NRAI Compliance Updates - September, 2003

Greetings,

Please find below NRAI's monthly collection of Business Entity, SEC changes and alerts. Please follow the links to additional information where applicable.


New Legislation

California - SB 220, September 3, 2003 Signed by Governor, Chaptered by the Secretary of State September 4, 2003, Effective January 1, 2004

This bill provides that the term signature include a signature in a facsimile document presented to the Secretary of State. It requires the Secretary of State to accept facsimile signatures on documents delivered by hand or mail. This bill authorized the Secretary to adopt procedures permitting the direct electronic or facsimile filing of documents and authorizes the Commissioner of Corporations to prescribe circumstances to accept such records and signatures.

Connecticut - H6802 Signed by the Governor on August 16, 2003, Public Act 03-1, Effective January 1, 2004

Effective January 1, 2004. Among other revenue enhancing measures, this bill provides for a 25% surcharge on income for years beginning January 1, 2004 and prior to January 1, 2005, where the corporation has a tax liability in excess of the $250 minimum tax. For full text go to:

http://www.cga.state.ct.us/2003/act/Pa/2003PA-00001-R00HB-06802SS2-PA.htm

Illinois - S. B. 600, Public Act 93-0581, Effective January 1, 2004

SB600 Enrolled                                                                    LRB093 03347 WGH 06123 b

AN ACT in relation to employment.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Minimum Wage Law is amended by changing Section 4 as follows:

(820 ILCS 105/4) (from Ch. 48, par. 1004)

Sec. 4. (a) Every employer shall pay to each of his employees in every occupation wages of not less than $2.30 per hour or in the case of employees under 18 years of age wages of not less than $1.95 per hour, except as provided in Sections 5 and 6 of this Act, and on and after January 1, 1984, every employer shall pay to each of his employees in every occupation wages of not less than $2.65 per hour or in the case of employees under 18 years of age wages of not less than $2.25 per hour, and on and after October 1, 1984 every employer shall pay to each of his employees in every occupation wages of not less than $3.00 per hour or in the case of employees under 18 years of age wages of not less than $2.55 per hour, and on or after July 1, 1985 every employer shall pay to each of his employees in every occupation wages of not less than $3.35 per hour or in the case of employees under 18 years of age wages of not less than $2.85 per hour, and from January 1, 2004 through December 31, 2004 every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $5.50 per hour, and on and after January 1, 2005 every employer shall pay to each of his or her employees who is 18 years of age or older in every occupation wages of not less than $6.50 per hour.  At no time shall the wages paid by every employer to each of his employees in every occupation be less than the federal minimum hourly wage prescribed by Section 206(a)(1) of Title 29 of the United States Code, and At no time shall the wages paid to any employee under 18 years of age be more than 50¢ less than the wage required to be paid to employees who are at least 18 years of age.

(b) No employer shall discriminate between employees on the basis of sex or mental or physical handicap, except as otherwise provided in this Act by paying wages to employees at a rate less than the rate at which he pays wages to employees for the same or substantially similar work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) a differential based on any other factor other than sex or mental or physical handicap, except as otherwise provided in this Act.

(c) Every employer of an employee engaged in an occupation in which gratuities have customarily and usually constituted and have been recognized as part of the remuneration for hire purposes is entitled to an allowance for gratuities as part of the hourly wage rate provided in Section 4, subsection (a) in an amount not to exceed 40% of the applicable minimum wage rate. The Director shall require each employer desiring an allowance for gratuities to provide substantial evidence that the amount claimed, which may not exceed 40% of the applicable minimum wage rate, was received by the employee in the period for which the claim of exemption is made, and no part thereof was returned to the employer.

(d) No camp counselor who resides on the premises of a seasonal camp of an organized not-for-profit corporation shall be subject to the adult minimum wage if the camp counselor (1) works 40 or more hours per week, and (2) receives a total weekly salary of not less than the adult minimum wage for a 40-hour week. If the counselor works less than 40 hours per week, the counselor shall be paid the
minimum hourly wage for each hour worked. Every employer of a camp counselor under this subsection is entitled to an allowance for meals and lodging as part of the hourly wage rate provided in Section 4, subsection (a), in an amount not to exceed 25% of the minimum wage rate.

(e) A camp counselor employed at a day camp of an organized not-for-profit corporation is not subject to the adult minimum wage if the camp counselor is paid a stipend on a onetime or periodic basis and, if the camp counselor is a minor, the minor's parent, guardian or other custodian has consented in writing to the terms of payment before the commencement of such employment.
(Source: P.A. 86-502.)

Section 99. Effective date. This Act takes effect on January 1, 2004.


Nevada

The 2003 Legislature has passed new legislation affecting the customers of this office. There are several new filing requirements and multiple fee increases with effective dates ranging from immediately to January 1, 2004. The following are the effective dates and the requirements and the related fees that will be implemented on those dates.

