Anxious to respond to growing concerns for adequate corporate disclosure, California recently adopted the "California Corporate Disclosure Act" which imposes significant new disclosure requirements on all publicly traded corporations doing business in California. The newly required disclosures are not identical in form or substance to federal disclosure requirements, and as a result a new layer of required filings has been added for most publicly traded corporations.
Effective January 1, 2003, additional disclosure information must be included in the annual statement filed by publicly traded corporations with the California Secretary of State. These new requirements apply to publicly traded corporations organized under California law and to publicly traded foreign corporations registered to do business in California. In general, all foreign corporations that enter into repeated and successive transactions in California, other than in interstate and foreign commerce, are currently required to register with the Secretary of State. However, a foreign corporation is not deemed to be transacting intrastate business merely because its subsidiary transacts intrastate business in California.
Under current law, public and private corporations must file, every two years, either a "Statement of Domestic Stock Corporation" or a "Statement by Foreign Corporation" for the purpose of providing the identities and addresses of officers and directors. Effective January 1, 2003, the Act requires annual filing for all corporations (but with no additional disclosure for private corporations) and specific additional disclosure for publicly traded corporations. Generally, the new law requires that each publicly traded domestic or foreign corporation disclose in its annual statement, in addition to currently required information:
For purposes of the new law, "publicly traded" means a corporation "with securities that are either listed or admitted to trading on a national or foreign exchange, or is the subject of two-way quotations . . . that is regularly published by one or more broker-dealers in the National Daily Quotation Service or a similar service." There is no definition of "foreign exchange," with the result that an offshore corporation publicly traded on any exchange in its home jurisdiction or elsewhere, and doing business in California, appears to be subject to the augmented disclosure requirements. Corporations with securities traded in the Over The Counter market or the "pink sheets" apparently are within the definition.
Pursuant to the new Act, a $5 fee is imposed to supplement the current $20 filing fee, with half of the additional revenue dedicated to building an online system for public viewing of the information and the other half to be deposited into a newly created Victims of Corporate Fraud Compensation Fund.
The Secretary of State is required to adopt a form to facilitate the submission of the newly required disclosures and may issue rules implementing the provisions. At this time it is unclear whether the Secretary of State will accept copies of Federal filings in satisfaction of the new State disclosure requirements.