Pre-Clearing Your Corporate Filing: Is It Necessary?
We’re often asked to pre-clear corporate filings for our clients, yet in many cases we’ll review the request before proceeding. Although pre-clearing is a good option to have, depending on the state and timeline of the project, this step may not be necessary.
Pre-clearing a corporate filing means submitting it to a Secretary of State for an official review and comment. They will either affirm that the document is acceptable for filing or will provide comments on required edits to get it in satisfactory shape. When there’s a time sensitive transaction such as a merger, pre-clearing a document can be an invaluable first step, both to prevent delays to closing and to provide peace of mind when there are multiple moving parts to manage.
However, pre-clearing a document can be expensive. To have a document pre-cleared on a 24-hour basis in California, the cost is $500.00. There are a range of timelines with the most affordable being a 10-day turnaround for $250.00.
In Massachusetts, there is no formal pre-clearance process, although one can request the staff attorneys at the Secretary of the Commonwealth to take an advanced look at a document and inform if anything jumps out at them. For any state, when using a corporate filing service, they see and process many filings and are usually willing to give an unofficial review as well.
In Delaware, the cost is $250 plus any additional expediting charges one may elect to apply (which range from $50 – $1,000). Some attorneys just get used to the concept of pre-clearance and consider requesting the service automatically. However, pre-clearance is not always necessary. If there are no special circumstances surrounding a routine filing, and particularly if the parties involved have a high level of experience with drafting a particular filing, there may be no need for the additional review (an experienced paralegal may have drafted a thousand of the subject document over the course of a career).
Further, in certain circumstances, there may simply be no advantage to be had. In Delaware, one is granted 5 days to fix a rejected filing and retain the filing date so long as it is resubmitted within that 5 day window. If the subject filing doesn’t trigger other events, than incurring the extra $250 cost to pre-clear earns no real advantage. Best to have those with experience review the filing on an unofficial basis, and if all appears well, submit the filing and let the Secretary of State do its job. Worst case scenario, you receive notice of rejection, fix the deficient items, re-submit, and have lost only a day or two of processing time at most.
There are times when pre-clearing a document is extremely important and worth every penny. But it’s also important to know when saving those fees are a better course of action.
As with most legal tasks, the rules governing pre-clearing will vary from state to state. It’s to your advantage to have expert support who can navigate the intricacies of each, saving you time and money in the process.
If you have questions about managing your state filings, or want to know if pre-clearing should be used for your entity, we are happy to help. Contact us today and we’ll be happy to work with you to ensure your filings are managed correctly.