Amended  IN  Senate  March 21, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 738

Introduced by Senator Hurtado

February 17, 2023

An act to amend Sections 2105 and 17708.02 of the Corporations Code, relating to businesses.


LEGISLATIVE COUNSEL'S DIGEST


SB 738, as amended, Hurtado. Secretary of State: business filings: foreign-owned shell companies. Corporate Transparency Act: foreign corporations: certificate of qualification.
The General Corporation Law (GCL) prohibits a foreign corporation from transacting intrastate business, as defined, without having first obtained from the Secretary of State a certificate of qualification and stating, as prescribed, certain information, including the state or place of its incorporation or organization and a statement that the foreign corporation is authorized to exercise its powers and privileges in that state or place of its incorporation or organization. The GCL makes a foreign corporation that transacts intrastate business without complying with the GCL guilty of a misdemeanor.
This bill, the Corporate Transparency Act, would require a foreign corporation to additionally disclose certain information with respect to any beneficial owner, as defined, of the foreign corporation, including the owner’s full legal name. By expanding the scope of the misdemeanor described above, this bill would impose a state-mandated local program.
The California Revised Uniform Limited Liability Company Act authorizes a foreign limited liability company to apply for a certificate of registration to transact business in this state by delivering an application to the Secretary of State for filing on a form prescribed by the Secretary of State that states certain information, including the state or other jurisdiction under whose law the foreign limited liability company is organized and a statement that the foreign limited liability company is authorized to exercise its powers and privileges in that state or other jurisdiction.
This bill would require a foreign limited liability company to additionally disclose certain information with respect to any beneficial owner, as defined, of the foreign limited liability company, including the owner’s full legal name.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law requires specified businesses and corporations to file certain business-related information with the Secretary of State.

This bill would state the intent of the Legislature to enact legislation that requires the Secretary of State to request the beneficial owners of foreign-owned shell companies to disclose specified personal information.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NOYES  

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


SECTION 1.

 This act shall be known as the Corporate Transparency Act.
SEC. 2.

It is the intent of the Legislature to enact legislation that requires the Secretary of State to request the beneficial owners of foreign-owned shell companies to disclose their (1) full legal name, (2) date of birth, (3) current residential or business street address, and (4) unique identifying number from an acceptable identification document or Secretary of State identification number, if available.

SEC. 2.

 Section 2105 of the Corporations Code is amended to read:

2105.
 (a) A foreign corporation shall not transact intrastate business without having first obtained from the Secretary of State a certificate of qualification. To obtain that certificate it shall file, on a form prescribed by the Secretary of State, a statement and designation signed by a corporate officer or, in the case of a foreign association that has no officers, signed by a trustee stating:
(1) The name of the corporation, and, if the name does not comply with Section 201, an alternate name adopted pursuant to subdivision (b) of Section 2106.
(2) The state or place of its incorporation or organization and a statement that the foreign corporation is authorized to exercise its powers and privileges in that state or place of its incorporation or organization.
(3) The street address of its principal office.
(4) The street address of its principal office in California, if any.
(5) The mailing address of its principal office, if different from the addresses specified pursuant to paragraphs (3) and (4).
(6) The name of an agent upon whom process directed to the corporation may be served within this state. The designation shall comply with subdivision (b) of Section 1502.
(7) (A) Its irrevocable consent to service of process directed to it upon the agent designated and to service of process on the Secretary of State if the agent designated or the agent’s successor is no longer authorized to act or cannot be found at the address given.
(B) Consent under this paragraph extends to service of process directed to the foreign corporation’s agent in this state for a search warrant issued pursuant to Section 1524.2 of the Penal Code, or for any other validly issued and properly served search warrant, for records or documents that are in the possession of the foreign corporation and are located inside or outside of this state. This subparagraph shall apply to a foreign corporation that is a party or a nonparty to the matter for which the search warrant is sought. For purposes of this subparagraph, “properly served” means delivered by hand, or in a manner reasonably allowing for proof of delivery if delivered by United States mail, overnight delivery service, or facsimile to a person or entity listed in Section 2110, or any other means specified by the foreign corporation, including, but not limited to, email or submission via an internet web portal that the foreign corporation has designated for the purpose of service of process.
(8) If it is a corporation that will be subject to the Insurance Code as an insurer, it shall state that fact.
(9) All of the following information with respect to any beneficial owner of the foreign corporation:
(A) The owner’s full legal name.
(B) The owner’s residential or business address.
(C) The owner’s email address, if applicable.
(b) Annexed to the statement and designation shall be a certificate by an authorized public official of the state or place of incorporation of the corporation to the effect that the corporation is an existing corporation in good standing in that state or place or, in the case of an association, an officers’ certificate stating that it is a validly organized and existing business association under the laws of a specified foreign jurisdiction.
(c) Before it may be designated by a foreign corporation as its agent for service of process, a corporate agent must shall comply with Section 1505.
(d) As used in this section, “beneficial owner” means a natural person who owns, directly or indirectly, 50 percent or more of the equity interest of a foreign corporation.

