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The Connecticut General Assembly this year cleaned up a mistake it made two decades ago when it stripped the secretary of the state of the authority to remove businesses from the state registry for having failed to file required annual reports. In restoring that authority, the legislature seeks to provide Secretary of the State Denise Merrill with the ability to clean up a public data base clogged with "zombie companies," which have effectively dissolved but remain listed because no one bothered to notify the state, as required.
Secretary Merrill had sought the change, which received unanimous approval. Gov. Dannel P. Malloy should sign it into law.
In a recent meeting with The Day editorial board, Secretary Merrill estimated 80,000 companies on the state records, about one in five, no longer operate. Yet annually her office must mail out tens of thousands of notifications to these entities, only to see them returned.
"It's a ridiculous waste of money," she said.
In addition to that waste, the current situation leaves those with corporate responsibility for the defunct companies facing years of back payments for the state business entity tax. There is also the potential for scammers to steal the identity of a non-operating business for fraudulent purposes.
If a business entity does not file an annual report for at least one year, the Office of the Secretary of the State will attempt to contact the business with a warning that it faces dissolution. If the required report is not filed in 90 days, the business can be dissolved. In the case of not-for-profit corporations, dissolution can take place after two years of failing to post a report.
Businesses would have the authority to apply for reinstatement.
The legislature stripped the secretary of dissolution authority in 1995. At the time it took an act of the legislature to reinstate a company to active status and lawmakers were weary of dealing with the requests.
Sometimes government can figure out how to do things better. This is such a case.