Amended in Senate June 15, 2014

Amended in Assembly April 21, 2014

Amended in Assembly April 1, 2014

Amended in Assembly March 20, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1859

Introduced by Assembly Member Maienschein

February 19, 2014

An act to add Article 7 (commencing with Section 6600) to Chapter 6 of Division 3 of the Business and Professions Code, to amend Section 13401 of the Corporations Code, and to add Sections 2104.5, 8406, and 15605 to the Probate Code, relating to professional fiduciaries.

LEGISLATIVE COUNSEL’S DIGEST

AB 1859, as amended, Maienschein. Professional fiduciaries: professional corporations.

Existing law, the Professional Fiduciaries Act, establishes the Professional Fiduciaries Bureau within the Department of Consumer Affairs and requires the bureau to license and regulate professional fiduciaries, as specified.

The Moscone-Knox Professional Corporation Act provides for the organization of a corporation under specified provisions of law for the purposes of qualifying as a professional corporation under that act and rendering professional services. The act defines professional services as services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act.

This bill would provide for the formation of licensed professional fiduciary corporations pursuant to the begin delete act described above end delete begin insert Moscone-Knox Professional Corporation Act end insert , as specified begin insert , and would make these corporations subject to registration by the Professional Fiduciaries Bureau and payment of a licensure fee, as specified end insert . The bill would provide that it is unprofessional conduct and a violation of the Professional Fiduciaries Act to violate, attempt to violate, directly or indirectly, or assist in or abet the violation of, or conspire to violate these provisions, the Moscone-Knox Professional Corporation Act, or any regulations duly adopted under those laws. The bill would require the name of a licensed professional fiduciary corporation and any name or names under which it may render professional services to contain the words “licensed professional fiduciary” and wording or abbreviations denoting corporate existence. The bill would require each director, shareholder, begin delete and end delete officer begin insert , or employee end insert of a licensed professional fiduciary corporation begin insert who renders professional services end insert to be begin insert a licensed person with regard to the professional services rendered and to also be end insert a licensed professional fiduciary. The bill would prohibit the income of a licensed professional fiduciary corporation attributable to professional services rendered while a shareholder is a disqualified person, as defined, from accruing, in any manner, to the benefit of the shareholder or his or her shares in the licensed professional fiduciary corporation. The bill would require the bylaws of a licensed professional fiduciary corporation to include a provision that requires the capital stock of the corporation owned by a disqualified person, as defined, or a deceased person, to be sold to the corporation or to the remaining shareholders of the corporation within 60 days. The bill would require a licensed professional fiduciary corporation to maintain insurance coverage of at least $1,000,000 for claims against the corporation, as specified. The bill would require a licensed fiduciary corporation that is appointed as a guardian, conservator, personal representative, or trustee by a court to be liable for any licensed professional fiduciary who violates the powers and duties of those appointments while acting on behalf of the corporation. begin insert The bill would impose other various duties upon a licensed professional fiduciary corporation, as specified. The bill would provide authority to the bureau to enforce the provisions of this act, as specified, and in accordance with the Administrative Procedure Act. end insert

Existing law governing the administration of estates and trusts authorizes the appointment of a person as a personal representative of a decedent’s estate, a guardian or conservator of a person or an estate, or a trustee. Existing law defines “person” to include a corporation for these purposes.

This bill would provide that if a licensed professional fiduciary corporation is appointed as a guardian, conservator, trustee, or personal representative, each shareholder, officer, director, or employee of the corporation who is a licensed professional fiduciary may individually exercise the powers and duties of that appointment begin insert , as specified end insert .

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Article 7 (commencing with Section 6600) is
added to Chapter 6 of Division 3 of the Business and Professions
Code, to read:

 

Article 7.  Licensed Professional Fiduciary Corporations

 

6600.  

