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SB-522 Business entities: filings.(2019-2020)

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Date Published: 01/15/2020 09:00 PM
SB522:v97#DOCUMENT

Amended  IN  Senate  January 15, 2020
Amended  IN  Senate  January 06, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 522


Introduced by Senator Hertzberg

February 21, 2019


An act to amend sections Sections 201, 2601, 5122, 7122, 9122, 12302, 13409, 15901.08, and 17701.08 of the Corporations Code, relating to business entities.


LEGISLATIVE COUNSEL'S DIGEST


SB 522, as amended, Hertzberg. Business entities: filings.
Existing law, namely the General Corporation Law, the Social Purpose Corporations Act, the Nonprofit Public Benefit Corporation Law, the Nonprofit Mutual Benefit Corporation Law, the Nonprofit Religious Corporation Law, and the Cooperative Corporation Law, among other things, prohibits the Secretary of State from filing articles of incorporation that set forth a name likely to mislead the public or that is the same as, or so similar as tends to deceive, the name of specified domestic and foreign corporations, except that a corporation is authorized to adopt a name that is substantially the same as a specified existing domestic or foreign corporation, upon proof of consent by that corporation and a finding by the secretary that the public, under the circumstances, is unlikely to be misled.
This bill would eliminate the above-described exception.
Existing law, the Moscone-Knox Professional Corporation Act, exempts a domestic or foreign professional corporation’s name from specified naming requirements in the General Corporation Law as long as the name of the professional corporation contains, and is restricted to, the name or last name of specified persons, including, but not limited to, present, prospective, or former shareholders. The act prohibits the Secretary of State from using specified naming requirements in the General Corporation Law to refuse to file articles of incorporation or issue a certificate of qualification, as applicable, that sets forth a name that does not comply with those requirements. However, under existing law law, the name is prohibited from being substantially the same as the name of a domestic corporation, the name of a foreign corporation qualified to render professional services in this state that is authorized to transact business in this state, or a name that is under reservation for another corporation.
This bill would delete the exemption and make the domestic and foreign professional corporations subject to the naming requirements of the General Corporation Law.
Existing law, the Uniform Limited Partnership Act of 2008, requires the name of a limited partnership be distinguishable from the names of other domestic and foreign limited partnerships that have previously filed a certificate or registered, as applicable, with the Secretary of State and from reserved names. An exemption to these requirements authorizes a limited partnership to apply to the Secretary for authorization to use a name that does not comply with those requirements, and the Secretary is required to authorize the use of the noncomplying name if certain conditions are met.
This bill would delete the exception and would prohibit the name from being one that the Secretary determines is likely to mislead the public. The bill would also authorize enjoining the use of a name violating these provisions notwithstanding the Secretary filing the certificate of limited partnership.
Existing law, the California Revised Uniform Limited Liability Company Act, prohibits the name of a limited liability company from being one that the Secretary of State determines is likely to mislead the public and requires the name to be distinguishable from the names of other domestic and foreign limited liability companies that are authorized to transact business in this state and from reserved names. An exemption to this prohibition authorizes a limited liability company to apply to the Secretary for authorization to use a name that does not comply with those requirements, and the Secretary is required to authorize the use of the noncomplying name if certain conditions are met.
This bill would delete the exception and would also authorize enjoining the use of a name violating these provisions notwithstanding the Secretary of State filing the limited liability company’s articles.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 201 of the Corporations Code is amended to read:

201.
 (a) The Secretary of State shall not file articles setting forth a name in which “bank,” “ trust,” “trustee,” or related words appear, unless the certificate of approval of the Commissioner of Business Oversight is attached thereto. This subdivision does not apply to the articles of any corporation subject to the Banking Law on which is endorsed the approval of the Commissioner of Business Oversight.
(b) The name of a corporation shall not be a name that the Secretary of State determines is likely to mislead the public and shall be distinguishable in the records of the Secretary of State from all of the following:
(1) The name of any corporation or foreign corporation.
(2) The name of any foreign corporation authorized to transact intrastate business in this state.

(2)

(3) Each name that is under reservation for another corporation pursuant to this title.

(3)

(4) The name of a foreign corporation that has registered its name pursuant to Section 2101.

(4)

(5) A name that a foreign corporation has assumed under subdivision (b) of Section 2106.

