BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 201 (DeSaulnier)
Hearing Date: 5/26/2011 Amended: 3/14/2011
Consultant: Maureen Ortiz Policy Vote: B&FI: 7-0 Jud: 3-1
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BILL SUMMARY: SB 201 authorizes the creation of a new form of
corporate entity entitled the Flexible Purpose Corporation and
delineates the provisions for structure and compliance.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Admin expenses $65
$55 $55 General
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STAFF COMMENTS: SUSPENSE FILE.
The Secretary of State indicates initial costs of approximately
$10,000 to create new filing forms and instructions, and to
revise the Internet Website. Annual ongoing costs include PY
for an attorney position at $54,452 to review filings, respond
to legal correspondence, and oversee any challenges that may
arise with the new entities. Actual costs may be higher and
will depend on the number of filings for the new business type.
The Department of Corporations indicates that costs will likely
be minor for overseeing the issuance of securities.
SB 201 authorizes existing corporations and business entities to
merge into or convert into a flexible purpose corporation (FPC)
upon completing specified requirements; and, it allows FPCs to
convert into a nonprofit corporation or other entity. The new
FPC will be required to file articles of incorporation with the
Secretary of State, and include a list of its flexible purposes
that could include any of the following:
a) One or more charitable or public purpose activities that a
nonprofit public benefit corporation is authorized to carry out;
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b) Promoting positive short-term or long-term effects of, or
minimizing adverse short-term or long-term effects of the FPC's
activities on its employees, suppliers, customers, creditors,
and the community.
Each FPC must prepare an annual report which shall be sent to
its shareholders no later than 120 days after the close of the
FPC's fiscal year, and at least 15 days prior to the
shareholders annual meeting. In addition to the balance sheet,
income statement, and a statement of cashflows for that fiscal
year, the annual report must include a management discussion and
analysis regarding the FPC's stated purpose.
Existing law authorizes the creation of several corporate forms
including corporations, partnerships, limited partnerships,
limited liability partnerships, and limited liability companies.
SB 201 will add flexible purpose corporations to those types of
entities that may be formed in California.
This bill is the product of a working group formed in 2008 to
facilitate the creation of a new corporate form intended to give
traditional corporations greater flexibility to combine
profitability with broader social and/or environmental issues.
Although companies may do this now, the organization is forced
to accept potential risk and liability in order to achieve
multiple objectives and corporate directors are faced with
having to weigh the trade-offs between profitability and their
organization's special purpose. The working group believes that
FPCs will be able to attract equity capital (something LLCs
cannot readily do) while mitigating the liability issues and
other challenges posed by corporations. SB 201 will provide a
balance between corporate special purposes and shareholder
protections.
SB 201 (DeSaulneir)
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