Statutes of 2002 – Legislative Summary



Following are summaries of bills enacted into law that may directly affect filings made and business conducted with the Secretary of State’s office. Unless otherwise indicated, these measures took effect on January 1, 2003. To research other legislation that does not impact filings made or business conducted with the Secretary of State’s office but that may affect your business, please refer to the Bill Index section of the California Legislative Counsel’s website for a list of all bills introduced in the Assembly and Senate during the 2001–2002 legislative session.

The various California Codes (reflecting laws currently in effect) can be accessed through the California Law section of the California Legislative Counsel’s website.


Business Entities

Chapter 1015 (AB 55 Shelley and Matthews)

This act enacts the California Corporate Disclosure Act, which requires additional information to be included in the statement of information filed by domestic stock and foreign corporations. It changes from biennial to annual the filing requirement for statements of information filed by domestic stock and foreign corporations. The act requires the Secretary of State to make the information in the statements available and open to the public for inspection, and specifies that by December 31, 2004, the Secretary of State must make the information available through an online database. It establishes a Victims of Corporate Fraud Compensation Fund, to be administered by the Secretary of State, and it requires the Secretary of State to adopt regulations regarding the administration of the fund and the eligibility of victims to receive compensation. In addition to the current $20 filing fee for statements of information, the bill requires the payment of a $5.00 disclosure fee each time the required statement of information is filed. Half of the $5.00 fee will be used to further the provisions of the bill, including the establishment of the online database, and the other half will be used to compensate victims of corporate fraud.

Victims of Corporate Fraud Compensation Fund
The Secretary of State has adopted regulations relating to the administration of the Victims of Corporate Fraud Compensation Fund and the eligibility of victims to receive compensation.

Chapter 734 (AB 2157 Papan)
Urgency Legislation
Effective September 20, 2002

This act, effective September 20, 2002 as an urgency statute, amends the purpose clause required to be included in articles of incorporation for nonprofit mutual benefit corporations pursuant to Corporations Code section 7130. It also provides a new purpose clause specifically for corporations subject to the California Credit Union Law. The act prohibits the Secretary of State from filing articles of incorporation for a credit union or a corporation that has "credit union" or related words in its name unless the articles of incorporation have been endorsed by the Commissioner of Financial Institutions. It provides that in the event of a conflict between the California Credit Union Law and any other law applicable to nonprofit mutual benefit corporations generally, the California Credit Union Law will apply. The act also specifies that no amendment to the articles of incorporation of a credit union, and no restated articles, certificate of correction, or certificate of revocation of a credit union shall be effective unless the approval of the Commissioner of Financial Institutions is filed with the Secretary of State.

Chapter 1117 (AB 643 Lowenthal)

This act requires a common interest development association to file specified information with the Secretary of State. The information is to be submitted on a form and for a fee, not to exceed $30, prescribed by the Secretary of State. For an incorporated association, the form will be filed within 90 days of filing its articles of incorporation and thereafter at the same time the association files its biennial statement with the Secretary of State pursuant to Corporations Code § 8210. For an unincorporated association, the form will be filed in July of 2003, and biennially in that same month thereafter. An incorporated association that does not comply with this requirement faces the possibility of suspension and monetary penalties. All information in the form is subject to the Public Records Act except for specified information, which is confidential and will not be available for public inspection.

Effective January 1, 2006, a corporation formed to manage a common interest development is subject to an additional $50.00 penalty, and subsequent suspension, for failure to file the initial or biennial Statement by Common Interest Development Association. This penalty is in addition to the penalty for failure to file the initial or biennial Statement of Information. (Civil Code § 1363.6(d), Corporations Code § 8810, and Revenue and Taxation Code § 19141.)

Chapter 1116 (AB 555 Dutra and Correa)

This act makes several changes to the Davis–Stirling Common Interest Development Act. The provision that affects the Secretary of State’s office is amended Civil Code § 1363.5(a), which requires the Articles of Incorporation filed with the Secretary of State by a common interest development association to include information concerning whether the association’s managing agent, if any, is certified pursuant to new Business and Professions Code § 11502.

Chapter 390 (AB 1875 Nakano and Correa)

This act allows a corporation to file a short–form certificate of dissolution if all of the following information applies: (1) the certificate of dissolution is being filed within 12 months from the date the articles of incorporation were filed; (2) the corporation does not have any debts or liabilities; (3) the tax liability will be satisfied on a taxes paid basis or a person, corporation, or other business entity assumes the tax liability of the dissolving corporation; (4) a final franchise tax return has been filed with the Franchise Tax Board; (5) the corporation has not conducted any business from the time of the filing of the articles of incorporation; (6) that the corporation acquired no assets, or that they have all been distributed to the persons who are entitled to them; (7) that the dissolution has been authorized by the appropriate persons; and (8) that the corporation has not issued any shares, and if payments for shares have been received from investors, those payments have been returned.

Chapter 112 (AB 2519 Keeley)

This act prohibits nonprofit public benefit corporations and nonprofit religious corporations from filing a certificate of dissolution with the Secretary of State in the case of a voluntary dissolution unless attached to the certificate is a document issued by the Attorney General either waiving objections to the distribution of the corporation’s assets or confirming that the corporation has no assets.