A licensed professional fiduciary corporation is a
corporation begin delete that end delete begin insert , which is registered with the Professional
Fiduciaries Bureau and has a currently effective certificate of
registration from the bureau, and end insert is authorized to render
professional services, as defined in Section 13401 of the
Corporations Code, if that corporation and its shareholders,
officers, directors, and employees rendering professional services
who are licensed professional fiduciaries are in compliance with
the Moscone-Knox Professional Corporation Act begin insert (Part 4
(commencing with Section 13400) of Division 3 of Title 1 of the
Corporations Code) end insert , the provisions of this article, and all other
statutes and regulations pertaining to the corporation and the
conduct of its affairs. With respect to a licensed professional
fiduciary corporation, the governmental agency referred to in the
Moscone-Knox Professional Corporation Act (Part 4 (commencing
with Section 13400) of Division 3 of Title 1 of the Corporations
Code) is the Professional Fiduciaries Bureau.

begin insert

begin insert 6600.3. end insert   

An applicant for registration as a licensed professional
fiduciary corporation shall provide to the bureau all necessary
and pertinent documents and information requested by the bureau,
including the names of all of the officers, directors, shareholders,
or employees who are licensed professional fiduciaries, as set
forth in subdivision (c) of Section 6600.5. The bureau may make
available forms of application for registration pursuant to this
article.

end insert begin insert

begin insert 6600.5. end insert   

The bureau shall issue a certificate of registration,
which may be in electronic form, if all of the following apply:

(a) The corporation is duly organized and existing under the
General Corporation Law (Division 1 (commencing with Section
100) of Title 1 of the Corporations Code).

(b) Each officer, director, shareholder, or employee who will
render professional services is a licensed person, as defined in the
Moscone-Knox Professional Corporation Act (Part 4 (commencing
with Section 13400) of Division 3 of Title 1 of the Corporations
Code).

(c) Except as provided in Section 13403 of the Corporations
Code, each officer, director, shareholder, or employee who will
render professional services is a licensed professional fiduciary
who has satisfied all of the licensing requirements under the
Professional Fiduciaries Act (Chapter 6 (commencing with Section
6500)).

(d) From the application, it appears to the bureau’s satisfaction
that the affairs of the corporation will be conducted in compliance
with the law and the rules and regulations of the bureau.

(e) The corporation pays the registration fee in the amount as
the bureau may determine pursuant to Section 6600.7.

end insert begin insert

begin insert 6600.6. end insert   

Each licensed professional fiduciary corporation shall
renew its permit to practice annually and shall pay the renewal
fee fixed by the bureau pursuant to Section 6600.7.

end insert begin insert

begin insert 6600.7. end insert   

(a) The fee to be charged to each applicant for
registration as a licensed professional fiduciary corporation shall
be fixed by the bureau at an amount not to exceed two hundred
fifty dollars ($250).

(b) The annual fee for the renewal of registration as a licensed
professional fiduciary corporation shall not exceed two hundred
fifty dollars ($250).

(c) The license and renewal fees under subdivisions (a) and (b)
shall be set by the bureau through regulation at an amount not to
exceed that which is necessary to recover the reasonable costs to
the bureau to implement this article.

end insert

6601.  

It is unprofessional conduct and a violation of this chapter
for any person licensed pursuant to this chapter to violate, attempt
to violate, directly or indirectly, or assist in or abet the violation
of, or conspire to violate any provision or term of this article, the
Moscone-Knox Professional Corporation Act begin insert (Part 4 (commencing
with Section 13400) of Division 3 of Title 1 of the Corporations
Code) end insert , or any regulations duly adopted under those provisions.

6602.  

A licensed professional fiduciary corporation shall not
commit or omit any act that, if committed or omitted, would
constitute unprofessional conduct under any statute or regulation.
A licensed professional fiduciary corporation, in the conduct of
its practice, shall observe and be bound by these statutes and
regulations to the same extent as a person holding a license under
this chapter.

6603.  

The name of a licensed professional fiduciary corporation
and any name or names under which it may render professional
services shall contain the words “licensed professional fiduciary”
and wording or abbreviations denoting corporate existence.

begin delete

6604.  

Except as provided in Section 13403 of the Corporations
Code, each director, shareholder, and officer of a licensed
professional fiduciary corporation shall be a licensed professional
fiduciary.

end delete

6605.  

The income of a licensed professional fiduciary
corporation attributable to professional services rendered while a
shareholder is a disqualified person, as defined in Section 13401
of the Corporations Code, shall not in any manner accrue to the
benefit of the shareholder or his or her shares in the licensed
professional fiduciary corporation.

begin insert

begin insert 6606. end insert   

(a) The bureau may adopt and enforce regulations to
implement the purposes and objectives of this article.