(5)

(6) A name that will become the record name of a domestic or foreign corporation upon a corporate instrument when there is a delayed effective or file date.
(c) Subject to Section 2106, this section applies to a foreign corporation transacting business in this state or that has applied for a certificate of qualification.
(d) The use by a corporation of a name in violation of this section may be enjoined notwithstanding the filing of its articles by the Secretary of State.
(e) Any applicant may, upon payment of the fee prescribed therefor in Article 3 (commencing with Section 12180) of Chapter 3 of Part 2 of Division 3 of Title 2 of the Government Code, obtain from the Secretary of State a certificate of reservation of any name not prohibited by subdivision (b), and upon the issuance of the certificate the name stated therein shall be reserved for a period of 60 days. The Secretary of State shall not, however, issue certificates reserving the same name for two or more consecutive 60-day periods to the same applicant or for the use or benefit of the same person; nor shall consecutive reservations be made by or for the use or benefit of the same person; of names so similar as to fall within the prohibitions of subdivision (b).

SEC. 2.

 Section 2601 of the Corporations Code is amended to read:

2601.
 (a) The Secretary of State shall not file articles setting forth a name in which “bank,” “trust,” “trustee,” or related words appear, unless the certificate of approval of the Commissioner of Business Oversight is attached to the articles. This subdivision does not apply to the articles of any social purpose corporation subject to the Banking Law on which is endorsed the approval of the Commissioner of Business Oversight.
(b) (1) The name of a social purpose corporation shall not be a name that the Secretary of State determines is likely to mislead the public and shall be distinguishable in the records of the Secretary of State from all of the following:
(A) The name of any corporation or foreign corporation.
(B) The name of any foreign corporation authorized to transact intrastate business in this state.

(B)

(C) Each name that is under reservation for another corporation pursuant to this title.

(C)

(D) The name of a foreign corporation that has registered its name pursuant to Section 2101.

(D)

(E) A name that a foreign corporation has assumed under subdivision (b) of Section 2106.

(E)

(F) A name that will become the record name of a domestic or foreign corporation upon a corporate instrument when there is a delayed effective or file date.
(2) The use by a social purpose corporation of a name in violation of this section may be enjoined notwithstanding the filing of its articles by the Secretary of State.
(3) A corporation formed pursuant to this division before January 1, 2015, may elect to change its status from a flexible purpose corporation to a social purpose corporation by amending its articles of incorporation to change its name to replace “flexible purpose corporation” with “social purpose corporation” and to replace the term “flexible purpose corporation” with “social purpose corporation” as applicable in any statements contained in the articles. For any flexible purpose corporation formed prior to January 1, 2015, that has not amended its articles of incorporation to change its status to a social purpose corporation, any reference in this division to social purpose corporation shall be deemed a reference to “flexible purpose corporation.”
(c) Any applicant may, upon payment of the fee prescribed in Article 3 (commencing with Section 12180) of Chapter 3 of Part 2 of Division 3 of Title 2 of the Government Code, obtain from the Secretary of State a certificate of reservation of any name not prohibited by subdivision (b), and upon the issuance of the certificate the name stated in the certificate shall be reserved for a period of 60 days. The Secretary of State shall not, however, issue certificates reserving the same name for two or more consecutive 60-day periods to the same applicant or for the use or benefit of the same person. No consecutive reservations shall be made by or for the use or benefit of the same person of names so similar as to fall within the prohibitions of subdivision (b).

SEC. 3.

 Section 5122 of the Corporations Code is amended to read:

5122.
 (a) The Secretary of State shall not file articles setting forth a name in which “bank,” “trust,” “trustee,” or related words appear, unless the certificate of approval of the Commissioner of Business Oversight is attached thereto.
(b) The name of a corporation shall not be a name that the Secretary of State determines is likely to mislead the public and shall be distinguishable in the records of the Secretary of State from all of the following:
(1) The name of any corporation or foreign corporation.
(2) The name of any foreign corporation authorized to transact intrastate business in this state.

(2)

(3) Each name that is under reservation for another corporation pursuant to this title.

(3)

(4) The name of a foreign corporation that has registered its name pursuant to Section 2101.

(4)

(5) A name that a foreign corporation has assumed under subdivision (b) of Section 2106.

(5)

(6) A name that will become the record name of a domestic or foreign corporation upon a corporate instrument when there is a delayed effective or file date.
(c) The use by a corporation of a name in violation of this section may be enjoined notwithstanding the filing of its articles by the Secretary of State.
(d) Any applicant may, upon payment of the fee prescribed therefor in the Government Code, obtain from the Secretary of State a certificate of reservation of any name not prohibited by subdivision (b), and upon the issuance of the certificate the name stated therein shall be reserved for a period of 60 days. The Secretary of State shall not, however, issue certificates reserving the same name for two or more consecutive 60-day periods to the same applicant or for the use or benefit of the same person; nor shall consecutive reservations be made by or for the use or benefit of the same person of names so similar as to fall within the prohibitions of subdivision (b).

