Bill Text


Bill PDF |Add To My Favorites | print page

AB-2927 California Revised Uniform Limited Liability Company Act: Secretary of State: filing procedures.(2019-2020)

SHARE THIS: share this bill in Facebook share this bill in Twitter
Date Published: 02/21/2020 09:00 PM
AB2927:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2927

Introduced by Assembly Member Cervantes

February 21, 2020

An act to amend Section 17701.08 of the Corporations Code, relating to limited liability companies.


LEGISLATIVE COUNSEL'S DIGEST


AB 2927, as introduced, Cervantes. California Revised Uniform Limited Liability Company Act: Secretary of State: filing procedures.
The California Revised Uniform Limited Company Act governs the formation and operation of limited liability companies (LLCs), including executing and filing articles of organization with the Secretary of State. Existing law establishes procedures governing the use of the name of an LLC or foreign LLC authorized to transact business in this state. Existing law prohibits the name of an LLC from being a name that the Secretary of State determines is likely to mislead the public and requires that the name be distinguishable in the Secretary of State’s records from other specified entities.
This bill would require the Secretary of State, after accepting a filing of an articles of organization and determining that the filing does not comply with the above name requirements, to provide written notice to the LLC requesting an amendment, in accordance with specified timelines and procedures. The bill would require the Secretary of State, if the LLC has not submitted completed documentation to meet the amendment requirements, to send notice to the LLC that the next biennial statement of information shall not be accepted until the LLC either amends its name or submits appropriate documents to meet these requirements. The bill would also require the Secretary of State, if the issue of noncompliance is brought forward by a party other than the Secretary’s office, to review the complaint and make a determination of its validity within 30 days after submittal of the complaint.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 This act shall be known, and may be cited, as the Government Correction Act of 2020.

SEC. 2.

 The Legislature finds and declares all of the following:
(a) Small businesses are a core driver of California’s $1.9 trillion economy. California leads the nation in business startups, attraction of foreign direct investment, and location preference for the largest number of businesses within many industry sectors. These business owners, however, face many challenges in ensuring that their businesses are successful. California government is responsible for setting the regulatory framework in which businesses compete and grow.
(b) Among other duties, California sets specific requirements for the establishment of limited partnerships, limited liability partnerships, and limited liability corporations, including a mandate to file articles of organization with the Secretary of State’s office.
(c) In their articles of organization, a limited liability company is required to specify the name of the company. Existing law prohibits the name of a limited liability company from being a name that may be misleading to the public or indistinguishable from other companies in the records of the Secretary of State.
(d) In instances in which a proposed name is potentially indistinguishable from another company, the Secretary of State is authorized to accept the articles of organization with that name, if the applicant also obtains permission from the current user of the name and the current user submits appropriate documentation to change their name to another compliant name. Alternatively, the applicant may submit to the Secretary of State a certified copy of the final judgment of a court establishing the applicant’s right to use the name.
(e) Another California requirement for the legal operation of a limited liability company is the payment of certain taxes and fees. Regardless as to the revenues of the business, these taxes and fees are required and are assessed based on a business’s right to exercise the powers granted to it as a corporation doing business in California, including the limited liability protection under California law.
(f) Existing law provides no reasonable remedy for instances in which the Secretary of State accepts articles of organization that include a potentially indistinguishable name of the limited liability company. Having two businesses operating with substantially similar names can be misleading to the public and diminish the overall value of the state’s business filing system and foundation for accessing fees. This act establishes a reasonable remedy for a potentially damaging circumstance.

SEC. 3.

 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) Unless authorized by subdivision (c), 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 limited liability company authorized to transact business in this state.
(2) Each name reserved under Section 17701.09.
(c) A limited liability company may apply to the Secretary of State for authorization to use a name that does not comply with subdivision (b). The Secretary of State shall authorize use of the name applied for if, as to each noncomplying name, either of the following applies:
(1) The present user, registrant, or owner of the noncomplying name consents in a signed record to the use and submits an undertaking in a form satisfactory to the Secretary of State to change the noncomplying name to a name that complies with subdivision (b) and is distinguishable in the records of the Secretary of State from the name applied for.
(2) The applicant delivers to the Secretary of State a certified copy of the final judgment of a court establishing the applicant’s right to use in this state the name applied for.
(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.
(f) (1) If, after accepting a filing of an articles of organization, the Secretary of State determines that the filing is not in compliance with subdivision (b) and for which the limited liability company did not receive permission from the Secretary of State pursuant to subdivision (c), the Secretary of State shall do both of the following:
(A) Within 30 calendar days of the determination being made, the Secretary of State shall send a written notice to the limited liability company requesting an amendment be filed within 45 calendar days. This amendment shall be at no cost to the limited liability company. The notice shall provide at least two suggestions as to how the name of the limited liability company may be modified to meet the requirements of subdivision (b) and how to submit documents required to meet the requirements of subdivision (c).
(B) If, after 60 calendar days of the notice being sent pursuant to this subparagraph, the limited liability company has not submitted completed documentation to meet the requirements of subdivisions (b) and (c), the Secretary of State shall send written notice to the limited liability company that the next biennial Statement of Information shall not be accepted until the limited liability company either amends its name to meet the requirements of subdivision (b) or submits appropriate documents to meet the requirements of subdivision (c).
(2) If the issue of noncompliance with subdivisions (b) and (c) is brought forward by a party other than the office of the Secretary of State’s office, the Secretary of State shall review the complaint and make a determination of its validity within 30 days of the submittal of the complaint.