BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1532
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          SENATE THIRD READING
          SB 1532 (Pavley)
          As Amended  June 19, 2012
          Majority vote 

           SENATE VOTE  :38-0  
           
           BANKING & FINANCE   10-0        JUDICIARY           10-0        
           
           ----------------------------------------------------------------- 
          |Ayes:|Eng, Achadjian, Fletcher, |Ayes:|Feuer, Wagner, Atkins,    |
          |     |Gatto, Harkey, Roger      |     |Dickinson, Gorell, Huber, |
          |     |Hernández, Lara, Morrell, |     |Jones, Monning,           |
          |     |Perea, Torres             |     |Wieckowski, Bonnie        |
          |     |                          |     |Lowenthal                 |
           ----------------------------------------------------------------- 
           
          APPROPRIATIONS      17-0                                        
           
           -------------------------------- 
          |Ayes:|Fuentes, Harkey,          |
          |     |Blumenfield, Bradford,    |
          |     |Charles Calderon, Campos, |
          |     |Davis, Donnelly, Gatto,   |
          |     |Hall, Hill, Lara,         |
          |     |Mitchell, Nielsen, Norby, |
          |     |Solorio, Wagner           |
          |     |                          |
           -------------------------------- 
           
          SUMMARY  :  Updates and standardizes California Law to more 
          efficiently facilitate the development of California Business 
          Connect (a 24 hour, online business filing program).    
          Specifically,  this bill  :   

          1)Requires the Secretary of State (SOS) to cause the lien notice 
            filing or certificate to be filed, indexed, and marked, as 
            specified.  

          2)Provides that the SOS must file the instrument on the date it 
            is received, unless the instrument provides that it is to be 
            withheld from filing until a future date or, in the judgment 
            of the SOS, the filing is intended to coordinate with the 
            filing of another document that cannot be filed.








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          3)Provides that the SOS must file the instrument on the date it 
            is received, unless the instrument provides that it is to be 
            withheld from filing until a future date not to exceed 90 days 
            or, in the judgment of the SOS, the filing is intended to 
            coordinate with the filing of another document that cannot be 
            filed.

          4)Specifies that the address required is the street address.  

          5) Requires the business entity to disclose the mailing address 
            of its principal office (or other   specified office), if 
            different from the street address.

          6)Requires that the business entity disclose both its street 
            address and its mailing address, if different from the street 
            address, wherever this information is not specifically 
            required to be disclosed.

          7)Adds that the articles of incorporation shall also disclose 
            the name and street address of the entity's initial agent for 
            service of process, as specified.

          8)Requires the street address of the corporation and the mailing 
            address of the corporation to be added to information required 
            to be provided in the articles of incorporation.

          9)Provides that a limited liability company (LLC) shall not 
            amend its articles of organization to amend any statement that 
            may appear in the original articles of organization concerning 
            the street address, mailing address, or name and address of 
            the initial agent for service of process, except as specified.

          10)Specifies that the required address information is the 
            initial street address, and requires the business entity to 
            provide its initial mailing address, if different from its 
            street address.

          11)Provides that completion of filing is reached upon acceptance 
            by the SOS.

          12)Allows a corporation to amend or restate its articles of 
            incorporation, as specified, but prohibits it from amending 
            its articles to alter any statement which may appear in its 








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            original articles of the names and addresses of the first 
            directors or initial agent for service of process.   

          13)Adds that whenever the street address, mailing address, or 
            electronic mail addresses of an LLC changes, it may file a 
            current statement, as specified.  This bill amends the above 
            to specify that the address that these documents shall include 
            is the street address.   

          14)Deletes existing law that allows for the SOS to collect a fee 
            for comparing a copy of any law, resolution, record or other 
            document or paper with the original, or the certified copy of 
            the original, on file with the SOS.  

          15)Provides that the SOS shall provide a copy without charge at 
            the time of the filing.

          16)Makes various finding and declarations.

          17)Makes other technical and non-substantive changes.

           EXISTING LAW  : 

          1)Requires the SOS, upon receipt of specified lien notice 
            filings or specified certificates, to be marked, held, and 
            indexed upon receipt, as specified.  ÝCode of Civil Procedure, 
            Sections 2103(a)-(b)]

          2)Requires that the SOS file specified instruments on the date 
            they are received, unless the submitting party requests a 
            later date or, in the judgment of the SOS, the filing is 
            intended to coordinate with the filing of another instrument 
            that cannot be filed.   ÝCorporations Code, Sections 110(a), 
            5008(a), and 12214(a)]

          3)Requires that the SOS file specified instruments on the date 
            they are received, unless the instrument is withheld from 
            filing for a period of time not to exceed 90 days pursuant to 
            a request from the submitting party or, in the judgment of the 
            SOS, the filing is intended to coordinate with the filing of 
            another instrument that cannot be filed.  ÝCorporations Code,  
            Section 17062(d)]

