Update: New York Adopts Superseding Amendments To Publication Requirements For Limited Liability Entities

Saturday, July 1, 2006 - 01:00

On May 31, 2006, one day before the effective date of a much-criticized amendment to the publication requirements for limited liability companies,1 New York enacted a superseding law which removed the most controversial provisions.2 Under the new law, entities that fail to comply with the publication requirements will be suspended from carrying on, conducting or transacting business in New York during the period of noncompliance. Existing entities not in compliance with the publication requirement must comply before June 1, 2007 in the manner described below.

I. Publication Requirements For Entities Formed After June 1, 2006

A limited liability company formed after June 1, 2006 will have 120 days after its initial articles of organization become effective3 to publish a copy of the articles of organization or a notice containing the substance of such articles for six4 consecutive weeks in one daily and one weekly newspaper in the county where the company intends to be located.5 Subsequently, the company must file proof of publication with the New York Department of State. While the general requirements to publish a notice and to file proof of such publication are substantially unchanged, the amendments contain new forms of a Certificate of Publication (for the company) and an Affidavit of Publication (for each newspaper) to be used for the purpose of filing the proof of publication.6

If a covered limited liability entity fails to comply with the publication requirements within the 120-day grace period, its authority to "carry on, conduct or transact business" in New York is suspended. Such suspension becomes effective upon the expiration of the 120-day period.

a. Consequences Of Non-compliance

Suspension can be subsequently annulled at any time upon the filing of proof of publication in substantial compliance with the law.7

A non-compliant entity will be barred from maintaining a legal action in New York, but the statute does not address whether suspension will result in other consequences. The statute does provide, however, that suspension (and non-compliance) shall not (i) "result in any member, manager or agent of such limited liability company becoming liable for the contractual obligations or other liabilities of the limited liability company" or (ii) "limit or impair the validity of any contract or act of such limited liability company, or any right or remedy of any other party under or by virtue of any contract, act or omission of such limited liability company, or the right of any other party to maintain any action or special proceeding on any such contract, act or omission, or right of such limited liability company to defend any action or special proceeding" in New York.

b. Change In Content Of Published Notice

In addition to the existing requirements,8 covered entities are now also required to publish a more specific identification of the address of the offices of the company, as well as the date of formation of the company, if different than the date its articles of organization were filed.9

If any of the information contained in the notice changes at any time after the publication of the first of the six weekly publications, the company need not update the information.

II. Grandfather Provisions

a. Grandfathered Entities in Compliance with Prior Law

A limited liability company formed prior to January 1, 1999 is automatically deemed in compliance with the new publication requirements. A limited liability company formed thereafter but before June 1, 2006 which complied10 with the then-applicable publication requirements has no new publication requirements.

b. Grandfathered Entities Not in Compliance with Prior Law

Any limited liability company formed after 1998 but prior to June 1, 2006 which did not comply with the then-applicable publication requirements has a grace period of 12 months11 from June 1, 2006 to cure such non-compliance by publishing its articles of organization or a notice containing the substance of such articles as required by the then-applicable publication law followed by the filing of proof of such publication with the Department of State.

Failure to cure the noncompliance within 12 months will subject the limited liability company to suspension in the same manner and with the same limitations as non-compliant limited liability companies formed after June 1, 2006.12

1 The law covers the following entities, whether formed in New York or doing business in New York regardless of the jurisdiction of incorporation: limited liability companies, professional service limited liability companies, limited partnerships and limited liability partnerships.
2 The new law removed a requirement that the names of the top ten members be published, and clarified that failure to comply with the publication requirements would not impair the members' limited liability protection.
3 Effectiveness is deemed to occur at the time such articles are filed with the Department of State or at such later date specified in the articles. See Section 203(d) of the limited liability company law.
4 The superseded amendment would have reduced the publication period to four weeks .
5 The county clerk designates the newspapers. If no newspapers are designated in the appropriate county, newspapers in any county which is contiguous to such county must be used.
6 The forms of Affidavit and Certificate are contained in Section 102(a-1) and (e-1) of the limited liability company law.
7 Excluding the requirement that proof of publication must be filed within 120 days.
8 Limited liability companies are required to publish a notice containing the name of the company, the date its articles of organization were filed, the county within the state where its offices are located, a statement designating the Secretary of State as its agent for service of process, a dissolution date, if any, and the purpose of the business of the company.
9 This latter requirement only applies to domestic limited liability companies.
10 Such limited liability company must have filed at least one affidavit of the printer or publisher of a newspaper with the Department of State prior to June 1, 2006 to be deemed in compliance.
11 Under the superseded amendments, this grace period would have been 18 months.
12 See Section I above.

Monica C. Lord is a Partner practicing corporate and securities law. Sidney Friedman is an Associate practicing general corporate law.

Please email the authors at mlord@kramerlevin.com or sfriedman@kramerlevin.com with questions about this article.