From the headline of this column, you might be asking, “What are organic documents?” They are the records critical to the existence and operation of your dealership. So what are we talking about?
Corporation or LLC Documents: The formation and ongoing validity of your corporation or limited liability company is critical to shield equity owners from liabilities.
If the company's separate organization can be attacked, then the limited liability for owners that the business structure provides may be compromised, resulting in personal liability for the owners.
Possess the documents that reflect the actions your state laws require: articles of incorporation (or organization in the case of an LLC), bylaws (or operating agreement in the case of an LLC), equity ownership records, and meeting minutes including records of resolutions.
Franchise materials: Franchised dealers sometimes negotiatie with franchisors. Know the important terms of your relationship and the rights and obligations your dealer agreement provides. Have your dealer agreement and amendments, performance reports, franchisor policy announcements and correspondence.
Financing Agreements: In recent months, dealers have had to negotiate and restructure loan terms. If you must prepare for such negotiations, you and your attorney must know the terms of your agreements. Have copies of all floorplan agreements and other line of credit and loan documents.
Real Estate Documentation: Be sure your right to occupy your dealership premises is undisturbed. If you own your real estate, maintain a copy of the deed and the mortgage. Whether or not you own your real estate, have the lease handy.
Vendor Agreements: The ability to make decisions on company expenditures will depend upon the terms of the agreements to which you have already committed. Do monthly agreements whenever possible, although short-term agreements aren't possible for computer contracts and equipment leases.
In those cases, dealers should understand their obligations to properly evaluate changes and renewals, replacements, additional service and equipment agreements, and the like. You can only do that if you have copies of the agreements.
Retail Credit and Lease Agreements: Occasionally,, a retail credit or lease source may contact you to repurchase a deal for an alleged violation of your representations and warranties.
It's difficult to determine the validity of a repurchase demand unless you have master dealer agreements for your retail credit and lease sources.
Other Important Documents: These are critical to your ability to do business and protect your assets. They include: trade name registrations, dealer licenses, business licenses, occupancy permits, insurance policies, and equipment warranties. Make sure you have them and that they are filed so that you can refer to them when necessary.
- If you don't have some organic documents, request them from your franchisor, lender, landlord, or supplier. Explain that you and your accountant are reviewing your records and you need the documents to complete your files.
- Documents should be well-organized and kept in your dealership's fire-proof safe.
- Duplicate copies should be kept by the dealer at his or her home. In the event of an emergency affecting the dealership, hard copies will be readily available. Or keep virtual copies. Have digital copies made in an Adobe or other similar format. Store the files on a flash drive or similar medium that you keep away from your business premises. Upload the documents to a virtual document storage service. If you don't know how to do that, ask your computer consultant or any teenager. In case of a problem requiring you to quickly reference one of your organic documents, you will be ready.
Michael Charapp, an attorney with Charapp & Weiss, LLP, specializes in representing motor vehicle dealers. He can be reached at (703) 564-0220 or [email protected]
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