SEC. 4.

 Section 7122 of the Corporations Code is amended to read:

7122.
 (a) The Secretary of State shall not file articles setting forth a name in which “bank,” “trust,” “trustee,” or related words appear, unless the certificate of approval of the Commissioner of Business Oversight is attached thereto.
(b) The Secretary of State shall not file articles pursuant to this part setting forth a name that may create the impression that the purpose of the corporation is public, charitable, or religious or that it is a charitable foundation.
(c) The name of a corporation shall not be a name that the Secretary of State determines is likely to mislead the public and shall be distinguishable in the records of the Secretary of State from all of the following:
(1) The name of any corporation or foreign corporation.
(2) The name of any foreign corporation authorized to transact intrastate business in this state.

(2)

(3) Each name that is under reservation for another corporation pursuant to this title.

(3)

(4) The name of a foreign corporation that has registered its name pursuant to Section 2101.

(4)

(5) A name that a foreign corporation has assumed under subdivision (b) of Section 2106.

(5)

(6) A name that will become the record name of a domestic or foreign corporation upon a corporate instrument when there is a delayed effective or file date.
(d) The use by a corporation of a name in violation of this section may be enjoined notwithstanding the filing of its articles by the Secretary of State.
(e) Any applicant may, upon payment of the fee prescribed therefor in the Government Code, obtain from the Secretary of State a certificate of reservation of any name not prohibited by subdivision (c), and upon the issuance of the certificate the name stated therein shall be reserved for a period of 60 days. The Secretary of State shall not, however, issue certificates reserving the same name for two or more consecutive 60-day periods to the same applicant or for the use or benefit of the same person; nor shall consecutive reservations be made by or for the use or benefit of the same person of names so similar as to fall within the prohibitions of subdivision (c).

SEC. 5.

 Section 9122 of the Corporations Code is amended to read:

9122.
 (a) The Secretary of State shall not file articles setting forth a name in which “bank,” “trust,” “trustee,” or related words appear, unless the certificate of approval of the Commissioner of Business Oversight is attached thereto.
(b) The name of a corporation shall not be a name that the Secretary of State determines is likely to mislead the public and shall be distinguishable in the records of the Secretary of State from all of the following:
(1) The name of any corporation or foreign corporation.
(2) The name of any foreign corporation authorized to transact intrastate business in this state.

(2)

(3) Each name that is under reservation for another corporation pursuant to this title.

(3)

(4) The name of a foreign corporation that has registered its name pursuant to Section 2101.

(4)

(5) A name that a foreign corporation has assumed under subdivision (b) of Section 2106.

(5)

(6) A name that will become the record name of a domestic or foreign corporation upon a corporate instrument when there is a delayed effective or file date.
(c) The use by a corporation of a name in violation of this section may be enjoined notwithstanding the filing of its articles by the Secretary of State.
(d) Any applicant may, upon payment of the fee prescribed therefor in the Government Code, obtain from the Secretary of State a certificate of reservation of any name not prohibited by subdivision (b), and upon the issuance of the certificate the name stated therein shall be reserved for a period of 60 days. The Secretary of State shall not, however, issue certificates reserving the same name for two or more consecutive 60-day periods to the same applicant or for the use or benefit of the same person; nor shall consecutive reservations be made by or for the use or benefit of the same person of names so similar as to fall within the prohibitions of subdivision (b).

SEC. 6.

 Section 12302 of the Corporations Code is amended to read:

12302.
 (a) The Secretary of State shall not file articles setting forth a name in which “bank,” “trust,” “trustee,” or related words appear, unless the certificate of approval of the Commissioner of Business Oversight is attached thereto.
(b) The name of a corporation shall not be a name that the Secretary of State determines is likely to mislead the public and shall be distinguishable in the records of the Secretary of State from all of the following:
(1) The name of any corporation or foreign corporation.
(2) The name of any foreign corporation authorized to transact intrastate business in this state.

(2)

(3) Each name that is under reservation for another corporation pursuant to this title.

(3)

(4) The name of a foreign corporation that has registered its name pursuant to Section 2101.

(4)

(5) A name that a foreign corporation has assumed under subdivision (b) of Section 2106.

