Bill would let Secretary of State reject or cancel business filings found false or fraudulent

The Vermont House Committee on Commerce and Economic Development on March 12, 2025 heard the Secretary of State’s office propose new authority to reject, amend or terminate business registrations that contain false, fraudulent or clearly erroneous information.

The proposal, offered by David Hall, director of the Business Services Division in the Office of the Secretary of State, would add a new statutory section (proposed in committee discussion as 16 38) to allow two distinct actions: (1) a ministerial-style rejection of a filing the office reasonably determines contains an obvious error, and (2) after notice and an administrative hearing under the Vermont Administrative Procedure Act (3 V.S.A. chapter 25), the office could amend a record or terminate a registration if it finds false or fraudulent information or filing in bad faith. Hall said aggrieved parties would be able to appeal a final agency decision de novo to the Civil Division of Washington County Superior Court.

Why it matters: Hall framed the change as addressing a practical gap in the current business-records regime. Under present law much of the Secretary’s filing duty is ministerial—if a submission appears to meet form requirements it is accepted—leaving the office to refer suspected fraud or perjury to law enforcement. Hall said this process is slow and often inadequate to stop ongoing harms such as identity co-option, synthetic identities, or persistent, erroneous address listings that expose private residents to continued solicitations and potential fraud.

Hall described two tiers of authority in the bill. The “reject” authority would be used for clear errors—examples he gave include filings that list a nonexistent Vermont town or an obviously wrong address—so the office can return the filing and refund the fee so the filer can correct and refile. The second, weightier authority would trigger a contested-case hearing under the Administrative Procedure Act before the office could amend or terminate an existing registration. Hall emphasized that amending or terminating a registration is a substantive action and must follow the contested-case process: notice, opportunity to be heard, findings, and an appeal right.

Committee members asked about how Vermont’s approach compares to other states and about operational impacts. Hall said a few other states, including Colorado and Rhode Island, have adopted or are considering similar provisions but warned that processes in some states can be lengthy—he cited Colorado taking weeks in some cases—and said the Vermont language aims to allow an expedited contested-case process while preserving due process. Hall said the office has handled a handful of contested name proceedings recently and does not expect a large workload increase, but acknowledged the possibility of spikes. Legislative counsel Rick Segal said he had no technical objection to the language and noted the proposal to rename Title 11 to “Business Organizations.”

The committee and staff also discussed safeguards. Hall repeatedly said the contested-case path is required for substantive changes to the public record and that routine rejections for clear errors would be a “light touch.” He described the plan to give notice to both the complainant and the listed registrant and to issue an administrative order with findings if the office terminates or amends a record. Hall also noted that secretarial action would not replace other legal processes and that appeal to the courts would be available.

Several committee members asked about the potential need for additional staff and about whether the new authority would make the Secretary of State the primary responder in disputes now handled by courts or law enforcement. Hall said he did not foresee a large personnel increase based on recent caseloads but acknowledged uncertainty if incidents increased.

The discussion did not include a final committee vote on the provision during the hearing. Committee members requested an interim report and a final report from the Secretary of State’s office as the office develops stakeholder outreach and implementation details.

Ending: Committee members asked staff to return draft report language; Legislative Counsel and Secretary of State staff agreed to provide an interim update in the fall and a final report by late 2026 as part of the bill’s study requirement.