BILL ANALYSIS
Date of Hearing: July 12, 1995
SB 261
SENATE COMMITTEE ON FINANCE, INVESTMENT, AND INTERNATIONAL
TRADE
LUCY KILLEA, CHAIR
SB 261 (Campbell) as amended July 3, 1995
Prior Action: None
Fiscal Committee: Yes
Summary: This bill exempts offers or sales of a security
under a stock purchase or stock option plan that complies
with the requirements of federal law, revises the
provisions to exempt certain exchanges involved in a merger
or sale of assets, provides for a minimum offering price of
$2 per share of voting common stock, and preferred stock
and imposes a fee for filing the notice of transactions
relating to the offer or sales of securities.
Digest:
Existing law:
1. Makes it unlawful to offer or sell a security
unless it is qualified or exempt from the Department of
Corporations qualification requirements;
2. Exempts certain transactions from the
qualification requirement applicable to offers or sales in
an issuer transaction or in connection with certain
reorganizations;
3. Exempts certain exchanges incident to a merger or
sale of corporate assets from qualification requirements of
federal law applicable to limited offers or certain
SENATE COMMITTEE ON FINANCE, INVESTMENT AND INTERNATIONAL
TRADE PAGE 1
HEARING: JULY 12, 1995
CAMPBELL - SB 261
compensatory benefit plans:
4. Permits a security for which a registration
statement has been filed under the federal Securities Act
of 1933 in connection with the same offering to be
qualified under a specified federal securities regulation.
5. Provides for the qualification of certain
securities by permit. Provides for the filing of a small
company application for permit if it meets certain
statutory requirements. These requirements include a
minimum offering price of voting common stock of $5 per
share and the submission of an application and disclosure
document that has been reviewed and signed by each member
of the board of directors.
6. Imposes various fees in connection with
securities-related actions by the Commissioner of
Corporations.
This bill:
1. Additionally exempts offers and sales of a
security under a stock purchase plan or stock option that
complies with the requirements of federal law that is
applicable to limited offer or certain compensatory benefit
plans;
2. Revises the provisions to exempt certain exchanges
incident to a merger, consolidation, or sale of assets
concerning the issuance of equity securities of another
entity if certain requirements are met;
3. Provides that the term oregistration statemento
include an offering statement as defined under federal
securities regulation;
SENATE COMMITTEE ON FINANCE, INVESTMENT AND INTERNATIONAL
TRADE PAGE 2
HEARING: JULY 12, 1995
CAMPBELL - SB 261
4. Provides for a minimum offering price of $2 per
share of voting common stock, preferred stock, and the
conversion of preferred stock into voting common stock;
5. Requires the application and disclosure document
to be reviewed and signed by a majority of the members of
the board of directors rather than each member;
6. Imposes a fee for filing the notice of transactions
under provisions related to the offer or sale of securities
under limited offers or certain compensatory benefit plans.
This bill would increase the fee for filing a notice of an
exchange incident to a merger, consolidation, or sale.
Comments:
This bill seeks to make a number of amendments to the
California Securities Law. The supporters of this bill
contend this is needed to increase options for capital
access for small businesses. The supporters claim this
bill would simplify the private offering procedure and
would bring California rules into conformity with those of
other states and federal securities law while reducing the
cost of compliance and permit more companies to access the
private capital markets. This bill provides for the
following reforms to the California Securities Law:
1. An exemption from the qualification
requirements of the
California Securities Law for certain qualified employee
stock purchase and stock option plans;
2. An exemption from the qualification
requirements of the
California Securities Law for certain mergers and
reorganization based on the proposal originally set forth
in Senate Bill 141 (Beverly);
SENATE COMMITTEE ON FINANCE, INVESTMENT AND INTERNATIONAL
TRADE PAGE 3
HEARING: JULY 12, 1995
CAMPBELL - SB 261
3. Elimination of the one class voting common
stock restriction for certain small company applications
under the California Securities Law;
4. Replacement of the requirement that all
directors review and sign
the application and disclosure document for certain small
company applications under the California Securities Law
with a provision that only a
majority of the directors need to take such action;
5. Reduction of the minimum per share offering
price restriction from $5 to $2 for certain small company
applications under the California Securities Law; and
6. Qualification by coordination for federal
Regulation A offerings.
The proponents also believe the amendments to the
California Securities Law will provide some of the needed
reforms to improve and facilitate the California capital
formation procedural and regulatory structure while
increasing and optimizing investor fraud prevention and
protection.
This bill has been substantially amended since it was
heard in this committee. The Department of Corporations
provided technical assistance in the form of amendments to
the author and committee staff. This bill in its present
form balances the Department of Corporations historic
policy of protecting investors with the public policy of
facilitating capital formation.
Support: Environmental Capital Corporation
California State Bar Business Law Section
Opposition: None reported to date: July 11, 1995
SENATE COMMITTEE ON FINANCE, INVESTMENT AND INTERNATIONAL
TRADE PAGE 4
HEARING: JULY 12, 1995
CAMPBELL - SB 261
Contact: Jan L. Owen 445-6306
SENATE COMMITTEE ON FINANCE, INVESTMENT AND INTERNATIONAL
TRADE PAGE 5
HEARING: JULY 12, 1995
CAMPBELL - SB 261