Business is hard. There are a lot of tasks and details that one has to attend to for the business to thrive and be successful. The business owner cannot do everything. Some tasks and details will be missed.
Business owners often have to triage their tasks, doing only what is necessary to get through the day.
This is why outsourcing certain tasks not only makes sense. In fact, failing to outsource can jeopardize the business. Outsourcing your resident agent for your legal entity is a task that should always be outsourced. The cost to hire a registered agent is nominal and the cost of non-compliance can be extreme.
The G.F.S. Ventures, Inc. v. Harris, 934 S.W.2d 813 (Tex. App. 1996) court case provides a prime example of why you should hire a registered agent for your Texas corporation even if the business operates in Texas.
Facts & Procedural History
This case involves a lawsuit filed in Texas against a Texas corporation.
The plaintiffs sued the defendant corporation, a construction company, for work-related injuries the plaintiffs suffered.
The corporation did not maintain worker’s compensation insurance.
The defendant corporation had listed the owner as its registered agent on its corporate filings. The evidence showed that the owner had moved and failed to update his address with the state as the registered agent.
The defendant then served the Texas Secretary of State and eventually obtained a default judgment when the defendant corporation did not appear or respond to the court filings.
The defendant corporation eventually learned of the default judgment that was entered against it. This case involved an appeal of the default judgment.
Service of Process in Texas
The defendant corporation argued that the service of process was defective and, as such, the default judgment was invalid.
Service of process on corporations is governed by the Texas Business Corporation Act. The Act places a duty upon corporations to maintain a registered agent and office, and to notify the Secretary of State of any change to either.
The Act provides that the Secretary of State becomes the agent for service of process of a corporation whenever a corporation fails to maintain a registered agent in Texas, or whenever its registered agent cannot be found with reasonable diligence at the registered office.
Deputy Constable who attempted service at the defendant corporation’s address returned the original citation unexecuted with the notation on the front of the citation “Return to Attorney — Bad Address.” She also wrote notes on the back of the citation.
The trial court found this to be sufficient evidence of reasonable diligence. The appeals court agreed. The Texas Court of Appeals ruled that the service of process was not defective and upheld the default judgment.
The Takeaway
This case provides an example of why a corporation has to keep its registered agent address updated with the Texas Secretary of State. The failure to do so can have significant repercussions, such as the default judgment in this case.
We serve as the registered agent for businesses in Texas. Please contact us to find out more about our registered agent services.