(b) The bureau shall list the registered professional fiduciary
corporations and their managers on its publicly available Internet
Web site.

end insert

begin delete 6606. end delete
begin insert 6606.5. end insert   

(a) The bylaws of a licensed professional fiduciary
corporation shall include a provision that requires the capital stock
of the corporation owned by a disqualified person, as defined in
Section 13401 of the Corporations Code, or a deceased person, to
be sold to the corporation or to the remaining shareholders of the
corporation within 60 days.

(b) A licensed professional fiduciary corporation shall maintain
adequate insurance at a minimum amount of one million dollars
($1,000,000) for claims against the corporation begin insert and for claims
against licensed professional fiduciaries who are its officers,
directors, shareholders, and employees, end insert by its customers arising
out of the rendering of professional services.

begin insert

(c) The minimum insurance amount required to be maintained
by this section shall be increased by two hundred fifty thousand
dollars ($250,000) for each licensed professional fiduciary in
excess of two licensed professional fiduciaries who are members
of the licensed professional fiduciary corporation.

end insert begin insert

(d) Nothing provided in this article shall be deemed to conflict
with the common law rule in this state under which personal
liability is imposed on officers, directors, and shareholders for
damages resulting from tortious conduct that they have personally
committed or participated in, and for damages resulting from
tortious conduct that they have specifically and directly ordered.

end insert

6607.  

(a) A licensed professional fiduciary corporation that
is appointed as a guardian, conservator, personal representative,
or trustee by a court shall be liable for any licensed professional
fiduciary who violates the powers and duties of those appointments
while acting on behalf of the corporation.

(b) Nothing in subdivision (a) shall be interpreted to prevent
the bureau from individual enforcement and disciplinary action
against a licensed professional fiduciary who has violated any of
the provisions of this chapter.

begin insert

(c) Notwithstanding subdivision (a), a licensed professional
fiduciary shall be entirely responsible and liable for his or her
compliance with the provisions of the Professional Fiduciaries
Act (Chapter 6 (commencing with Section 6500)) and this article.

end insert

begin insert

begin insert 6608. end insert   

Each office of a licensed professional fiduciary
corporation shall be managed by a licensed professional fiduciary.

end insert begin insert

begin insert 6609. end insert   

Each licensed professional fiduciary corporation shall
file with the bureau at the times the bureau may require a report
containing information pertaining to qualification and compliance
with the statutes, rules, and regulations of the bureau, as the
bureau may determine. All reports shall be signed and verified by
an officer of the corporation.

end insert begin insert

begin insert 6610. end insert   

The bureau may conduct an investigation of the conduct
of the business of a licensed professional fiduciary corporation.
Upon investigation, the bureau shall have power to issue
subpoenas, administer oaths, examine witnesses, and compel the
production of records, in the same manner as upon an investigation
or formal hearing in a disciplinary matter under this chapter.

end insert begin insert

begin insert 6611. end insert   

All proceedings against a licensed professional fiduciary
corporation for any violation of this article or any regulations
adopted by the bureau shall be conducted in accordance with the
Administrative Procedure Act (Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code), and shall be prosecuted by the Attorney General’s office,
and the bureau shall have all the powers granted therein.

end insert begin insert

begin insert 6612. end insert   

(a) Notwithstanding Section 6611 and Section 11415.60
of the Government Code, the bureau may enter into a settlement
with a licensed professional fiduciary corporation or applicant
for registration instead of the issuance of an accusation or
statement of issues against that licensee or applicant.

(b) The settlement shall identify the factual basis for the action
being taken and the statutes or regulations violated.

(c) Any settlement with a licensed professional fiduciary
corporation executed pursuant to this section shall be considered
discipline and a public record and shall be posted on the bureau’s
Internet Web site. Any settlement with an applicant for registration
executed pursuant to this section shall be considered a public
record and shall be posted on the bureau’s Internet Web site.

end insert begin insert

begin insert 6613. end insert   

Notwithstanding Section 6611, if any violation occurs,
in its discretion, the bureau may refer the case to the Attorney
General or to the local district attorney for criminal prosecution.
The referral of a case for criminal prosecution shall not preclude
the bureau from taking any other action provided for in this article.

end insert

SEC. 2.  

