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Why was a $2.35M judgment overturned for failure by a foreign LLC to register in Virginia?

The Virginia Supreme Court in the case of World Telecom Exchange Comm. LLC v. Sidya (VLW 017- 6-056) found that the lower court erred by allowing the plaintiff to litigate a claim without first obtaining an SCC certificate as required by Va. Code § 13.1-1057(A). In doing so, it reversed one of the largest Virginia verdicts of 2015.

Va. Code § 13.1-1057(A) states that a foreign limited liability company (LLC) “transacting business in the Commonwealth may not maintain any action, suit, or proceeding in any court of the Commonwealth until it has registered in the Commonwealth.” See our November 2016 newsletter in which we discuss registering your Virginia entity in other states where it transacts business.

One of the plaintiffs was a private foreign company organized in Dubai in the United Arab Emirates. The record shows that it was aware of the failure to register but, nevertheless, failed to cure the registration issue before the trial concluded. The company argued that it did not transact business in Virginia, and that only its wholly-owned subsidiary (also a plaintiff in the litigation) transacted business in Virginia. The court rejected this defense, opining that a parent company transacts business in the Commonwealth if its wholly-owned subsidiary transacts business in the Commonwealth. The defendant’s lawyer argued at trial that the Dubai company did not want to register in order to avoid paying taxes to Virginia. The company did obtain the certificate during the appeal process, but the Supreme Court held that a proper certificate was necessary before the final judgment was entered.

The Supreme Court remanded the case with instructions for the Fairfax County Circuit Court to enter a final judgment dismissing the foreign company’s claims against the defendant.

The ruling in this case illustrates just one reason why it is important for foreign companies transacting business in Virginia to obtain a certificate of authority before doing business in Virginia.



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If you need help determining whether you need to register your business in another state, and/or you need help registering your business in another state, do not hesitate to contact us for assistance. Our firm will provide you a reasonable flat-fee quote to perform the service, inclusive of any requisite filing fees. In most cases, the registration can be done relatively quickly.

In addition to acting as your company’s registered agent, our law firm can assist your company with most any business-related legal issue in Virginia, Maryland and the District of Columbia. We have a great deal of experience with respect to business litigation, mergers and acquisitions, reorganizations, contract review, employment law, partnership disputes, debt collection, and other business law topics. Go to www.grddlaw.com to learn more about us. Call us at 703-273-1400 or send an e-mail to info@grddlaw.com.

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About Our Law Firm

Gross & Romanick, P.C. is a law firm located in Fairfax, Virginia. Since 1980, our attorneys have dedicated themselves to providing cost efficient legal services to individuals and businesses in Northern Virginia and the Washington, D.C. Metro Area. We meet our clients’ needs by applying hard work with integrity to find creative and practical legal solutions. Our extensive business litigation experience, and our understanding of the transactional mistakes that often lead to expensive courtroom battles, helps us to advise our clients on business deals and the resolution of commercial disputes. To learn more about our firm, visit: www.grddlaw.com or call us at 703-273-1400