BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 1471 (Perea)
Version: April 14, 2015
Hearing Date: June 23, 2015
Fiscal: No
Urgency: No
RD
SUBJECT
Business entities: filings
DESCRIPTION
This bill would make various clarifying and technical changes
throughout the General Corporation Law, Social Purpose
Corporations Act, the California Uniform Limited Liability
Company Act, the Uniform Limited Partnership Act, and Uniform
Partnership Act, including:
updating and making consistent throughout the various acts the
information that must be provided in a certificate of
conversion;
clarifying signature authority in relation to Secretary of
State (SOS) filings; and
correcting cross-references to existing sections prescribing
the fees that a business entity must pay in order to reserve a
name with the SOS.
BACKGROUND
The California Corporations Code provides for the formation and
governance of various business entities, including corporations,
associations, partnerships, limited partnerships, limited
liability companies (LLC), and limited liability partnerships.
Each of these businesses must file certain documents with the
SOS in order to form, convert business entities (such as from a
corporation to an LLC), and stay in good standing with the
state. These include articles of incorporation, annual
statements, and statements or certificates of conversion. 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 Limited Liability Companies (LLCs), Limited
Partnerships (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." (Id.)
In the last several years, the Secretary of State's office has
sponsored two bills that have sought to facilitate the
development of the California Business Connect automated system.
In 2012, SB 1532 (Pavley, Ch. 494, Stats. 2012), the first of
those two bills, 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. The
second bill, SB 1041 (Jackson, Ch. 834, Stats. 2014), similarly
made various technical, non-substantive, and clarifying changes
throughout the Corporations Code in preparation for the SOS
automated filing system. These changes included, for example,
requiring that the SOS prescribe forms for the resignation of
agents for service of process; authorizing the SOS to remove and
destroy records relating to agent resignations if a new agent
for service of process is designated, as specified; clarifying
the necessary signatures for various business filings; and
clarifying when foreign limited liability company registration
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cancellations are effective.
Similarly, this bill, also sponsored by the Secretary of State,
seeks to address various statutory inconsistences and make other
clarifying changes that would assist in improving efficiencies
in the business filing procedures.
CHANGES TO EXISTING LAW
1.Existing law , the General Corporation Law and the Social
Purpose Corporations Act, authorizes the Secretary of State
(SOS), upon the applicant's payment of a prescribed fee under
the Government Code, to issue a certificate of reservation of
any name, not otherwise prohibited, for a period of 60 days.
Existing law prohibits the SOS from issuing certificates
reserving the same name for two or more consecutive 60-day
periods to the same applicant or for the use or benefit of the
same person, partnership, firm or corporation. (Corp. Code
Secs. 201(c), 2601(c).) Existing law, the California Revised
Uniform Limited Liability Company (LLC) Act, provides a
similar provision for the reservation of the exclusive use of
a name of an LLC or foreign LLC. (Corp. Code Sec. 17701.09.)
This bill would update the cross-references for the prescribed
fees, above, and remove the specific references to
"partnership, firm or corporations" in the General Corporation
Law and the Social Purposes Corporations Act provisions.
2.Existing law , the Social Purpose Corporations Act, prohibits
the SOS from setting forth a name in which "bank," "trust,"
"trustee," or related words appear, unless the certificate of
approval of the Commissioner of Financial Institutions is
attached to the articles, except as specified. (Corp. Code
Sec. 2601(a).)
This bill would update the above provision and its exception
to reflect changes made in the 2012 Governor Reorganization
Plan 2, by replacing references to the Commissioner of
Financial Institutions with the Commissioner of Business
Oversight.
3.Existing law , the General Corporation Law and the Uniform
Partnership Act, each require that any statement or
certificate of conversion of a converting corporation or any
certificate of conversion of a converting partnership, set
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forth certain information, including the name and street
address of the corporation's or partnership's agent for
service of process. (Corp. Code Secs. 1155(b)(4),
16906(a)(3), (b)(4).) Existing law provides that if a
qualified corporation, as specified, is designated, no address
for it shall be set forth. (Corp. Code Sec. 1155(b)(4);
similar provisions also at Section 16906(a)(3), (b)(4).)
Existing law , the Uniform Limited Partnership Act, requires,
in relevant part, that any certificate or statement of
conversion shall set for the street address of the converted
entity's agent for service of process. Existing law provides
that if a corporation that has complied with specified law is
designated as the agent, no address for it shall be set forth.
(Corp. Code Sec. 15911.06(b)(4).)
Existing law , the California Uniform LLC Act, requires that a
certificate of conversion set forth the name and mailing
address of the converted entity's agent for service of
process. (Corp. Code Sec. 17710.06(c)(2).)
This bill would make various technical and clarifying changes
to require that each of the entities above provide the same
information in a statement of conversion, except as specified.
Specifically, this bill would amend each of the above
sections to: (1) ensure that each entity is required to set
forth the name, mailing address, and street address of the
"converted entity" in its statement of conversion; and (2)
expressly specify that if a specified corporation is
designated as the agent, no addresses are required.