Section 13401 of the Corporations Code is amended
to read:

13401.  

As used in this part:

(a) “Professional services” means any type of professional
services that may be lawfully rendered only pursuant to a license,
certification, or registration authorized by the Business and
Professions Code, the Chiropractic Act, or the Osteopathic Act.

(b) “Professional corporation” means a corporation organized
under the General Corporation Law or pursuant to subdivision (b)
of Section 13406 that is engaged in rendering professional services
in a single profession, except as otherwise authorized in Section
13401.5, pursuant to a certificate of registration issued by the
governmental agency regulating the profession as herein provided
and that in its practice or business designates itself as a professional
or other corporation as may be required by statute. However, any
professional corporation or foreign professional corporation
rendering professional services by persons duly licensed by the
Medical Board of California or any examining committee under
the jurisdiction of the board, the Osteopathic Medical Board of
California, the Dental Board of California, the California State
Board of Pharmacy, the Veterinary Medical Board, the California
Architects Board, the Court Reporters Board of California, the
Board of Behavioral Sciences, the Speech-Language Pathology
and Audiology Board, the Board of Registered Nursing, the
Professional Fiduciaries Bureau, or the State Board of Optometry
shall not be required to obtain a certificate of registration in order
to render those professional services.

(c) “Foreign professional corporation” means a corporation
organized under the laws of a state of the United States other than
this state that is engaged in a profession of a type for which there
is authorization in the Business and Professions Code for the
performance of professional services by a foreign professional
corporation.

(d) “Licensed person” means any natural person who is duly
licensed under the provisions of the Business and Professions
Code, the Chiropractic Act, or the Osteopathic Act to render the
same professional services as are or will be rendered by the
professional corporation or foreign professional corporation of
which he or she is or intends to become, an officer, director,
shareholder, or employee.

(e) “Disqualified person” means a licensed person who for any
reason becomes legally disqualified (temporarily or permanently)
to render the professional services that the particular professional
corporation or foreign professional corporation of which he or she
is an officer, director, shareholder, or employee is or was rendering.

SEC. 3.  

Section 2104.5 is added to the Probate Code, to read:

2104.5.  

If a licensed professional fiduciary corporation is
appointed as a guardian or conservator, each shareholder, officer,
director, or employee of the corporation who is a licensed
professional fiduciary may individually exercise the powers and
duties of the guardian or conservator. begin insert The court shall appoint and
name both the professional fiduciary corporation and the
individuals who may individually exercise the power and duties
of the guardian or conservator. In the event that a corporation
ceases to operate, the individuals named as guardian or
conservator shall notify the court within 10 business days that the
corporation has ceased operating and the court shall make a new
appointment. The authority and responsibility of any individuals
previously appointed guardian or conservator shall continue
regardless of the existence of the corporation until the court makes
a new appointment. end insert

SEC. 4.  

Section 8406 is added to the Probate Code, to read:

8406.  

If a licensed professional fiduciary corporation is
appointed as a personal representative, each shareholder, officer,
director, or employee of the corporation who is a licensed
professional fiduciary may individually exercise the powers and
duties of the personal representative. begin insert The court shall appoint and
name both the professional fiduciary corporation and the
individuals who may individually exercise the power and duties
of the personal representative. In the event that a corporation
ceases to operate, the individuals named as guardian or
conservator shall notify the court within 10 business days that the
corporation has ceased operating and the court shall make a new
appointment. The authority and responsibility of any individuals
previously appointed guardian or conservator shall continue
regardless of the existence of the corporation until the court makes
a new appointment. end insert

SEC. 5.  

Section 15605 is added to the Probate Code, to read:

15605.  

If a licensed professional fiduciary corporation is
appointed as a trustee, each shareholder, officer, director, or
employee of the corporation who is a licensed professional
fiduciary may individually exercise the powers and duties of the
trustee. begin insert The court shall appoint and name both the professional
fiduciary corporation and the individuals who may individually
exercise the power and duties of the trustee. In the event that a
corporation ceases to operate, the individuals named as trustee
shall notify the court within 10 end insert begin insert business days that the corporation
has ceased operating and the court shall make a new appointment.
The authority and responsibility of any individuals previously
appointed as trustee shall continue regardless of the existence of
the corporation until the court makes a new appointment. end insert