BILL ANALYSIS Ó SENATE COMMITTEE ON BANKING AND FINANCIAL INSTITUTIONS Senator Marty Block, Chair 2015 - 2016 Regular Bill No: AB 1471 Hearing Date: June 17, 2015 ----------------------------------------------------------------- |Author: |Perea | |-----------+-----------------------------------------------------| |Version: |April 14, 2015 Amended | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant:|Eileen Newhall | | | | ----------------------------------------------------------------- Subject: Business entities: filings. SUMMARY Makes technical changes to provisions of the Corporations Code administered by the Secretary of State (SOS). DESCRIPTION 1. Requires paperwork filed with the SOS related to the conversion of one business entity into another business entity to include the name, mailing address, and street address of the converted entity's agent for service of process. 2. Clarifies that the managers of an LLC are responsible for signing and causing to be filed a certificate of cancellation of articles of organization upon the completion of the winding up of the affairs of a limited liability company (LLC), except as specified. 3. Updates, corrects, clarifies, and makes other nonsubstantive changes to the Corporations Code. EXISTING LAW 1. Requires certain business entities, including, but not limited to, a corporation, limited partnership (LP), foreign corporation, foreign LP, limited liability partnership (LLP), foreign LLP, flexible purpose corporation, LLC, AB 1471 (Perea) Page 2 of ? unincorporated association, and credit union, to make various filings with the SOS. 2. Is inconsistent in what it requires to be included on the paperwork that must be filed with the SOS when one business entity converts to a different business entity. 3. Contains confusing and inconsistent language regarding which persons are responsible for signing and causing to be filed a certificate of cancellation of articles of organization upon the completion of the winding up of the affairs of an LLC. COMMENTS 1. Purpose: AB 1471 is sponsored by the SOS to improve the efficiency of existing business filing procedures and help facilitate the implementation of an online document filing system. 2. Background: AB 1471 continues a multi-year effort spearheaded by the SOS to standardize business filing procedures and update the provisions of the Corporations Code administered by the SOS. The bill reduces statutory inconsistency within the Corporations Code, updates the codes to reflect changes made by recent legislation, and standardizes the processing and handling of specified SOS business customer transactions. According to this bill's sponsor, "these small but meaningful changes will pave the way for improving the overall SOS filing experience." By removing statutory inconsistencies and standardizing filing procedures, AB 1471 will also help smooth the way for the SOS's California Business Connect (CBC) online filing project, scheduled to be completed in 2016. Once implemented, the CBC will modernize and streamline the SOS's paper-based business filing processes, and allow customers to file documents and request records online, 24 hours a day, 7 days a week. 3. Discussion: According to the SOS, CBC is a six-year project, scheduled to be online by June 30, 2016, that aims to increase efficiency by eliminating paper-based manual transactions and their associated risk of loss to vital AB 1471 (Perea) Page 3 of ? state records. CBC will also minimize processing delays through the creation of a uniform data entry platform. Businesses that use CBC will be able to do many of their transactions online, without delay, and without paying an additional fee. Once operational, the network will automate paper-based processes, allow businesses to file and request copies of records online, provide the public and government agencies access to SOS records, and allow the SOS to process fee payments within one business day. 4. Summary of Arguments in Support: a. The SOS is sponsoring this bill for the reasons stated above. "California Corporations Code contains filing requirements for several different business entity types, such as domestic stock corporations, nonprofit corporations, partnerships and LLCs. Occasionally, omnibus legislation will be enacted for each of the individual types of entities. As a result, statute often contains different or disjointed policies for the different entities which can create confusion for SOS business customers attempting to file documents in the most expeditious manner. SB 1471 simplifies filing processes for businesses in-state and nationwide by creating consistency and efficiency in the existing filing system." b. The California Chamber of Commerce believes that the bill will provide much needed clarity for certain filing procedures and, in doing so, will help ensure that paper or online filing forms will be consistently user friendly for all types of businesses. "In this respect, we are also supportive of AB 1471's attempt to reduce costs and time for the implementation of the California Business Connect project, which will automate the Secretary of State's paper-based business filing system by 2016." 5. Summary of Arguments in Opposition: None received. 6. Prior and Related Legislation: a. SB 1041 (Jackson), Chapter 834, Statutes of 2014: Sponsored by the SOS. Made various technical, nonsubstantive, and clarifying changes to the AB 1471 (Perea) Page 4 of ? Corporations Code in preparation for the CBC online filing project. b. SB 1532 (Pavley), Chapter 494, Statutes of 2012: Sponsored by the SOS. Made legislative findings stating that the manual business filing system used by the SOS is very-time consuming and paper-intensive for both the SOS and businesses, and that the law must be updated and standardized to more efficiently facilitate the development of CBC. Made several technical, nonsubstantive, and clarifying changes to the Corporations Code in preparation for the CBC project. LIST OF REGISTERED SUPPORT/OPPOSITION Support Secretary of State (sponsor) California Chamber of Commerce Opposition None received -- END --