4.Existing law , the California Uniform LLC Act, governs the
signature of a record delivered to the SOS for filing pursuant
to this Act. Existing law provides that except as specified, a
record signed on behalf of an LLC shall be signed by a person
authorized by the LLC. Existing law also governs the signing
of a certificate of cancellation, as specified. (Corp. Code
Sec. 17702.03(a)(1), (5).) Existing law provides that any
record filed under this Act may be signed by an agent. (Corp.
Code Sec. 17702.03(b).)
This bill would clarify the limitations placed upon the
signature authority of a person authorized by the LLC to sign
records and would clarify the signature requirements for a
certificate of cancellation. This bill would also clarify the
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authority of an agent to sign records filed with the SOS under
this Act.
5.Existing law , the California Uniform LLC Act, requires that
managers sign and cause to be filed in the SOS office on a
prescribed form, a certificate of dissolution, and requires
that the "persons who filed the certificate of dissolution"
sign and cause to be filed in the SOS office on a prescribed
form, a certificate of cancellation of articles of
organization. (Corp. Code Sec. 17707.08.)
This bill would add consistency and clarity in the above
section by replacing the term "persons who filed with
certificate of dissolution" with "managers."
COMMENT
1. Stated need for the bill
According to the author:
AB 1471 improves the efficiency of existing and future
[Secretary of State (SOS)] business filing procedures. This
measure reduces statutory inconsistency within Corporations
Code, updates corporation filing statutes to reflect changes
made by recent legislation, and standardizes the processing
and handling of specified SOS business customer transactions
(conversions and name reservations). These small but
meaningful changes will pave the way for improving the overall
SOS filing experience.
The California Business Connect online filing project, which
is currently underway at SOS, will modernize the [SOS's]
paper-based business filing processes. California Business
Connect is scheduled to be completed in 2016. Once
implemented, customers will be able to file documents and
request records online 24 hours a day, 7 days a week. This
project will streamline processes for business entity,
trademark, and Uniform Commercial Code (UCC) filings, as well
as special filings not related to business entities.
2.Proposed changes to existing law are in continued effort to
prepare for an automated filing system
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This bill seeks to make various clarifying and technical changes
throughout the General Corporation Law, Social Purpose
Corporations Act, the California Uniform Limited Liability
Company Act, the Uniform Limited Partnership Act, and Uniform
Partnership Act in preparation for the Secretary of State's
(SOS) automated filing system. These changes largely relate to
the payment of fees for business entities to reserve names with
the SOS, provisions governing the signature authority of various
individuals for filings made with the SOS, and provisions
governing information that must be set forth in certificates of
conversion. This bill would add clarity and consistency
throughout each of these provisions, or would otherwise update
the law to reflect recent changes relating to the Governor's
reorganization of departments, among other things.
The sponsor of this bill, the Secretary of State, writes that
because the Corporations Code contains filing requirements for
various business entity types, and because omnibus legislation
will occasionally enact changes for each of those individual
entities, often times, the resulting statutes can contain
"different or disjointed policies for the different entities"
and cause confusion for business customers attempting to file
documents with the SOS in the most expeditious manner. The
California Chamber of Commerce writes that it supports AB 1471's
attempt to reduce costs and time for the implementation of the
SOS automation project and 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."
3. Suggested technical amendments
Staff notes that existing law, the General Corporation Law,
provides that "[i]f a corporation qualified under Section 1505
is designated [as the agent], no address for it shall be set
forth" in the certificate of conversion. (See Corp. Code Sec.
1155.) Similar, but not wholly identical, provisions exist
under the Uniform Partnership Act. (See Section 16906(a)(3),
(b)(4).) The Uniform Limited Partnership Act, in contrast,
provides "[i]f a corporation that has complied with Section 1505
is designated as the agent, no address for it shall be set
forth" in the certificate of conversion. (See Corp. Code Sec.
15911.06.) This bill would now add similar language to the
correlating provision governing certificates of conversation
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under the Uniform LLC Act. The following technical amendment
is suggested to bring uniformity throughout each of these
provisions.
Technical amendments :
On page 4, line 37, after "designated" insert "as the agent"
On page 7, line 33, strike "that has complied with" and insert
"qualified under"
On page 8, line 27, after "designated" insert "as the agent"
Support : California Chamber of Commerce
Opposition : None Known
HISTORY
Source : Secretary of State
Related Pending Legislation : None Known
Prior Legislation :
SB 1041 (Jackson, Ch. 834, Stats. 2014) See Background.
SB 1532 (Pavley, Ch. 494, Stats. 2012) See Background.
Prior Vote :
Senate Banking and Financial Institutions Committee (Ayes 7,
Noes 0)
Assembly Floor (Ayes 78, Noes 0)
Assembly Banking and Finance Committee (Ayes 12, Noes 0)
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