(5)

(6) A name that will become the record name of a domestic or foreign corporation upon a corporate instrument when there is a delayed effective or file date.
(c) The use by a corporation of a name in violation of this section may be enjoined notwithstanding the filing of its articles by the Secretary of State.
(d) Any applicant may, upon payment of the fee prescribed therefor in the Government Code, obtain from the Secretary of State a certificate of reservation of any name not prohibited by subdivision (b), and upon the issuance of the certificate the name stated therein shall be reserved for a period of 60 days. The Secretary of State shall not, however, issue certificates reserving the same name for two or more consecutive 60-day periods to the same applicant or for the use or benefit of the same person; nor shall consecutive reservations be made by or for the use or benefit of the same person of names so similar as to fall within the prohibitions of subdivision (b).

SEC. 7.

 Section 13409 of the Corporations Code is amended to read:

13409.
 (a) Subject to Section 201, a professional corporation may adopt any name permitted by a law expressly applicable to the profession in which the corporation is engaged or by a rule or regulation of the governmental agency regulating that profession. The Secretary of State may require proof by affidavit or otherwise establishing that the name of the professional corporation complies with the requirements of this section and of the law governing the profession in which that professional corporation is engaged. The statements of fact in those affidavits may be accepted by the Secretary of State as sufficient proof of the facts.
(b) Subject to Section 201, a foreign professional corporation qualified to render professional services in this state may transact intrastate business in this state by any name permitted by a law expressly applicable to the profession in which the corporation is engaged, or by a rule or regulation of the governmental agency regulating the rendering of professional services in this state by the corporation. The Secretary of State may require proof by affidavit or otherwise establishing that the name of the foreign professional corporation qualified to render professional services in this state complies with the requirements of this section and of the law governing the profession in which the foreign professional corporation qualified to render professional services in this state proposes to engage in this state. The statements of fact in those affidavits may be accepted by the Secretary of State as sufficient proof of the facts.

SEC. 8.

 Section 15901.08 of the Corporations Code is amended to read:

15901.08.
 (a) The name of a limited partnership may contain the name of any partner.
(b) The name of a limited partnership shall contain the phrase “limited partnership” or the abbreviation “L.P.” or “LP” at the end of its name.
(c) The name of a foreign limited liability limited partnership that is applying for a certificate of registration pursuant to Section 15909.02 shall contain the phrase “limited liability limited partnership” or the abbreviation “LLLP” or “L.L.L.P.” and shall not contain the abbreviation “L.P.” or “LP.”
(d) The name of a limited partnership shall not be a name that the Secretary of State determines is likely to mislead the public and shall be distinguishable in the records of the Secretary of State from all of the following:
(1) the name of any limited partnership that has previously filed a certificate pursuant to Section 15902.01 or any foreign limited partnership registered pursuant to Section 15909.01.
(2) each name reserved under Section 15901.09.
(e) The use by a limited partnership of a name in violation of this section may be enjoined notwithstanding the filing of its certificate of limited partnership by the Secretary of State.
(f) Subject to Section 15909.05, this section applies to any foreign limited partnership transacting business in this state, having a certificate of registration to transact business in this state, or applying for a certificate of registration.
(g) The name of a limited partnership may not contain the words “bank,” “insurance,” “trust,” “trustee,” “incorporated,” “inc.,” “corporation” or “corp.”

SEC. 9.

 Section 17701.08 of the Corporations Code is amended to read:

17701.08.
 (a) The name of a limited liability company shall contain the words “limited liability company,” or the abbreviation “L.L.C.” or “LLC.” “Limited” may be abbreviated as “Ltd.,” and “company” may be abbreviated as “Co.”
(b) The name of a limited liability company shall not be a name that the Secretary of State determines is likely to mislead the public and shall be distinguishable in the records of the Secretary of State from all of the following:
(1) The name of any limited liability company or foreign company.
(2) The name of any foreign limited liability company authorized to transact intrastate business in this state.

(2)

(3) Each name reserved under Section 17701.09.
(c) The use by a limited liability company of a name in violation of this section may be enjoined notwithstanding the filing of its articles by the Secretary of State.
(d) Subject to Section 17708.04, this section applies to a foreign limited liability company transacting intrastate business in this state that has a certificate of registration to transact intrastate business in this state or that has applied for a certificate of registration.
(e) The name shall not include the words “bank,” “trust,” “trustee,” “incorporated,” “inc.,” “corporation,” or “corp.” and shall not include the words “insurer” or “insurance company” or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.