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Legal Alert

California Senate Passes New Beneficial Ownership Disclosure Bill

California Senate Passes New Beneficial Ownership Disclosure Bill

On May 23, 2024, the California Senate approved SB 1201, which if also approved by the California Assembly and signed into law by Gov. Gavin Newsom, will require domestic and foreign corporations and limited liability companies doing business in California on or after January 1, 2026 to publicly disclose their beneficial owners.

Expanding upon the existing federal Corporate Transparency Act disclosure requirements, California's SB 1201 requires a reporting company to file the name and address of each beneficial owner of the company in its biennial Statement of Information with the California Secretary of State. This information would be accessible to the public online through the California Secretary of State's online portal. Though similar to the Corporate Transparency Act, SB 1201 will create a distinct California regulatory requirement regarding the disclosure of a company's beneficial owners.

SB 1201 defines “beneficial owner,” as a natural person for whom either of the following applies, directly or indirectly, and through any relationship or otherwise with the company: (i) any person that exercises substantial control over the entity; or (ii) any person that owns 25 percent or more of the equity interests in the entity.

SB 1201 defines “substantial control,” over a reporting company under the law to include an individual that: (i) serves as a senior officer of the reporting company; (ii) has authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar body); or (iii) directs, determines, or has substantial influence over important decisions made by the reporting company, including decisions regarding the nature, scope, and attributes of the business of the reporting company. SB 1201 clarifies that substantial control has the same meaning as that in the Corporate Transparency Act.

Current California law already requires that all companies transacting business in California periodically file a Statement of Information with the Secretary of State and list the name and addresses of any manager and certain officers.

We recommend that any company transacting business in California confer with its legal counsel: (i) to determine whether it will be subject to the Corporate Transparency Act and/or California's SB 1201; and (ii) if the company is subject to one or both of these laws, then to determine the company's beneficial owners and the information required to be disclosed along with the filing deadlines.

For more information, please visit our CTA Resource Page.

For More Information, Please Contact:

Jonathan Storper
Jonathan Storper
Partner
San Francisco, CA
Emmanuel Hamidi
Emmanuel Hamidi
Associate
Los Angeles, CA

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