Act 122 (the “Act” or “HB 2057”), signed into law on November 3, 2022, amends Title 15 of the Pennsylvania Consolidated Statutes dealing with Corporations and Unincorporated Associations. It repealed the decennial reporting requirement for certain entities and replaced it with an annual reporting requirement that will begin on January 2, 2024 – with administrative consequences for failure to file delayed until 2027.
Domestic filing entities, domestic limited liability partnerships, domestic electing partnerships that are not limited partnerships, registered foreign associations, limited liability companies, and limited partnerships must file and deliver an annual report to the PA Department of State including the following minimum information:
- The entity’s name and jurisdiction of formation;
- The entity’s registered office address in Pennsylvania;
- The name of at least one “governor” (i.e., director, manager, member, partner, etc.);
- The names and titles of the persons who are the entity’s principal officers, if any, as determined by its governors;
- The address of its principal office, including street and number, if any, wherever located; and
- Its entity number or similar identifier issued by the PA Department of State.
The annual report requirement applies to for-profit and nonprofit corporations and entities. The Act provides the following staggered filing deadlines based on the type of entity:
- before July 1 for nonprofit and for-profit corporations,
- before October 1 for limited liability companies, and
- on or before December 31 for any other entity or association.
Administrative consequences for failure to file an annual report are delayed until 2027 providing the opportunity to educate Pennsylvania businesses before potentially losing their names or registrations. After the three-year grace period, failure to file may result in:
- (i) administrative dissolution if it is a domestic filing entity,
- (ii) administrative cancellation if it is a domestic limited liability partnership or electing partnership; or
- (iii) administrative termination of its registration if it is a foreign association, with the penalty that it will lose the right to its name.
The Act provides the following additional changes, among others:
- Addition of statutory procedures to ratify defective actions by Pennsylvania entities without voiding the action or an automatic bar on potential stale challenges to authorization. HB 2057, § 223.
- Business judgment rule modified to include only that inquiry which is required by state statute and those interests and factors listed or described in section 1715(a) (relating to exercise of powers generally) or 1716(a) (relating to alternative standard) that the director considers appropriate. HB 2057 § 1712.
- Renunciation of a business opportunity eliminates the requirement for an interested officer or director to first bring such an opportunity to the corporation. HB 2057 § 1719.
- Personal liability protection may be extended to all officers through adoption of a bylaw by the shareholders. HB 2057 § 1735.
- Duty of the board of directors, committees of the board and individual directors relating to standard of care, justifiable reliance, and business judgment rule (§1712) is solely to the business corporation and not to any shareholder or creditor or any other person or group. HB 2507 § 1717.
For assistance with Pennsylvania Annual Reporting Requirements or to learn more, please contact the Corporate Practice Group.
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