BILL ANALYSIS                                                                                                                                                                                                    






                  SENATE BANKING & FINANCIAL INSTITUTIONS COMMITTEE
                             Senator Juan Vargas, Chair


          AB 657 (Gordon)                         Hearing Date:  June 29, 
          2011  

          As Amended: March 21, 2011
          Fiscal:             Yes
          Urgency:       No
          

           SUMMARY    Would allow businesses to elect to receive electronic 
          notices, in lieu of hard copy notices, from the Secretary of 
          State; standardize the filing requirements imposed on different 
          types of business entities by the Secretary of State; and make 
          other technical changes intended to improve the Secretary of 
          State's ability to administer the laws under her jurisdiction.  
          
           DESCRIPTION
           
            1.  Would authorize, but not require, business entities to 
              elect to receive notices from the Secretary of State via 
              electronic mail.  

           2.  Would require foreign corporations to submit an initial 
              Statement of Information within 90 days after filing their 
              original statements of designation.

           3.  Would permit a suspended common interest development 
              corporation to file its Statement by Common Interest 
              Development while it is suspended.

           4.  Would authorize the Secretary of State to destroy 
              superseded Statements of Common Interest Development.

           5.  Would standardize the Statement of Information requirements 
              imposed on credit union corporations with those imposed on 
              all other types of corporations, and would permit these 
              corporations to designate a registered corporation as an 
              agent for service of process.

           6.  Would set the filing fees for the initial 90-day Statement 
              of Information for California and foreign LLCs, credit union 
              corporations, and consumer cooperative corporations at $20.





                                                AB 657 (Gordon), Page 2




           7.  Would make other conforming technical changes and correct 
              incorrect code references.  


           EXISTING LAW   Relevant sections of existing law, which are 
          amended by AB 657, are described in further detail in the 
          section immediately below.











































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           COMMENTS

          1.  Background and Discussion:    This bill is sponsored by 
              Secretary of State Debra Bowen, as part of her ongoing 
              efforts to update and modernize the Secretary of State's 
              office.  The Business Entities Section of the Secretary of 
              State's office processes, files, and maintains records 
              related to corporations, limited liability companies (LLCs), 
              limited partnerships (LPs), and other business entities that 
              wish to do business in California.  

          According to information provided by the sponsor, AB 657 
              contains seven changes, as follows.

               a.     Under existing law, the Secretary of State is 
                 required to mail paper notices to all corporations and 
                 LLCs, reminding those entities to file required annual or 
                 biennial Statements of Information.  Notices to 
                 cooperative corporations, credit union corporations, and 
                 LLCs must also include a paper copy of the Statement of 
                 Information form, which is already available for download 
                 on the Secretary of State's web site.  As a result, the 
                 Secretary of State mails over 1.2 million reminder, 
                 delinquency, penalty, and suspension notice to 
                 businesses, at a cost of over $500,000 in printing and 
                 postage each fiscal year.

               The first of this bill's provisions authorizes businesses 
                 to provide a valid electronic address to the Secretary of 
                 State, for the purpose of receiving future notices, thus 
                 reducing the costs related to paper postal mailings.  
                 These changes are contained in Corporations Code Sections 
                 1502, 2203, 2205, 6210, 6810, 8210, 8810, 12570, 12670, 
                 17060, 17651, 17653, and 17654.

               b.     Existing law requires California corporations and 
                 foreign LLCs to file their initial Statements of 
                 Information within 90 days of formation or registration.  
                 Foreign corporations are not required to file an initial 
                 Statement of Information until one year after the 
                 corporation has qualified to do business in California.  
                 To ensure consistency among business entities and ease 
                 the automation of Statement of Information filing, AB 657 
                 imposes the same 90-day filing requirement on foreign 
                 corporations as is imposed on all other corporations and 
                 LLCs.  This change is contained in Corporations Code 




                                                AB 657 (Gordon), Page 4




                 Section 2117.

               c.     Existing law permits a suspended common interest 
                 development corporation to file its Statement of 
                 Information while suspended, but does not allow it to 
                 file the Statement by Common Interest Development, which 
                 is the most current information about the business.  AB 
                 657 would amend Corporations Code Section 1363.6 to allow 
                 the Statement of Common Interest Development to be filed 
                 while a common interest development corporation is 
                 suspended.  However, this bill would not grant the 
                 suspended corporation any other powers it currently 
                 lacks.

               d.     Existing law allows the Secretary of State to 
                 destroy Statements of Information once they have been 
                 superseded, but does not grant the Secretary of State 
                 similar authority to destroy superseded Statements of 
                 Common Interest Development.  This bill provides such 
                 authorization through another amendment to Civil Code 
                 Section 1363.6.

               e.     AB 657 would also standardize the Statement of 
                 Information requirements imposed on credit union 
                 corporations with those imposed on all other types of 
                 corporations and would permit these corporations to 
                 designate a registered corporation as an agent for 
                 service of process (Financial Code Section 14101.6).

               f.     Existing law specifies the fees to file certain 
                 documents at various levels, and states that filings 
                 whose fees are unspecified are charged at a rate of $30 
                 per filing.  AB 657 specifies the filing fees for the 
                 initial 90-day Statement of Information for California 
                 and foreign LLCs, credit union corporations, and consumer 
                 cooperative corporations at $20, which has the effect of 
                 reducing the cost to file these forms by $10 (Government 
                 Code Section 12186 and 12190).  

           2.  Summary of Arguments in Support:   Secretary of State Debra 
              Bowen is sponsoring AB 657 as an efficiency measure, which 
              will provide businesses the option of providing an e-mail 
              address to receive paperless reminders and notifications 
              from the Secretary of State's office.  The bill's changes 
              are also intended to conform several of the document filing 
              requirements for different corporate types, to make the 




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              creation of an automated filing system less complex and less 
              expensive.  

          The California Credit Union League supports the provision of AB 
              657 that allows credit unions to elect to receive annual 
              renewal notices and other notifications from the Secretary 
              of State in electronic form.  CCUL believes that this is a 
              smart, effective measure that provides expedient delivery of 
              notifications.

           3.  Summary of Arguments in Opposition:    None received.

           
          LIST OF REGISTERED SUPPORT/OPPOSITION
          
          Support
           
          Secretary of State Debra Bowen (sponsor)
          California Credit Union League
           
          Opposition
               
          None received

          Consultant:  Eileen Newhall  (916) 651-4102