BILL NUMBER: SB 335	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JUNE 2, 2003
	AMENDED IN SENATE  MAY 6, 2003
	AMENDED IN SENATE  APRIL 24, 2003

INTRODUCED BY   Senator Romero
   (Coauthor:  Senator Kuehl)
   (Coauthor:  Assembly Member Hancock)

                        FEBRUARY 19, 2003

   An act to add Title 6 (commencing with Section 40000) to the
Corporations Code, relating to corporations.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 335, as amended, Romero.  Corporations:  Corporate Three
Strikes Act.
   Existing law sets forth requirements and procedures for the
formation of corporations, partnerships, and limited liability
companies and for the transaction of intrastate business by these
entities.
   This bill would enact the Corporate Three Strikes Act, which would
require general corporations, nonprofit public benefit corporations,
nonprofit mutual benefit corporations, partnerships, and limited
liability companies that are convicted of certain felony crimes to
meet specified reporting requirements. The bill would also prohibit
repeat offenders, as defined, from incorporating, forming, or
transacting business in this state.   The bill would require the
Secretary of State and the Attorney General to enforce the act.
   Vote:  majority.  Appropriation:  no.  Fiscal committee:  yes.
State-mandated local program:  no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Title 6 (commencing with Section 40000) is added to the
Corporations Code, to read:

