BILL ANALYSIS                                                                                                                                                                                                    Ó




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                                   THIRD READING 


          Bill No:  AB 1430
          Author:   Cooper (D) 
          Amended:  3/26/15 in Assembly
          Vote:     21 

           SENATE BUS., PROF. & ECON. DEV. COMMITTEE:  8-0, 6/6/16
           AYES:  Hill, Bates, Block, Gaines, Galgiani, Hernandez,  
            Mendoza, Wieckowski
           NO VOTE RECORDED:  Jackson

           ASSEMBLY FLOOR:  76-0, 5/7/15 - See last page for vote

           SUBJECT:   California family owned businesses


          SOURCE:    Family Business Association


          DIGEST:  This bill creates a definition for California family  
          owned business in the Government Code.


          ANALYSIS:  


          Existing law:


          1) Defines a small business as "an independently owned and  
             operated business that is not dominant in the field of  
             operation, the principal office of which is located in  
             California, the officers of which are domiciled in  
             California, and which, together with affiliates, has 100 or  
             fewer employees, and average annual gross receipts of ten  
             million dollars or less over the previous three years, or is  








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             a manufacturer as specified."  (Government Code (GC) § 14837)

          2) Defines a microbusiness as "a small business which, together  
             with affiliates, has average annual gross receipts of two  
             million, five hundred thousand dollars or less over the  
             previous three years or is a manufacturer as specified."  
          (GC § 14837)

          3) Defines a disabled veteran's business enterprise as "an  
             enterprise that has been certified as meeting the  
             qualifications established by Section 999 of the Military  
             Code."  (GC § 14837)


          This bill: 


          1) Makes various findings and declarations about California  
             family owned businesses, including recognition that these  
             businesses invest more in their employees in terms of  
             training and benefits, promote more women to high-level  
             management positions, and are less likely to lay off  
             employees or downsize in tough economic times while also  
             outlining the engagement in and commitment to local  
             California communities made by these businesses.  

          2) Defines a "California family owned business" (CFOB) as a  
             business that meets certain requirements.  A CFOB must be  
             organized as a privately held business by one individual or  
             two or more related persons or is a partnership of business  
             entities owned by related persons and must maintain its  
             principal executive office in California and have been in  
             business continuously for more than 10 years.

          3) Requires the business, in order to be defined as a CFOB, to  
             also either be owned by a sole proprietorship, be a business  
             entity owned by one individual or two or more related persons  
             domiciled in California who hold a majority of the equity  
             interests, or be a partnership of business entities owned by  
             related persons domiciled in California who hold a majority  
             of the equity interests.









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          4) Requires the business, in order to be defined as a CFOB, to  
             be controlled by one individual or two or more related  
             persons who exhibit strategic influence and control of the  
             business by holding it as a sole proprietorship or by holding  
             a majority of the voting interest.

          5) Requires that the business, in order to be defined as a CFOB,  
             demonstrates an intent to continuously operate as a family  
             business in the future by either present ownership by two or  
             more related persons, a previous transfer of ownership of  
             equity interests between related persons, or being subject to  
             a written agreement providing for a future transfer between  
             related persons provided that the agreement was executed in  
             good faith.

          6) Defines "related person" as a person who is related by a  
             common ancestor, pursuant to state or federal law up to four  
             generations.  Provides that any person related by greater  
             than four generations is included if his or her ownership or  
             operational involvement arose from an exercise of continuity  
             across generations.  Provides that "related person" also  
             includes a parent, stepparent, brother, sister, stepbrother,  
             stepsister, half-brother, half-sister, adopted person, person  
             born out of wedlock, stepchild, foster child, uncle, aunt,  
             niece, nephew, first cousin, and any person denoted by the  
             prefix "grand" or "great."  A spouse, domestic partner, and  
             the spouse or domestic partner of any person that qualifies  
             as a person related by a common ancestor, pursuant to state  
             or federal law up to four generations, is also included  
             within the definition of "related persons" and shall continue  
             to be included in the event of the legal relationship being  
             terminated by death or dissolution.


          Background
          
          The sponsor of this bill is the Family Business Association.   
          According to the author, research has shown that family-owned  
          businesses have unique characteristics that distinguish them  
          from other businesses; however, there is currently no  
          standardized definition for family owned business.  The author  
          states that a standardized definition is needed in order to  








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          recognize the needs and contributions of family owned  
          businesses.

          An almost identical bill, AB 1260 (Medina, 2013-14 Session), was  
          vetoed in 2014.  In his veto message, Governor Brown wrote,  
          "Family-owned businesses have an important role in our state and  
          local economies and I am supportive of efforts that recognize  
          their vital contributions.  I am concerned, however, that adding  
          a definition of 'California Family Owned Business' in statute  
          with no legal or programmatic purpose will not achieve the  
          bill's intended purpose."  It remains unclear how adding a  
          definition of California family owned business to the statute  
          will provide any benefit to the state or those businesses that  
          fall under the definition.  


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified6/7/16)


          Family Business Association (source)
          California Asian Pacific Chamber of Commerce 


          OPPOSITION:   (Verified6/7/16)


          None received

          ARGUMENTS IN SUPPORT:  Supporters write that that establishing a  
          statutory definition of a family owned business for the first  
          time is important, in that it more clearly identifies the unique  
          and distinct differences between family-owned enterprises from  
          other businesses and allows decision makers to consider the  
          special aspects of operating these businesses when considering  
          future action. 
          
          ASSEMBLY FLOOR:  76-0, 5/7/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  








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            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,  
            Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,  
            Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray,  
            Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer,  
            Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis,  
            Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,  
            O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon,  
            Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,  
            Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood,  
            Atkins
          NO VOTE RECORDED:  Campos, Gordon, Roger Hernández, Steinorth

          Prepared by:Nicole Billington / B., P. & E.D. / (916) 651-4104
          6/8/16 16:12:01


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