SEC. 3.

 Section 17708.02 of the Corporations Code is amended to read:

17708.02.
 (a) A foreign limited liability company may apply for a certificate of registration to transact business in this state by delivering an application to the Secretary of State for filing on a form prescribed by the Secretary of State. The application shall state all of the following:
(1) The name of the foreign limited liability company, and, if the name does not comply with Section 17701.08, an alternate name adopted pursuant to subdivision (a) of Section 17708.05.
(2) The state or other jurisdiction under whose law the foreign limited liability company is organized and a statement that the foreign limited liability company is authorized to exercise its powers and privileges in that state or other jurisdiction.
(3) The street address of the foreign limited liability company’s principal office and of its principal office in California, if any.
(4) (A) The name and street address of the foreign limited liability company’s initial agent for service of process in this state who consents to service of process and meets the qualifications specified in subdivision (c) of Section 17701.13. If a corporate agent is designated, only the name of the agent shall be set forth.
(B) Consent under this paragraph extends to service of process directed to the foreign limited liability company’s agent in this state for a search warrant issued pursuant to Section 1524.2 of the Penal Code, or for any other validly issued and properly served search warrant, for records or documents that are in the possession of the foreign limited liability company and are located inside or outside of this state. This subparagraph shall apply to a foreign limited liability company that is a party or a nonparty to the matter for which the search warrant is sought. For purposes of this subparagraph, “properly served” means delivered by hand, or in a manner reasonably allowing for proof of delivery if delivered by United States mail, overnight delivery service, facsimile, or any other means specified by the foreign limited liability company, including email or submission via an internet web portal the foreign limited liability company has designated for the purpose of service of process.
(5) A statement that the Secretary of State is appointed the agent of the foreign limited liability company for service of process if the agent has resigned and has not been replaced or if the agent cannot be found or served with the exercise of reasonable diligence.
(6) The mailing address of the foreign limited liability company if different than the street address of the principal office, or principal office in California.
(7) All of the following information with respect to any beneficial owner of the foreign corporation:
(A) The owner’s full legal name.
(B) The owner’s residential or business address.
(C) The owner’s email address, if applicable.
(b) A foreign limited liability company shall deliver with a completed application under subdivision (a) a certificate of existence, status, or good standing or a record of similar import, issued within the past six months from the submission of the application for filing in California, signed by the Secretary of State or other official having custody of the foreign limited liability company’s publicly filed records in the state or other jurisdiction under whose law the foreign limited liability company is formed.
(c) The Secretary of State shall include with instructional materials, provided in conjunction with registration under subdivision (a), a notice that filing the registration will obligate the foreign limited liability company to pay an annual tax to the Franchise Tax Board pursuant to Section 17941 of the Revenue and Taxation Code. That notice shall be updated annually to specify the dollar amount of the tax.
(d) As used in this section, “beneficial owner” means a natural person who owns, directly or indirectly, 50 percent or more of the equity interest of a foreign limited liability company.

SEC. 4.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.