SB 594: Beneficial Owners

Senate Bill 594 by Sen. Maria Elena Durazo (D-Los Angeles) was amended to disclosure owners of certain corporate entities. SB 594 would amend California Corporations Code Section 1502, 17702.09, 18200, 18205, and 18210.

Section 1 of the bill would amend Corporations Code Section 1502 to require every corporate to file, within 90 days after the filing of its original articles and annually thereafter, a statement that includes the names and complete business or residence addresses of any beneficial owner. For purposes of this new requirement, the term “beneficial owner” would mean a natural person for whom, directly or indirectly and through any contract arrangement, understanding, relationship, or otherwise, any of the following applies with respect to a corporation:

• The person exercises substantial control over the corporation.

• The person owns 25 percent or more of the equity interest of the corporation.

• The person receives substantial economic benefits from the assets of the corporation.

Section 2 of the bill would amend Corporations Code Section 17702.09 to require every limited liability company registered to transact intrastate business in California to deliver to the Secretary of State for filing within 90 days after the filing of its original articles of organization or registering to transact intrastate business and biennially thereafter, a statement of information containing all of the following:

• Any manager or a statement that a manager has not been elected or appointed.

• The chief executive officer, if any, appointed or elected in accordance with the articles of organization or operating agreement or a statement that a chief executive officer has not been appointed or elected.

• Any member.

• Any beneficial owner.

Current law requires the disclosure of the name and complete business or residence addresses of any manager or managers and the chief executive officer, if any, appointed or elected in accordance with the articles of organization or operating agreement or, if no manager has been so elected or appointed, the name and business or residence address of each member.

For purposes of this new requirement, the term “beneficial owner” would mean a natural person for whom, directly or indirectly and through any contract arrangement, understanding, relationship, or otherwise, any of the following applies with respect to a limited liability company or a foreign limited liability company:

• The person exercises substantial control over the entity.

• The person owns 25 percent or more of the equity interest of an entity.

• The person receives substantial economic benefits from the assets of an entity.

Section 3 of the bill would amend Corporations Code Section 18200 to require a real estate investment trust to file with the Secretary of State a statement containing the name and complete business or residential address of any beneficial owner. For purposes of this new requirement, the term “beneficial owner” would mean a natural person for whom, directly or indirectly and through any contract arrangement, understanding, relationship, or otherwise, any of the following applies with respect to an unincorporated association:

• The person exercises substantial control over the entity.

• The person owns 25 percent or more of the equity interest of an entity.

• The person receives substantial economic benefits from the assets of an entity.

Section 4 of the bill would amend Corporations Code Section 18205 to correct a cross-reference to the proper subdivision. Section 5 of the bill would amend Corporations Code Section 18210 to correct a cross-reference to the proper subdivision.