BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                       SB 1041|
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                                       CONSENT


          Bill No:  SB 1041
          Author:   Jackson (D)
          Amended:  4/21/14
          Vote:     21


           SENATE JUDICIARY COMMITTEE  :  7-0, 4/8/14
          AYES:  Jackson, Anderson, Corbett, Lara, Leno, Monning, Vidak

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8


           SUBJECT  :    Business:  filings

           SOURCE  :     California Secretary of State


           DIGEST  :    This bill makes various technical, non-substantive,  
          and clarifying changes throughout the Corporations Code in  
          preparation for the Secretary of State (SOS) automated filing  
          system.

           ANALYSIS  :    

          Existing law:

          1.Requires certain business entities, including, but not limited  
            to, a corporation, a limited partnership (LP), a foreign  
            corporation, a foreign LP, a limited liability partnership  
            (LLP), a foreign LLP, a flexible purpose corporation, a  
            limited liability company (LLC), an unincorporated  
            association, and a credit union, to make various filings with  
            the SOS.
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          2.Authorizes agents designated for service of process for  
            specified entities to file a written statement of resignation  
            as that agent with the SOS.

          3.Allows a person to apply for and reserve a name for a business  
            entity and to reinstate a fraudulently terminated business  
            entity upon court order with the SOS.

          This bill:

          1.Requires a written statement of resignation to be made on a  
            form prescribed by the SOS for filing, and allows the SOS to  
            destroy or otherwise dispose of a resignation after a new form  
            is filed, replacing the agent.

          2.Allows a person to cancel the registration of the name of  
            specified business entities by delivering to the SOS a  
            certificate of cancellation of the entity's name on a form  
            prescribed by the SOS.

          3.Requires a foreign LLC that adopts a new name to relinquish an  
            alternate name, and additionally conditions reinstatement of a  
            fraudulently terminated business entity upon the business  
            entity concurrently submitting for filing an amendment to  
            change its name to eliminate conflict, if there is a conflict  
            with the entity name.

          4.Specifies the process by which a foreign LP and foreign LLP  
            can change its name with the SOS.

          5.Corrects cross-references.

          6.Makes technical, non-substantive or clarifying changes.

           Background
           
          The California Corporations Code provides for the formation and  
          governance of various business entities, including corporations,  
          associations, partnerships, LPs, LLCs, and LLPs.  Each of these  
          businesses must file certain documents with the SOS in order to  
          form and stay in good standing with the state.  These include  
          articles of incorporation, annual statements, and more.  The  
          California Business Connect Project is a project set to automate  

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          current processes within the SOS office, and allow for all  
          business instruments to be filed and accessed online, on an  
          around the clock basis.

          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.  (California Business Connect Feasibility Study  
          Report, March 2011, page 4.)  "SOS staff pointed out that the  
          filing systems are so archaic, that in many cases, there is no  
          backup.  The systems contain only a single paper copy of each  
          recording for LLCs, LPs, and general partnerships for the  
          generations of filings that make up much of the state's legally  
          organized small businesses.  This means that in the event of a  
          disaster, such as a fire, the permanent records of hundreds of  
          thousands of California businesses may be wiped out."

           Prior Legislation  

          SB 1532 (Pavley, Chapter 494, Statutes of 2012), similar to this  
          bill, was enacted to implement changes necessary for the  
          California Business Connect automated system.  The bill  
          specified that the required address information in business  
          filings is the street address and required business entities to  
          provide a mailing address if not the same as the street address.  
           SB 1532 also revised requirements with respect to the  
          maintenance of forms filed with the SOS, revised provisions  
          relating to the assignment of filing dates and fees by the SOS,  
          repealed specified provisions relating to special purpose  
          corporations, and made other technical changes.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT  :   (Verified  4/28/14)

          California Secretary of State (source)
          California Chamber of Commerce


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           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          currently, business filing statutes complicate the automated and  
          manual processing procedures, which ultimately results in  
          certain benefits being made available to some businesses, but  
          not all.

          This bill seeks to standardize the business filing process to  
          make it more efficient upon completion of the California  
          Business Connect automation project.

          The bill makes minor and clarifying changes to achieve two main  
          goals,                     (1) standardize filing processes to  
          avoid unnecessary confusion and inconsistencies 
          for business filers and other SOS customers; and (2) avoid  
          unnecessary California Business Connect design and development  
          costs by eliminating technical deficiencies in existing law that  
          add unnecessary complexities to the project.


          AL:e  4/29/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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