The Importance of Updating Annual Reports

The Importance of Updating Annual Reports

Under Kentucky law, corporations, LLCs and limited partnerships are required to file with the Kentucky Secretary of State an annual report. For a business corporation, the annual report will list the directors and executive officers. Foreign LLC, assuming it is manager-manage, each manager will be listed. For a limited partnership, each general partner must be identified. A recent case out of New York highlights the importance of keeping these public records current.

In that New York decision, Matter of Hu (Lowbet Realty Corp.), 2018 NY slip op. 03529 (First Dept. May 16, 2018), the court considered and rejected an effort to rescind a sale of corporate owned realty to a third party when the person who executed the transaction documents on the corporation’s behalf did not, in fact, have authority to do so. In part, the court did not grant the requested relief on the basis that the corporation’s public filings continue to list the individual as an officer of the corporation. On that basis, the court found that the third-party was able to rely upon the capacity to bind the corporation and transfer the real property.

This latest iteration of the Lowbet Realty Corp. saga is reviewed by Peter Mahler in his blog New York Business Divorce in a posting titled Bona Fide Purchaser Avoids Rescission of Minority Shareholder’s Unauthorized Sale of Corporation’s Realty (June 4, 2018). HERE IS A LINK to that posting.

Under Kentucky law, it is permissible to, over the course of the year, amend an annual report. Upon the departure of an officer, a manager or a general partner, prompt amendment of the annual reports corrects the public records and supports the position of the venture that there is no longer any apparent agency authority of that person to bind the venture.