IMMEDIATELY - Effective immediately, all returned checks will be assessed a $25 returned check fee. Additionally, in the case of multiple entities on a single returned check, you may be assessed the actual costs incurred to reverse the affected filings. In the case of a returned check, customers are responsible for the fees associated with services such as certificates, copies and expedited service.

OCTOBER 1, 2003 - Effective October 1, 2003, publicly-traded corporations must indicate on their list of officers that they are publicly-traded and must include their Central Key Index number. This applies to all corporations that are required to register with the Securities and Exchange Commission. A check box and Central Index Key number field have been added to the corporation Annual List of Officers form sent out by the Secretary of State and due after October 1, 2003. If you have an older version of the form that does not include these fields and the corporation is publicly-traded, you may write the Central Index Key number on the form and indicate that the corporation is publicly-traded. Annual Lists received with the box checked and no Central Index Key Number listed will be returned unfilled for correction. Corrected forms received after the due date, require payment of associated fees and penalties.

NOVEMBER 1, 2003 - Effective November 1, 2003, all filings submitted to the Secretary of State must be on or accompanied by a form as prescribed by the Secretary of State. Any filing submitted without the prescribed form will be returned unfilled to the customer. All forms will be available on our website by September 30, 2003.

All annual and initial lists received on or after November 1, 2003 must acknowledge that pursuant to NRS 239.330, it is a category C felony to knowingly offer any false or forged instrument for filing for filing with the Office of the Secretary of State. This statement has been added to all annual lists sent to our customers. Any lists received after November 1, 2003 not containing this acknowledgement will be returned unfiled to the customer. Rejected lists returned to us after the due date will require additional fees and penalties.

Please note, as of November 1, 2003, the Secretary of State will no longer accept the postmark date as the date of submission of filing. All Initial and Annual Lists must be in the care custody and control of the Secretary of State by the close of business on the due date. Lists received after the due date will be returned unfiled, and will require any associated fees and penalties as a result of being late.

MOST NOTABLY - Effective November 1, 2003, fees for all filings will change. The minimum fee for filing new Articles will be $75 with a maximum of $35,000. Each Amendment increasing the capitalization of corporation will require the fees associated with the increase in capital to a maximum of $35,000. Corporation Annual List fees will be calculated based on capitalization on the graduated scale with a minimum annual fee of $125; maximum $11,100. The initial List fee for all for-profit entities and the Annual List fee for all other for-profit entities will be $125. A schedule of November 1, 2003 fee changes will be available on the state website in early September.

Oregon Senate Bill 609, Chapter 631, 2003 Laws

Specifies that persons who offers security or offers to purchase security in violation of securities laws or by means of untrue statement or omission may be liable for damages in action; allows for actual damages, including commissions, fees and interest, for violations involving securities fraud; sets time limits on actions; provides exemption for certain actions; provides for liability of partners, limited liability company managers and officers.

Texas HB 1165, Changes to the Texas Business Corporation Act Effective September 1, 2004

Permits the board of directors to amend the designation, preferences, limitation, and relative rights of unissued series of shares. The amendment of a series of shares would be filed in accordance with Section 2.13 E of the TBCA.

This Act eliminates the requirement that the articles of incorporation state that a corporation will not commence doing business until it has received at least $1,000 in consideration for issuance of it's shares.

This Act eliminates the requirements that articles of amendment state the number of shares outstanding and entitled to vote and the number of shares voting for and voting against the amendment.

It also provides for court ordered revocation of articles of dissolution when the corporation was dissolved as a result of actual or constructive fraud. The secretary of state is authorized to take any action necessary to reactivate the corporation and implement the court order. This applies to both the profit and not-for-profit acts.

In regards to applications for certificates of authority, it abrogates the requirement to include information regarding the number of authorized shares, the number of issued shares, the amount of the corporation's stated capital, and the statement that the corporation has received at least $1,000 for its issued shares. Additionally the requirement that an application for certificate of authority be accompanied by a certificate of existence or good standing from its domestic jurisdiction is no longer in effect.

Texas - HB1637 Effective September 1, 2003, Limited Liability Companies.

Article 2.23 is amended and provides that a majority of the initial managers named in the articles of organization may amend the articles of organization where there are no members and no capital has been received.

Dissolution may be effected by initial managers named in the articles of organization may amend the articles of organization where there are no members and no capital has been received.

Additionally, the requirement that an application for certificate of authority be accompanied by a certificate of existence or good standing from its domestic jurisdiction is no longer in effect.

Pending Legislation


California -SB 434 Enrolled September 9, 2003

SB 434, Escutia. State Departments: Investigations and Hearings.

(1) Existing law, the Corporate Securities Law of 1968 and the California Commodity Law of 1990, authorize the Commissioner of Corporations to bring an action or conduct a public or private investigation when it appears any person has violated or is about to violate these laws. Existing law authorizes the commissioner to refer any evidence showing a violation of these laws to the appropriate district attorney for possible prosecution. Existing law requires the commissioner to bring a civil action in superior court to recover a civil fine imposed against a person for violation of these laws.

