Recently we have been hearing about homeowners associations experiencing extremely long delays for the filing of business forms at the California Secretary of State, resulting in an association's corporate status being suspended. In one situation, a manager reported to us that a form sent to the Secretary of State by mail in December still had not been processed by the end of March, resulting in the association's corporate status becoming suspended. The Secretary of State website even reports that [a]s a result of budget cuts, the time to process requests has increased significantly and provides, that the current processing times of a Statement of Information is currently over 3 months (for updated information on the processing time of the most common forms, see http://www.sos.ca.gov/business/be/processing-times.htm.)
Suspension of a corporate status can cause very serious consequences for a homeowner association, its board, and its members, including subjecting officers and director's to personal liability, result in the corporation losing its name, interfere with an association's collection of delinquent assessment, and cause insurance contracts to be void. A more detailed discussion of what it means for an association to lose corporate status can be found in our previous article Suspension of a Homeowners Association Corporate Status, It's not 'Just a Technicality'.
Other than failure to file the appropriate tax forms with the Franchise Tax Board,1 the most common reason we see for suspension of the corporate status is a failure to comply with the filing requirements of the Secretary of State. The Secretary of State filing requirements vary depending on whether the association is incorporated, unincorporated, or a stock cooperative. Each is outlined as follows:
Other filing requirements may apply to a homeowner association, including filing requirements when an Agent for Service of Process resigns. For a complete list of the Secretary of State forms, including the forms mentioned above, and the applicable filing requirements, see http://www.sos.ca.gov/business/be/forms.htm#corp.
Statement of Information forms (i.e., SI-100 and SI-200 mentioned above) may be submitted online at https://businessfilings.sos.ca.gov. When submitted online, such Statements of Information are processed immediately, but payment of the registration fee must be done with a credit card, which may be administratively difficult for some associations. Unfortunately Form SI-CID is not currently available to be filed online.
If the association is in a situation in which the association needs to file urgently, the Secretary of State offers Preclearance and Expedited filing services, where the filing speed can be as fast as same day filing. Not surprisingly, such services come at a considerable cost, ranging from $350 to $750 per form filed. In addition, to be eligible for Preclearance and Expedited filing, the forms must be personally delivered to the Sacramento office, so unless someone from the association is willing to make the trip and stand in line, the association is likely to incur additional costs to pay for a private company to personally deliver the documents to the Secretary of State offices. More information about the Preclearance and Expedited Filing services may be found on the Secretary of State's website at http://www.sos.ca.gov/business/be/preclearance-expedited-services.htm#expedited.
The Secretary of State website warns that significantly more requests are submitted at the end of the fiscal and calendar years, which slows the processing time for all requests. If possible, associations should try to send in the form well before these times to avoid the possibility of suspension.