BILL ANALYSIS
AB 285
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 285 (Tran)
As Amended May 12, 2009
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |78-0 |(April 13, |SENATE: |40-0 |(June 22, |
| | |2009) | | |2009) |
-----------------------------------------------------------------
Original Committee Reference: B. & F.
SUMMARY : Eliminates the requirement to satisfy the federal
Electronic Signatures in Global and National Commerce Act
(E-SIGN Act) (15 U.S.C. Sec.7001(c) (1)). Specifically, this
bill requires that electronic transmissions to an individual
shareholder or member who is a natural person be preceded by or
include a written statement containing:
1)Any right of the recipient to have the record provided or made
available on paper or in nonelectronic form.
2)Whether the consent applies only to that transmission, to
specified categories of communications, or to all
communications from the corporation.
3)The procedure the recipient must use to withdraw consent.
The Senate amendments make technical changes.
EXISTING FEDERAL LAW establishes the E-SIGN Act (15 USC Section
7001 et seq.), which makes electronic signatures and records
valid for all types of transactions that occur in interstate
and foreign commerce, unless the transactions are specifically
exempted, and which establishes specific standards for any
electronic communication that is sent to a consumer relating to
a transaction.
EXISTING STATE LAW :
1)Establishes the Uniform Electronic Transactions Act (UETA),
which enacts procedures and establishes safeguards for the use
of electronic records and electronic signatures in business
and governmental activities [Civil Code Section 1633.1 et
seq.].
AB 285
Page 2
2)Defines "electronic transmission by the corporation" as a
communication that satisfies the requirements applicable to
consumer consent to electronic records, as set forth in the
Electronic Signatures in Global and National Commerce Act, and
that is all of the following [Corporations Code Section 20]:
a) Delivered by facsimile or electronic mail; posting on an
electronic message board or network that the corporation
has designated for those communications, together with a
separate notice to the recipient of the posting; or other
means of electronic communication;
b) Sent to a recipient who has provided an unrevoked
consent to the use of those means of transmission for
communications; and,
c) Creates a record that is capable of retention,
retrieval, and review, and that may thereafter be rendered
into clearly legible, tangible form.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version passed by the Senate.
FISCAL EFFECT : None
COMMENTS :
Background : The President of the United States signed the
E-SIGN Act on June 30, 2000, to facilitate the use of electronic
records and signatures in interstate and foreign commerce by
ensuring the validity and legal effect of contracts entered into
electronically. The E-SIGN Act went into effect in October
2000.
On top of the E-SIGN Act, California was the first state to
enact the UETA which was signed on September 22, 1999, and
became effective on January 1, 2000. The overall purpose of
UETA is to ensure that electronic signatures and transactions
have the same legal effect as "wet" signatures and paper
documents. Some may consider this as a movement to become a
"paperless" society.
AB 285 would in fact be eliminating the requirement to follow 15
U.S.C. Sec 7001(c) (1) which states that information may be
AB 285
Page 3
provided or made available to consumers through the use of an
electronic record, and doing so will satisfy any requirement
under any statute, regulation or other rule of law, that the
information be in writing. However, there are limitations on the
ability to provide electronic disclosures to consumers. There
are four restrictions which include:
1)The consumer must have affirmatively consented to the use by
the other party of electronic records to provide or make
available the required information; and, the consumer must not
have withdrawn that consent.
2)The consumer must have received specified disclosures prior to
consenting. These include informing the consumer how the
consumer may obtain a paper copy of the electronic record, and
any fees the consumer may be charged.
3)The consumer must be informed of the hardware and software
requirements for access to the disclosure information. The
consumer must consent to the use of electronic records, or
confirm his or her consent, in a manner that "reasonably
demonstrates" the consumer can access the information. This
requirement is thought to be a significant protection against
consumer mistake or abuse of the consumer, by establishing
that no consumer will receive electronic disclosures except
after the consumer has demonstrated that he or she has and can
operate the systems (hardware and software) that are required
to receive the disclosures. The disclosing party is not
required to engage in any further verification of the
consumer's capabilities.
4)If the hardware or software requirements are changed after
consent, the consumer must receive a revised disclosure of the
new requirements and a resolicitation of the consumer's
consent.
Although AB 285 is eliminating the above requirements, the new
language puts in place similar language which the sponsor
contends will clarify the ambiguity and make it easier for
corporations to understand and use this law accurately in
real-life.
Federal preemption : One of the most significant issues arising
from the E-SIGN Act is the interplay of federal and state law.
The E-SIGN Act provides that the states may override the
AB 285
Page 4
preemptive effect of the federal law. A state may modify,
limit, or supersede the E-SIGN Act if it specifies alternative
procedures or requirements for the use and/or acceptance of
electronic records or electronic signatures. California has the
authority in this manner to determine what is best. This is an
example where state law is not preempted by federal law.
Need for the bill : Two reasons have been stated as to why this
bill is necessary. The first is the E-Sign Act applies to
consumers, not corporate communications to members or
shareholders. Hence, existing law requires corporations to
apply a standard to shareholder and member communications that
was not drafted for those communications. Second, existing law
is ambiguous as to whether all communications with directors are
restricted, not only those communications relating to those
directors as shareholders or members.
According to the sponsor, the Nonprofit and Unincorporated
Organizations Committee of the Business Law Section of the State
Bar of California, "AB 285 would provide a workable standard in
lieu of the E-Sign Act, while using it as a general guide. The
constraints of the federal E-Sign Act are not quite appropriate
for electronic transmissions by corporations under the
California Corporations Code. In fact, even if they were, it
would be better if the actual requirements were in the
Corporations Code rather than requiring people to find and then
apply the federal law. In addition, there apparently may be some
concerns that the requirements of Section 20 run afoul of the
SEC's 'notice and access' regulation dealing with proxy
materials."
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081
FN: 0001429