Firm News

10 Ways A Company’s Agent Can End Up In A Legal Dispute

According to the New York State Education Department, all foreign businesses planning to do business in New York must have a “registered agent” – also known as a “company agent.” This rule also applies to limited liability companies (LLCs). The main purpose of a registered agent is to receive service of process notices and mail from government organizations. According to Empire State Development, every region in New York offers unique opportunities for international businesses – and many of these businesses will probably need a company agent. One should not rush the process of obtaining a company agent, however. These individuals can create significant legal disputes, which may be difficult to resolve. To learn more about the legal disputes a company agent might create, consider consulting with an experienced business litigation lawyer in New York. Aside from education, Schwab & Gasparini may be able to help companies resolve these issues confidently. For our Syracuse office, call (315) 422-1333. For our Albany office, call (518) 591-4664. For our White Plains office, call (914) 304-4353. And for our Hudson Valley office, call (914) 304-4353. 

1. The Agent Might Not Be Available

Perhaps the most obvious legal dispute that a company agent can trigger is also one of the most common. A company agent must be physically present at the office address registered with New York State authorities. If the agent is not available to receive service of process notices, this can trigger default judgments. If the mail carrier or process server leaves the documents with someone else, the company may not be able to respond to lawsuits in time. 

2. The Agent’s Information May Not Be Up-to-Date

If the company agent relocates or moves to a different company, it is important to update this information with the appropriate authorities in New York. If this information is not updated, legal documents and process notices may find their way to the wrong address. Again, this can cause default judgments – and it may make it impossible to respond to lawsuits in a timely manner. 

3. The Agent Might Ignore The Process

Even if documents reach the correct agent, the individual may ignore them. For example, the agent may lack the training to properly address the documents. They may not even know what the documents mean. Perhaps they will mistake important documents for advertising pamphlets. Alternatively, the agent might be so busy with other work that they simply toss the documents aside and forget about them. Sometimes, unexpected life events may make agents indisposed. Whatever the case may be, this can cause serious legal disputes.

4. The Agent Might Mishandle Documents

An equally serious issue is the mishandling of documents. An agent might mistakenly believe that the documents are meant for a different company, and they might forward the information to the wrong people. A company agent might mishandle documents in many other ways, and these mistakes can easily cause legal disputes. To avoid this issue, it makes sense to discuss options for experienced company agents alongside Schwab & Gasparini. 

5. The Agent Might Engage in Fraud

A company agent might also engage in fraud. Outside of New York, fraud committed by company agents is closely correlated with offshore, shell corporations in tax havens. Companies who wish to engage in these activities must carefully select their registered agents, as this position requires no qualifications or degrees (unlike lawyers). 

6. The Agent May Act Beyond Their Scope of Authority

A company agent may trigger legal disputes if they act beyond their scope of authority. This issue is particularly common for foreign companies that rely on agents in other countries. The local agent may not be familiar with the limitations of the foreign company. For example, the agent may agree to sell a number of items that are beyond the production capacity of the company. This can trigger contractual and legal disputes. 

7. The Agent May Engage in Corruption or Bribery

A company agent may engage in acts that trigger criminal or civil legal disputes. Common examples in the business world include corruption and bribery. For example, the local company agent might attempt to bribe a local government official after receiving some kind of regulatory notice on behalf of the foreign company. 

8. The Agent May Disclose Trade Secrets

A company agent may become aware of trade secrets while acting on behalf of a foreign company or local LLC in New York. This agent may then feel tempted to disclose the trade secrets to interested third parties – perhaps in exchange for payment. While federal and state laws prohibit this type of corporate espionage, it may still cripple innovative companies in New York. 

9. The Agent May Subcontract Work Without Permission

When a business begins a relationship with a company agent, it must carefully draft a contract to prohibit unpermitted subcontracting. While some businesses may find subcontracting acceptable, those that do not should make their objections clear in writing. If an agent violates their agreement and subcontracts work without permission, this may trigger significant legal disputes. 

10. The Agent May Claim Contractual Violations Upon Termination

If it becomes necessary to terminate the company agent, this individual may attempt to claim contractual violations. Businesses should review the terms of these contracts before attempting to fire their company agents. In some cases, it may only be permissible to terminate them under very specific circumstances. These terminations may trigger legal disputes, and terminations that violate existing contracts may make company agents eligible for compensation. 

Learn More About Company Agents With Schwab & Gasparini

Each legal dispute involving a company agent might be slightly different. Although online research may help New York companies get a sense of what to expect from these disputes, reading alone will not resolve legal issues. A personalized, targeted approach may be helpful when dealing with specific legal disputes involving company agents. Executives, directors, and other business leaders may contact New York business litigation lawyers at Schwab & Gasparini to discuss potential resolutions for these disputes. Clients in Syracuse can call (315) 422-1333, while clients in Albanay can dial (518) 591-4664. Those located in White Plains may call (518) 591-4664, while Hudson Valley clients may dial (914) 304-4353 for our local office. 

Mon Feb 3 2025, 1:00am