California AB 1000 -- Changes to California Disclosure Statement

News Brief

As you may recall, beginning in 2003, all publicly traded companies incorporated or qualified to do business in California were required to disclose certain additional information when filing their initial or annual Statement of Information.  Effective immediately, all publicly traded corporations are required to disclose this additional information by filing a separate Corporate Disclosure Statement rather than including the information as part of the Statement of Information.

In September 2004, Governor Schwarzenegger signed into law AB 1000 which provides for the new Corporate Disclosure Statement as well as makes numerous changes to the information required to be included in the Corporate Disclosure Statement.  AB 1000 amends California Corporations Code sections 1502 and 2117 and adds California Corporations Code sections 1502.1 and 2117.1.

The new law:

  • Requires that the Corporate Disclosure Statement (the "Statement") for publicly traded corporations be filed separately from the Statement of Information within 150 days after the end of the corporation’s fiscal year. There is no fee for filing the Statement.
  • Eliminates the requirements to attach a copy of the most recent independent auditor’s report and include the date of the report.
  • Modifies the definitions of the terms "publicly traded corporation", "executive officer", "compensation" and "loan".
    • A publicly traded corporation means a California or foreign corporation, as defined in Corporations Code section 162 or 171, respectively, that is an issuer as defined in Section 3 of the Exchange Act, and has at least one class of securities listed or admitted for trading on a national securities exchange, the National or Small-Cap Markets of the NASDAQ Stock Market, the OTC-Bulletin Board, or the electronic service operated by Pink Sheets, LLC.
    • Executive officer means the chief executive officer, president, any vice president in charge in of a principal business unit, division, or function, any other officer of the corporation who performs a policymaking function, or any other persons who perform similar policymaking functions for the corporation.
    • Loan excludes an advancement for expenses permitted under section 315(d), the corporation's payment of life insurance premiums permitted under section 315(e), and an advance of expenses permitted under Section 317.
    • Compensation means all plan and non-plan compensation awarded to, earned by, or paid to the person for all services rendered in all capacities to the corporation (and subs), as the compensation is specified under Item 402 of Regulation S-K.
  • Requires the disclosure of the name of the independent auditor that prepared the most recent auditor’s report and, if different, the name of the independent auditor employed by the corporation on the date of the statement.
  • Changes the time period for reporting the description of other services performed by the independent auditor that prepared the corporation’s most recent auditor’s report to the two most recent fiscal years and the period between the end of the corporation’s most recent fiscal year and the date of the Statement.
  • Requires disclosure, for the most recent fiscal year of the corporation, of the compensation paid to each member of the board of directors and each of the five most highly compensated executive officers of the corporation who are not members of the board, including the number of any shares issued, options granted and similar equity-based compensation granted to each of those persons.
  • Requires disclosure of the compensation paid to the chief executive officer even if the chief executive officer is not among the five most highly compensated executive officers of the corporation.

** Note that the law previously required that stock and option information be disclosed only if "it was not available to other employees of the corporation."

  • Requires disclosure of any loan for the two most recent fiscal years to directors made at an interest rate lower than the interest rate available from unaffiliated commercial lenders generally to a similarly-situated borrower. The law previously required disclosure of loans at a "preferential rate" for the previous 24 months.
  • Requires disclosure of any order for relief entered in a bankruptcy case 10 years preceding the date of the Statement against the corporation, any member of the board of directors or any executive officer of the corporation. The law previously required disclosure about the filing of bankruptcies.
  • Requires disclosure of any conviction of fraud within 10 years of the date of the Statement which has not been overturned or expunged against any member of the board of directors or any executive officer of the corporation.
  • Requires disclosure of any material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the corporation or any of its subsidiaries is a party or to which any of their property is the subject, as specified by Item 103 of Regulation S-K.
  • Requires disclosure of any material legal proceeding during the five years preceding the date of the Statement which the corporation was found legally liable by entry of a final judgment or final order that was not overturned on appeal.

A copy of AB 1000 and the relevant forms (Statements of Information and Corporate Disclosure Statement) are attached. The Corporate Disclosure Statement is available on the Secretary of State's website and can be viewed, filled in and printed from a computer. The completed form can be mailed to Secretary of State, Statement of Information Unit, P.O. Box 944230, Sacramento, CA 94244-2300 or delivered in person to the Sacramento office, 1500 11th Street, 3rd Floor, Sacramento, CA 95814. If the form is not completed online, it must be typed or printed in black or blue ink. In addition to the Corporate Disclosure Statement, all publicly traded corporations must also file, during their applicable filing period, a Statement of Information as required by Corporations Code section 1502 or 2117. For faster processing, the required Statement of Information can be filed online.

Attachments:

AB 1000 Chaptered Bill Text 

Instructions for Completing Form SI-200 C

Instructions for Completing Form SI-200 N/C

Instructions for Completing Form SI-350

Notice of Lesiglative Change -- Corporate Disclosure - Publicly Traded Corporations (Assembly Bill 1000)

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