BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1041| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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. CONTINUED SB 1041 Page 2 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 CONTINUED SB 1041 Page 3 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 CONTINUED SB 1041 Page 4 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 **** END **** CONTINUED