- A Foreign Corporation’s Right to Appear in Ohio Courts
- February 12, 2013 | Author: Matthew G. Burg
- Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Cleveland Office
Generally, no foreign corporation shall transact business in Ohio unless it holds a license to do so issued by the Ohio Secretary of State. Of course, as the old adage states: “there’s an exception to every rule.” But first, a review of the key terms and applicable rules.
First, the rule. Ohio law defines a “foreign corporation” as a corporation incorporated under the laws of another state or a bank, savings bank, or savings and loan association chartered under the laws of the United States, the main office of which is located in another state. Ohio Revised Code 1703.01(B). Generally, no “foreign corporation” shall transact business in Ohio unless it holds an unexpired and uncanceled license. O.R.C. 1703.03. And a “foreign corporation” that has not obtained such a license is prohibited from maintaining any action in any Ohio court until it has obtained the license. O. R. C. 1703.29(A). (The same holds true for limited liability corporations. See O.R.C. 1705.58(A)).
Now, the exceptions. Some foreign corporations are specifically excepted from the rule, such as credit unions, title guarantee and trust companies, bond investment companies, to name a few. O.R.C. 1703.02. Still others may benefit from federal law, which preempts Ohio’s licensing requirement for “national banks”. The National Bank Act allows “national banks” to maintain actions in Ohio despite not having obtained a license. More specifically, a credit card issuer that is a “national bank” can pursue an action for the unpaid debt in Ohio, and it is not restricted by the Ohio statute. The Office of the Comptroller of the Currency regulates “national banks” and it maintains a list of those banks.
Even if a “foreign corporation” is not a “national bank”, it may still be excepted from the rule if it engages solely in interstate commerce. With respect to credit card companies, the cardmember agreement may set forth this notion: “Your Account involves interstate commerce and this provision shall be governed by the Federal Arbitration Act (FAA)”.
Or, the credit card relationship alone may be sufficient to demonstrate interstate commerce. A determination depends on the particular facts of each case to determine if the creditor is “transacting business” in the state. “Transacting business” has been characterized when a creditor “has entered the state by its agents and is therefore engaged in carrying on and transacting through them some substantial part of its ordinary or customary business, usually continuous in the sense that it may be distinguished from merely casual, sporadic, or occasional transactions and isolated acts.'" To show that it was not “transacting business” in Ohio one foreign corporation submitted an affidavit that it "has no office in Ohio, no agents based in Ohio, and does not actively market in Ohio."
At times, the easiest argument concerning a foreign corporation’s capacity to sue is when the defendant does not raise the issue in the case because the issue is then waived. But it is better practice to assume the capacity issue will be raised so that you can tackle it headfirst as outlined above.