Understanding the Delaware Certificate of Good Standing: Delays, Expedites, and Best Practices
The Delaware Certificate of Good Standing is a crucial document for businesses registered in Delaware. Whether you’re involved in a financial transaction, opening a business bank account, or completing a due diligence checklist, this certificate often acts as proof that your entity is legally compliant and in good standing with the Delaware Division of Corporations.
While Delaware is well-known for its business-friendly environment and efficient Secretary of State office, there are scenarios where even a seemingly routine document like the Delaware Certificate of Good Standing cannot be obtained on a rush basis. This article breaks down the details you need to know to avoid surprises and ensure smooth processing when you need this document urgently.
What Is a Delaware Certificate of Good Standing?
A Delaware Certificate of Good Standing is an official document issued by the Delaware Secretary of State that confirms a business entity—whether a corporation, LLC, LP, or other type—is duly formed, currently existing, and has paid all franchise taxes and other obligations owed to the state. It proves that the company has complied with all state requirements and is authorized to conduct business.
This certificate is often required in the following situations:
- Opening a corporate bank account
- Entering into lease agreements
- Filing legal opinions
- Completing financial closings
- Complying with due diligence for mergers or acquisitions
Because of its legal and operational significance, many parties request a Delaware Certificate of Good Standing on a same-day or expedited basis.
Why Can’t You Always Get a Delaware Certificate of Good Standing on a Rush Basis?
While Delaware generally offers remarkably fast turnaround times—sometimes even within an hour—there are specific circumstances where obtaining a Delaware Certificate of Good Standing quickly may not be possible.
Pending Filings Cause Delays
If there are any pending filings with the Delaware Secretary of State, they can place a block on issuing a Delaware Certificate of Good Standing or any charter documents such as a Certificate of Incorporation or Amendment. This means that even if your company is current on taxes and annual reports, a pending document (like a merger or amendment) can prevent the release of your certificate.
Types of Pending Filings That Can Delay Your Certificate
Let’s look at some common filings that may delay the issuance of a Delaware Certificate of Good Standing:
- Certificate of Amendment
- Certificate of Merger
- Certificate of Conversion
- Certificate of Validation
Of these, the most challenging delay is caused by a pending Certificate of Validation under Section 204 of the Delaware General Corporation Law. These filings cannot be expedited.
Understanding Certificate of Validation and Why It Can’t Be Expedited
A Certificate of Validation is used to ratify defective corporate acts—such as issuing stock that was not properly authorized—under DGCL §204. These filings are reviewed by a specialized team within the Secretary of State’s office.
Because of the complexity and potential implications of the administrative errors they’re meant to fix, Delaware does not offer any expedite option for these validations. The processing time can vary widely and may cause a significant delay if a Delaware Certificate of Good Standing is required urgently.
Real-Life Example: A Costly Delay
A client recently learned the hard way. They requested a same-day Delaware Certificate of Good Standing for an upcoming closing, only to find out that a Certificate of Validation had been filed a month prior. That pending validation placed a block on the issuance of any documents, resulting in a delay that impacted their transaction timeline.
How to Check for Pending Filings Before Requesting a Delaware Certificate of Good Standing
To avoid such delays, always:
- Confirm that all franchise taxes have been paid.
- Verify that the annual report (for corporations) has been filed.
- Check with your registered agent or legal counsel to see if there are any pending filings.
- Understand that certain filings like validations are not eligible for expedite service.
Delaware’s Expedite Tiers for Corporate Filings
Delaware offers five tiers of expedited service for filings—each with different turnaround times and costs. If your filing is not a Certificate of Validation, you may be able to use one of the following options to speed things up:
- 24-hour expedite – Additional $100 ($50 for new entity filings)
- Same-day expedite – Additional $200 ($100 for new entities), cutoff at 2:00 p.m. ET
- Two-hour expedite – Additional $500, cutoff at 7:00 p.m. ET
- One-hour expedite – Additional $1,000, cutoff at 9:00 p.m. ET
- 30-minute expedite – Additional $1,500, cutoff at 9:00 p.m. ET
These expedited options can also be used to fast-track a pending filing, which in turn may unlock the release of your Delaware Certificate of Good Standing—unless the filing is a validation.
What Happens if Your Entity Misses Deadlines?
Annual Report Deadlines
All Delaware corporations are required to file their annual reports online. This can be done up to 30 days ahead of a major transaction like a merger, provided it’s within the same calendar year.
If the annual report isn’t filed on time, you may not be able to get your Delaware Certificate of Good Standing until the requirement is met.
Alternative Business Entities and LLCs
LLCs and partnerships must pay their annual tax by June 1. If they miss this deadline:
- A $200 penalty is assessed
- 1.5% interest per month accrues on both the tax and the penalty
- After 3 consecutive years, the entity becomes void in Delaware records
You can reinstate the entity by filing a Certificate of Reinstatement and paying all back taxes, penalties, and interest.
Best Practices for Obtaining a Delaware Certificate of Good Standing
To avoid unnecessary stress or delays:
- Plan ahead: Don’t wait until the last minute.
- Check for pending filings: Especially amendments, mergers, and validations.
- Use expedited options: When possible, pay for quicker processing.
- Coordinate with your legal team or registered agent: They can check the status of filings and advise on the best strategy.
FAQs:
1. What is a Delaware Certificate of Good Standing?
It’s an official document showing that a company is duly formed, active, and compliant with state requirements.
2. How long does it take to get one?
Usually, within an hour or same day if there are no pending filings. Expedite options are available for faster service.
3. Why can’t I get one if there’s a pending filing?
The Delaware Secretary of State will block the release of documents until any pending filings are approved.
4. Can I expedite the processing of a pending Certificate of Validation?
No. Delaware does not offer expedite options for validations under DGCL §204.
5. What if I urgently need the certificate?
You may be able to expedite other types of filings to clear the path, but validations will require patience.
6. What causes a business to fall out of good standing?
Failing to file annual reports or pay franchise taxes by the deadline.
7. How can I check if my entity is in good standing?
Contact your registered agent or the Delaware Division of Corporations.
Final Thoughts:
The Delaware Certificate of Good Standing is essential in many business scenarios. While Delaware is incredibly efficient, certain nuances—like pending filings or validations—can cause unexpected delays. By proactively monitoring your entity’s status, understanding expedite options, and planning ahead, you can avoid delays that could impact transactions or partnerships.
When time is of the essence, knowing the intricacies of how and when the Delaware Certificate of Good Standing can be issued can make all the difference.
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