Chapter 480 (SB 399 Ackerman)

This act establishes procedures for a domestic corporation to convert into a domestic other business entity. It also permits the formation of a domestic corporation upon the conversion of a domestic or foreign other business entity or foreign corporation. The filing fee for a conversion pursuant to this act is $250 until January 1, 2005, and $150 thereafter.

Chapter 169 (AB 2791 Migden)

This act requires the Secretary of State to include with instructional materials provided in conjunction with any of the following filings a notice that the filing will obligate the filer to pay an annual tax to the Franchise Tax Board for the taxable year in which the filing occurs: (1) certificate of limited partnership; (2) application for registration as a foreign limited partnership; (3) application for registration as a limited liability partnership; and (4) application for registration as a foreign limited liability partnership. It also changes similar language, which is already in statute relating to limited liability companies and foreign limited liability companies to specify that the notice must inform the filer that the filing will obligate the filer to pay an annual tax to the Franchise Tax Board for the taxable year in which the filing occurs, rather than in the calendar year. This act also requires the Franchise Tax Board to notify a limited liability company or limited liability partnership that files a return designated as its final return that the annual tax continues to be due annually until a certificate of cancellation is filed with the Secretary of State.


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Special Filings

Chapter 844 (AB 2058 Papan, Dutra and Simitian)

This act creates the Bay Area Water Supply and Conservation Agency (Agency). The provisions that affect the Secretary of State’s office are new Water Code §§ 81326, 81327, and 81456.7. These provisions specify that if a sufficient number of public entities adopt resolutions to form the Agency, the Clerk of the Board of Supervisors of San Mateo County shall file a certificate with the Secretary of State indicating the name of the Agency and the names of each public entity that is a member of the Agency. The Secretary of State is required, within 10 days of receipt of the certificate, to issue a certificate of formation indicating that the Agency has been formed and identifying the public entities that are members of the Agency. The Secretary of State is then required to transmit a copy of the certificate of formation to each public entity that is a member. The Agency is required to notify the Secretary of State in writing within 10 days of admission whenever a new public entity becomes a member of the Agency.

Chapter 341 (AB 2224 Nation)

This act creates the Sonoma–Marin Area Rail Transit District. The provision that affects the Secretary of State’s office is new Public Utilities Code § 105335, which provides that if the voters elect to dissolve the district, the board of the district must adopt a resolution dissolving the district, and a certified copy of the resolution must be filed with the Secretary of State.

Chapter 1001 (AB 2637 Cardoza, Cox and Matthews)

This act establishes an enhanced smog check program in the San Francisco Bay Area Basin. The provision that affects the Secretary of State’s office is Section 10 of the bill, which specifies that the bill shall only become operative if the all of the following conditions are met: (1) petitioners in Sacramento Metropolitan Air Quality Management District, and Yolo Solano Air Quality Management District v. the United States Environmental Protection Agency, in the United States Court of Appeals for the Ninth Circuit (Petition Number 02–70848), move to withdraw from the lawsuit, with prejudice, on or before October 4, 2002; (2) the court issues an order granting the motion; and (3) the petitioners file a certified copy of that petition with the Secretary of State.

Chapter 722 (SB 800 Burton and Wesson)

This act specifies the rights and requirements of a homeowner in bringing an action for construction defects. The provision that affects the Secretary of State ’s office is new Civil Code § 912(e), which requires a builder to maintain the name and address of an agent for notice with the Secretary of State, unless the builder elects to use a third party for that notice under specified circumstances.

Chapter 1141 (SB 1423 Chesbro)

This act relates to the California Victim Compensation and Government Claims Board. The provision that affects the Secretary of State’s office is new Government Code § 13957.2(a), which allows the board to establish maximum rates and service limitations for reimbursement of medical and medical– related services and for mental health and counseling services, and requires the board to file an informational copy of these service limitations and maximum rates with the Secretary of State.

Chapter 395 (SB 1588 Torlakson, Ackerman, Machado, Margett, Perata and Soto)

This act creates the Mosquito Abatement and Vector Control District Law. The provision that affects the Secretary of State’s office is new Health and Safety Code § 2043(b), which permits the board of trustees of a mosquito abatement and vector control district to adopt a resolution to change the name of the district. A copy of the resolution must be filed with the Secretary of State.

Chapter 900 (SB 1637 Torlakson)

This act provides that an employee organization primarily comprised of peace officers that is a chapter of, or affiliated with, a general nonprofit corporation formed for the purpose of acting as an employee organization for peace officers in California that represents less than 7,000 retired or active peace officers is not qualified to be the exclusive or majority bargaining agent until January 1, 2007, if it has not filed with the Secretary of State by January 1, 2003, a notice designating an agent for service of process.

Chapter 812 (SB 1653 Costa)

This act creates the California Bay–Delta Authority. The provision that affects the Secretary of State’s office is new Water Code § 79475, which provides that this act will be repealed as of January 1, 2006, unless the Secretary of the Resources Agency determines that federal legislation has been enacted authorizing the participation of the appropriate federal agencies in the authority. Upon making that determination, the Secretary of the Resources Agency is required to notify the Secretary of State in writing with regard to that determination.

Chapter 743 (SB 1703 Peace)

This act creates a consolidated transportation agency in San Diego. The provision that affects the Secretary of State’s office is new Public Utilities Code § 132372.4, which requires the agency to file an executed copy of each authorized lease and agreement with the Secretary of State. The act authorizes the Secretary of State to receive one dollar ($1.00) for each copy filed.


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