This bill would additionally authorize the Attorney General to bring an action or conduct an investigation when it appears any person has violated or is about to violate these laws. The bill would also authorize the Attorney General to bring a civil action in superior court to recover a civil fine imposed against a person for violation of these laws. Because the bill would make specified activities associated with investigations under these laws a crime, it would impose a state-mandated local program.

(2) Existing law provides that, at the request of a prosecuting attorney or the Attorney General, any state agency, bureau, or department may assist in conducting an investigation of an unlawful activity that involves matters within or reasonably related to the jurisdiction of the agency, bureau, or department.

This bill would provide that, at the request of a prosecuting attorney or the Attorney General, any agency, bureau, or department of this state, any other state, or the United States may assist in conducting an investigation of an unlawful activity that involves matters within or reasonably related to the jurisdiction of the agency, bureau, or department. It would authorize the prosecuting attorney or the Attorney General to disclose documents or information acquired pursuant to the investigation to another agency, bureau, or department if that entity agrees to maintain the confidentiality of the information. This bill would provide that a department head may divulge specified information or evidence discovered in the investigation to the Attorney General or to any prosecuting attorney of this state, any other state, or the United States who has responsibility for investigating the unlawful activity, and may present evidence related to the investigation to a court or at an administrative hearing. The bill would state that the Legislature declares that these provisions are declaratory of existing law.

(3) Existing law authorizes the head of a state department in connection with investigations of an unlawful activity to inspect books and records and to issue subpoenas for the attendance of witnesses and the production of papers, books, accounts, documents, and testimony and to promulgate interrogatories pertinent to the investigation.

This bill would provide that the department head may copy these books and records as well as other specified materials and issue a subpoena for the production of any other "writing," as defined. It would specify procedures for the appearance of witnesses when the witness named in a subpoena is not a natural person and authorize specified procedures for securing compliance with a subpoena.

(4) Under existing law, except in a report to the head of a department or when testifying or reporting to a prosecutor, any state officer who divulges information acquired from the private records of a person under the provisions in paragraph (1) or (2) above, is guilty of a misdemeanor and disqualified from office.

This bill would expand the materials protected from being unlawfully divulged, thus imposing a state-mandated local program by increasing the scope of an existing crime.

(5) This bill would require that the investigation and enforcement of its provisions by the Attorney General and the commissioner be accomplished without duplication of effort. The bill would provide that the Attorney General shall use existing resources in exercising this authority.

(6) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

California A.B 123 Enrolled September 2, 2003

AB 123, Cohn. Professional Corporations: Dentists.

Existing law authorizes dentists to practice dentistry as part of a professional corporation. Existing law, with respect to various other healing arts professions, authorizes certain licensed persons other than those licensed to practice in a particular profession to be shareholders, officers, directors, or professional employees of a professional corporation, subject to certain limitations.

This bill would provide that physicians and surgeons, dental assistants, registered dental assistants, registered dental assistants in extended functions, registered dental hygienists, registered dental hygienists in extended functions, or registered dental hygienists in alternative practice may be shareholders, officers, directors, or professional employees of dental corporations.

This bill would incorporate additional changes in Section 13401.5 of the Corporations Code proposed by SB 907 that would become operative only if SB 907 and this bill are both enacted and become effective on or before January 1, 2004, and this bill is enacted last.

California SB 523, Corporate Liability, September 9, 2003, Enrolled and Sent to Governor.

Existing law provides for the regulation of corporations and limited liability companies. Existing law requires corporations and limited liability companies to pay specified penalties for neglecting, failing, or refusing to keep, or causing to be kept or maintained, certain records relating to the corporation or limited liability company.

This bill would make a corporation and a limited liability company liable for civil penalties up to $1,000,000 in an action brought by the Attorney General or a district attorney or city attorney if the corporation or limited liability company has knowledge of certain acts and fails to notify the Attorney General or the appropriate government agency and shareholders or investors.


Securities and Exchange Commission Developments

The SEC is currently considering mandatory noisy withdrawal rules. For those who are not yet familiar with this development, noisy withdrawal entails a duty for an attorney, either within a corporate entity or outside counsel for, being required to, upon discovery of a violation, to report that violation up the ladder of authority until action is taken rectifying the situation. If the attorney is unsuccessful in solving the problem in this manner, it may be required that the attorney cease representation and notify the SEC of the breach. This is yet another bit of fallout from Sarbanes-Oxley and should be carefully watched.

The "Thompson Memorandum" Department of Justice, January 2003.

If you haven't yet, and you're in a corporate practice, you should download a copy of the "Thompson Memorandum" which can be accessed at http://www.usdoj.gov/dag/cftf/corporate_guidelines.htm .

This memorandum contains recommendations for the guidelines for the DOJ to follow in making the decision to prosecute corporations and corporate officers.


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