      TITLE 6.  CORPORATE THREE STRIKES ACT

   40000.  This title shall be known and may be cited as the
Corporate Three Strikes Act.
   40001.  The Legislature finds and declares all of the following:
   (a) Some corporations and other entities authorized under the
Corporations Code repeatedly violate the law and, if caught, pay
relatively insignificant amounts that they pass on to the public as a
cost of doing business.  This practice is a gross injustice both to
the public and to law-abiding businesses, and also undermines a
healthy California economy.
   (b) Threats of imprisonment are meaningless when directed at
corporations and other entities that under the law are fictional
persons, because there is no way to imprison a fictional person.
   (c) The courts have long held, however, that corporations and
other such fictional persons are mere artificial creatures of law and
may be dissolved or denied permission to do business if they violate
the law.  The statutes of California permit these remedies, but
public authorities rarely use them.
   (d) Therefore, to protect the people and economy of the State of
California, the Legislature declares that no entity subject to this
title shall be authorized by the State of California to do business
if it has been convicted of three or more felony crimes as specified
in this title.
   40002.  (a) This title applies to the following entities:
   (1) General corporations subject to Division 1 (commencing with
Section 100) of Title 1.
   (2) Nonprofit public benefit corporations subject to Part 2
(commencing with Section 5110) of Division 2 of Title 1.
   (3) Nonprofit mutual benefit corporations subject to Part 3
(commencing with Section 7110) of Division 2 of Title 1.
   (4) Partnerships subject to Title 2 (commencing with Section
15501).
   (5) Limited liability companies subject to Title 2.5 (commencing
with Section 17000).
   (b) This title does not apply to nonprofit religious corporations
subject to Part 4 (commencing with Section  9110) of Division 2 of
Title 1, or to corporations sole subject to Part 6 (commencing with
Section 10000) of Division 2 of Title 1.
   40003.  (a) An entity subject to this title is a repeat offender
if it has three or more strikes against it within any 10-year period
after the effective date of this title.
   (1) For purposes of this title, a strike against a wholly owned
subsidiary shall also be considered a strike against the parent
entity.
   (2) For purposes of this title, the following terms shall have the
following meanings:
   (A) "Conviction" means a judgment or conviction by a court of
competent jurisdiction in the United States, whether entered upon a
verdict or a plea, including a plea of nolo contendere.
   (B) "Felony crime" means a crime that would be classified as a
felony under Section 17 of the Penal Code if the crime were committed
in California, or a federal crime that is classified as a class A,
B, C, D, or E felony, as defined in Section 3559 of Title  8
  18  of the United States Code.
   (C) "Strike" means the conviction of a felony crime arising from
any violation of fraud, tax, bribery, extortion, consumer protection,
environmental protection, civil rights, labor, employment,
antitrust, political campaign, or finance law.
   (b) A repeat offender shall not be incorporated, formed, or
transact intrastate business in California if its third  or
subsequent  strike was a conviction by a state or federal court
in California or if the facts giving rise to the  conviction
 third or subsequent strike  occurred in
California.
   (c) An entity subject to this title shall not be incorporated,
formed, or transact intrastate business in California if a majority
of its directors or officers were directors or officers of a repeat
offender when it became subject to subdivision (b), as determined by
the Secretary of State after notice to the entity and an opportunity
for the entity to respond.
   (d) An entity subject to this title shall not be incorporated,
formed, or transact intrastate business in California if it is
legally controlled by an entity with a majority of directors or
officers who were directors or officers of a repeat offender when it
became subject to subdivision (b), as determined by the Secretary of
State after notice to the entity and an opportunity for the entity to
respond.
   40004.  Multiple convictions arising out of the same facts and
circumstances and heard by the same court shall be considered one
conviction for purposes of this title.
   40005.  (a) An entity subject to this title that is formed under
the laws of this state or is qualified to transact intrastate
business in this state shall file with the Secretary of State an
annual statement of any criminal convictions against the entity
during the previous year.   No statement shall be filed if there
are no convictions to report. 
   (b) The Secretary of State shall prescribe an electronic form for
submission of these statements and shall make them available to the
public in a timely fashion through the Secretary's Internet Web site.
  A statement shall be accessible on the Web site of the Secretary
for a minimum of 10 years.  
   (c) If the entity is a wholly owned subsidiary of another entity,
the statement shall also indicate the following information:
   (1) The parent entity's name.
   (2) The parent entity's place of incorporation.
   (3) Whether the parent entity is authorized to transact intrastate
business in California. 
   40006.  (a) If a repeat offender is a corporation formed under the
laws of this state, and its third  or subsequent  strike
was a conviction by a state or federal court in California or if the
facts giving rise to the  conviction   third or
subsequent strike  occurred in California, the Attorney General
shall bring an action under Section 1801, 6511, or 8511, as
applicable, to dissolve the corporation and provide for forfeiture of
its corporate existence.
   (b) If a repeat offender is a partnership or limited liability
company formed under the laws of this state, and its third  or
subsequent  strike was a conviction by a state or federal court
in California or if the facts giving rise to the  conviction
  third or subsequent strike  occurred in
California, the Attorney General shall bring an action under Section
803 of the Code of Civil Procedure for unlawful exercise of a
franchise.
   (c) If an entity is subject to subdivision (a) or (b), the court
may appoint a receiver to take over and manage the business and
affairs of the entity, and to preserve its property  , pending
its final dissolution and forfeiture .  The court shall issue
orders, decrees, and injunctions as justice and equity require,
consistent with the purposes of this title, and shall specifically
issue orders necessary to ensure that jobs and wages are not lost, to
protect community interests and legitimate investor interests, and
to maintain the entity's obligations to protect the health, safety,
and environment of workers and the public.
   40007.  (a) If a repeat offender is an entity formed under the
laws of a jurisdiction other than this state and is qualified to
transact intrastate business in this state, and its third  or
subsequent  strike was a conviction by a state or federal court
in California or if the facts giving rise to the conviction occurred
in California, the Secretary of State shall, after a fair hearing and
on the basis of substantial evidence that the entity is a repeat
offender, revoke   order forfeiture of  the
entity's qualification to transact intrastate business.
   (b) The date of  revocation   forfeiture
 shall be delayed until the Secretary of State has determined on
the record of a hearing that the intrastate business will be
replaced in a manner that assures jobs and wages are not lost,
community interests and legitimate investor interests are protected,
and the obligation of the entity to protect the health, safety, and
environment of workers and the public is maintained.
   40008.   (a)  In addition to all other civil and criminal
remedies, an entity subject to this title that has committed a first
 or second  strike offense shall publish the
details of its offense in a full page  advertisement
  statement  in the largest newspaper of general
circulation in California  and in the largest newspaper of
general  circulation in any community in California in which the
offender transacts business.   .
   (b) In addition to all other civil and criminal remedies, an
entity subject to this title that has committed a second strike
offense shall publish the details of its offense in a full page
statement in the six largest newspapers of general circulation in
California.  
   40009.  (a) Neither the Attorney General nor the Secretary of
State has discretion to refuse to enforce their respective duties set
forth in this title.
   (b)  
   40009.  (a)  A person may petition the Attorney General or
the Secretary of State to enforce this title against a repeat
offender or a first or second strike offender.  
   (c)  
   (b)  If the Attorney General or the Secretary of State
rejects the petition, or fails to act within 180 days of the
submission of the petition, a person may bring an action for a writ
of mandate to compel enforcement of this title.
   (d) The person bringing the action for writ of mandate shall be
entitled to an award of costs and reasonable attorney's fees if he or
she is the prevailing party.
  SEC. 2.  The provisions of this act are severable.  If any
provision of this act or its application is held invalid, that
invalidity shall not affect other provisions or applications that can
be given effect without the invalid provision or application.