Fund sponsors who have established a limited liability company in New York to serve as the management company for their hedge fund should be aware of the New York publication requirement. Pursuant to Section 206 of the New York Limited Liability Company Act, within 120 days after the effective date of the initial articles of organization, a LLC must publish a copy of the articles of organization or a notice related to the formation of the LLC in two newspapers. After publication, the sponsor will need to submit additional paperwork to the New York Department of Corporations to complete the publication requirement process. This article provides an overview of the process as well as the consequences for not fulfilling the requirement.
Publication in Newspapers
The notice required under the act must be printed in two different newspapers once each week for six successive weeks. The sponsor does not choose the newspapers in which the notice will be published; instead, the newspapers are predetermined for the LLC.
The first newspaper will be the same for all LLCs – the New York Law Journal. [Information on the New York Law Journal to be forthcoming.]
The second newspaper will be different for each LLC. In order to determine the second newspaper, the fund sponsor will need to contact the county clerk of the county in which the LLC’s office is located (as stated in the articles of organization). After the county clerk provides the sponsor with the information as to which newspaper to publish the notice, the sponsor will need to contact the newspapers for instruction on the manner in which to cialis in the united kingdom submit the materials for publication.
Submitting the Certificate of Publication
After the publication notices have run for six weeks in the two newspapers, the printer or publisher of each newspaper will provide the sponsor with an affidavit of publication. The sponosor will then need to submit (1) a Certificate of Publication (2) the affidavits of publication of the newspapers, and (3) a filing fee of $50, to:
Department of State, Division of Corporations
One Commerce Plaza
99 Washington Avenue
Albany, NY 12231
Failure to Satisfy the Publication Requirement
According to the law, if an LLC fails to satisfy this requirement, the LLC will be “suspended” from carrying on, conducting or transacting business in the state. However, a suspension will not invalidate any contract or act of the LLC or the limited liability of the members. It is therefore unclear exactly what “suspended” means, as the law and the courts have failed to elaborate. In the future, the New York legislature or courts could institute more serious repercussions, such as the inability to open bank accounts or enter into certain transactions, but presently, the law explicitly states that a suspension does not invalidate the LLC’s contracts or acts and a suspension can be lifted if the LLC substantially complies with the publication requirement.
More information about the LLC publication requirement is available here and here.
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Bart Mallon, Esq. is a hedge fund attorney and provides hedge fund compliance services through Cole-Frieman & Mallon LLP. He can be reached directly at 415-868-5345.