          4)Requires business entities to file specified documents with 








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            the SOS, and to disclose, among other things, specified 
            contact information for the entity.  This contact information 
            includes, in relevant part, the address of the entity's agent 
            for service of process, or address of the principal (or other 
            specified) office, or both.  ÝCorporations Code,  Sections 
            202(c), 1505(a)(1), 1505(a)(1), 2105(a)(2)-(3),  2602(c), 
            5130(c), 7130(c), 9130(c), 12310(c), 12570(c),  13226, 
            15901.16(d)(1), 15092.01(a)(2)-(3), 15909.02(a)(3)-(4), 
            16303(a)(1), 16309(a), 16953(a)(2)-(3),  16959(a)(1), 
            17051(a), 17051(a)(4), 17060(a)(2), 17060(d),  17451(a), 
            17451(a)(3), 17451(a)(5), 18200(a)(1)-(2), and  18200(b)]

          5)Requires that a credit union specify in its articles of 
            incorporation, among other things, the name and address of its 
            initial agent for service of process, as specified.  
            ÝFinancial Code, Section 14101(c)]

          6)Provides that the articles of organization of an LLC may be 
            amended at any time, and in any manner as the members may 
            determine, as specified.  Existing law also specifies that a 
            certificate of amendment to the articles must be filed to 
            effect specified changes.  ÝCorporations Codes, Section 17054]

          7)Requires an LLC to file a statement containing specified 
            information on a biennial basis, starting within 90 days of 
            filing its original articles of incorporation, and that 
            whenever that information changes, the LLC may file a current 
            statement with the information required, as specified.  
            ÝCorporations Code,  Section  17060]

          8)Provides for what constitutes the completion of filing, 
            including that the SOS has accepted the statement, a copy of 
            the statement, and the filing fee.  Requires the SOS to return 
            a copy to the filing entity with notations that indicate the 
            file number and filing date of the original.  ÝCorporations 
            Code, Section 18200(c)]

          9)Allows for the SOS to collect a fee for comparing a copy of 
            any law, resolution, record or other document or paper with 
            the original, or the certified copy of the original, on file 
            with the SOS.  ÝGovernment Code, Section 12178.1(c)]

          10)Provides, that upon the filing of any document pursuant to 
            any provision of the Corporations Code for which there is a 








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            filing fee of $25 or more, the SOS shall compare and certify 
            up to two copies without charge, provided that the copies are 
            submitted to the SOS with the original to be filed.  
            ÝGovernment Code, Section 12185]

          11)Provides for the formation and operation of special purpose 
            corporations, including bridge, ferry, wharf, chute, and pier 
            corporations, as well as water and canal corporations.

           FISCAL EFFECT  :  According to the Assembly Appropriations 
          Committee, this measure has a negligible fiscal impact.

           COMMENTS  :   

           Background .  The California Corporations Code provides for the 
          formation and governance of various business entities, including 
          corporations, associations, partnerships, limited partnerships, 
          limited liability companies, limited liability partnerships, and 
          more.  Each of these businesses must file certain documents with 
          the SOS in order to form and stay in good standing with the 
          state.   These documents include articles of incorporation, 
          annual statements, and more.  

          The California Business Connect Feasibility Study Report, 
          approved by the California Technology Agency in April of 2011, 
          provides an overview of the problem faced by California with 
          respect to its current business filings system.  The reliance on 
          manual labor and hard copies makes it not only increasingly 
          difficult to comply with current mandates and new mandates that  
          are created by law, but it also makes these vital business 
          records prone to human error and at risk of irreparable 
          destruction.  In addition to such concerns, the report outlines 
          concerns for the time it takes to process and file documents - 
          all of which has already led to an extensive backlog.  
           
          Need for the bill  .  According to the author this measure is 
          necessary, "to update and standardize current law to prepare for 
          the creation of California Business Connect -- a program to 
          modernize the Secretary of State's antiquated paper-based 
          business filing processes allowing customers to file documents 
          and request records online 24 hours a day, 7 days a week.  The 
          new automated system, slated for 2016, will help expedite the 
          way California does business and provide a means to preserve the 
          business and special filing records of the state."








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          According to the SOS, the sponsor of this measure, California 
          Business Connect, will benefit businesses, the economy, and the 
          taxpayers, as well as SOS and other state government agencies.  
          Some of the benefits include:  eliminate unnecessary delays; 
          provide a centralized and integrated single point of services 
          for business entities and special filings; ensure a more secure 
          processing of payment; provide online help in completing forms; 
          reduce the cost and time required to establish and maintain a 
          business; make services available 24 hours a day, seven days a 
          week; and allow users to see all filing activities related to 
          the business over the long term.

          The SOS states, "My office relies on two separately developed 
          legacy information technology systems implemented in the 1980s 
          to serve as databases for most of California's business 
          entities.  There are 23 total applications to support the 
          processes of tracking recording and retrieving the records filed 
          and maintained in my office.  The current processes are very 
          manual and paper intensive.  The new automated system will 
          provide the foundation to expedite the way California does 
          business and provide a means to preserve the business and 
          special filing records of the state.  To prepare for California 
          Business Connect, many state laws related to business filings 
          with my office need to be standardized to improve the filing 
          processes.  There are no fiscal costs associated with this bill, 
          and by updating these laws now, it will be less expensive and 
          easier to design and build California Business Connect in the 
          future."


           Analysis Prepared by  :    Kathleen O'Malley / B. & F. / (916) 
          319-3081 


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