnel who can easily separate legal wheat from chaff -- gets bogus corporate correspondence selling ersatz compliance services. One official-looking legal letter came into the controller's office recently. It was from an "agency" calling itself the Corporate Minutes Compliance Counsel, or somesuch, and it strongly advised (warned, really) that Nolo send the Board a payment of $125 to prepare its state-mandated domestic corporation statement. Failure to do so could result in dire consequences, the letter advised, including a loss of corporate status with the Secretary of State.

Nolo's controller, who has years of experience with real and bogus corporate service solicitations, shredded this letter immediately. Even though the letter contained a statement that was carefully designed to mimic the official state form, she knew she had already filed the real statement with the state for the much lower $25.00 state filing fee.

This and other corporate compliance scams are rampant. Another common one is a warning letter that solicits corporations to engage the company to prepare state-mandated annual corporate minutes forms. Again, these letters, which appear at first glance to be sent out by a state "agency", warn that a failure to prepare the minutes will result in loss of the corporations status. These annual minute compliance solicitations are bogus, for several reasons:


  • Corporate minutes are a private document. They are not filed with the state.

  • No corporation has ever been suspended by any state for failure to prepare annual minute forms.

  • State corporate statutes usually require some, not all, corporations -- those whose directors serve only for a one-year term -- to hold an annual shareholders' meeting to elect or reelect directors. If they don't hold the meeting for some reason, the existing directors continue to hold office and the corporation continues (under most corporate bylaws, directors are elected for their stated term and until their successors are elected and qualified). The corporation does not lose its status (or even its current board) for failure to reelect directors with a one-year term.

  • Even if states were serious about making sure corporations held and prepared written minutes for meetings required under provisions of the state law, they would be unable to determine -- at least without a huge, unjustifiable allocation of human and financial resources -- what corporations actually had or had not held annual meetings and prepared or not prepared contemporaneous minutes of those meetings.


Any time your corporation or LLC gets a questionable solicitation for services, or a threatening or even friendly reminder to comply with a state or federal requirement, the first thing to do if you don't immediately toss the letter is to read all the small print -- you may discover a disclaimer that uses round-about legal language to say that the letter does not (despite all appearances to the contrary) come from a state agency.

The next thing to do if you still have questions is to perform a search online for the name of the "agency" sending the letter. Chances are, you'll get back a bunch of links to blogs that broadcast the bogusness of the agency and its bid for your money.

When I searched for annual minute compliance solicitations online, I was led to a private blogs and a Better Business Bureau article that contained numerous complaints about misleading and overpriced corporate compliance solicitations. Apparently, these solicitations continue to be sent out to registered LLCs and corporations under several aliases from several post office boxes in several states. Unfortunately, a number of unsuspecting corporate mail recipients have been taken in.

One final tip I use to filter questionable mail: If the sender did not pay full first-class postage -- and I don't mean pre-sorted or pre-stamped with another special category, I mean full price postage -- I toss it, contents sight-unseen, into the circular file.


Copyright 2008 by Anthony Mancuso. This blog is provided as information and opinion. Please check with a legal or tax adviser for legal or tax advice.