In the latest Weekly Wright Report:

• Mind Your State Registration – read now

Mind Your State Registration

In Maryland, all businesses, including corporations, limited liability companies, and non-profit organizations, must have a Resident Agent who is able to accept service of a court summons on behalf of the entity, and must register its principal office.  The name and address of the Resident Agent must be registered with the Maryland State Department of Assessments and Taxation, commonly known as “SDAT.”  The Resident Agent frequently is an owner, manager, officer or director, or the company’s corporate counsel, but it can be any person over the age of 18 who is authorized to accept service.

Companies must be mindful to update this information with SDAT.  Business ownership or management can change hands and companies relocate, and, inadvertently, the registration with SDAT becomes inaccurate.

Stale registration can lead to problems such as not receiving proper notice of a lawsuit.  In litigation, a plaintiff must serve process on the Resident Agent for a corporate defendant.  If the Resident Agent is no longer available at the address registered with SDAT, or if the Resident Agent no longer works for the company, then the business might not receive proper notice of the lawsuit, putting it at risk for a judgment by default.

Default judgments are problematic for a corporate defendant when there might have been insurance available to pay the claim.  Most commercial general liability policies contain a provision giving the insurer the right to disclaim coverage if a default judgment is entered against the insured entity.  This means that if you do not update your company’s principal office or Resident Agent’s name and address, you are putting your company at risk for a default judgment and being denied insurance coverage to pay the claim.

To avoid this scenario, all companies that conduct business in Maryland should periodically review their SDAT registration and promptly update their information when it is in need of correction.  Your company’s corporate counsel can handle this for you.  If your company does not have corporate counsel, the attorneys at WC&S can help you navigate this process. You can contact our Corporate and Business Law Team for more information.

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