For those businesses and advisors seeking the convenience and quick turn-around of electronic filings with the California Secretary of State (SoS), beware – there are new procedures that, if not followed, may turn a time-sensitive filing into a delayed and frustrating “over-the-counter” one. These procedures are part of the SoS’s revamped website and new “bizfile” e-filing interface.

As some may remember, the SoS’s online filing service “went dark” for a week this past March as the agency made these upgrades. For the most, part the new website and bizfile system have been worth the wait -- they are easier to use, give access to a broader range of entity filings and histories and streamline electronic filing.

As with any upgrade, however, this new bizfile system has pitfalls, perhaps the most onerous being the additional layer of security needed to submit expedited, electronic filings for time-sensitive transactions. These security measures require users to set up online accounts with the bizfile system using a unique entity-specific PIN. Unfortunately, whether or not a user has set up an online account, the SoS will not accept any filings that do not come from an approved user for the entity. As a result, in order for a law firm or outside service vendor (such as Paracorp, CSC, etc.) to file documents for a client, the account owner must specifically approve the law firm or vendor in order to allow them access to the entity’s account. As part of the approval process, the account owner will receive an email from bizfile@sos.ca.gov, giving the user the option to (i) grant the requestor “full online access” (the ability to file all documents online on behalf of the entity), (ii) grant the requestor “basic online access” (limited ability to file recurring filings, such as Statements of Information) or (iii) deny the requester access altogether. This email will provide a link to sign into the entity’s bizfile account, and from there, granting approval should be a simple “click-of-a-button” process. One can expect a law firm to prefer that the client grant “full online access” in order to expedite the filing process.

So what does this new procedure mean as a practical matter?

• Businesses and advisors with time-critical filings need to plan for delays as the SoS works out the kinks with this new procedure. Clients already have experienced technical issues with the approval process – for example, they have been unable to locate the entity’s PIN to set up the online account or never received the access request. Businesses should anticipate and deal with these glitches early and not late in a deal – otherwise a critical filing and, therefore, a closing might get delayed.
• Businesses and advisors should keep records of their various logins, passwords and PINs for the SoS system in a secure location, as well as records of all those who have access to their bizfile account(s). They also should conduct regular internal reviews of these records in order to keep them up to date.
• Advisors are still trying to figure out protocols for accessing an account if the account “owner” is a former employee or attached to a lost email account and are trying to navigate the requesting process if the account “owner” is a disgruntled owner or employee who refuses to cooperate or otherwise wants to hold the business “hostage.” Due to these and other issues, the SoS’s phone lines are completely tied up and routinely reach a waiting list of up to 400 calls daily. We anticipate further published guidance from the SoS and lower call volume as these issues are addressed and, hopefully, fully resolved. In the meantime, businesses should seriously consider an over-the-counter filing which, while slower and more cumbersome, does not present these access and approval complications. If done with enough lead-time, these OTC filings could mean the difference between closing on time or serious delays.