New California Reporting Requirements for Businesses

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In California, there is a new statement of information Successor Liability reporting requirement for businesses.

If you went online to file your annual statement of information with the California Secretary of State in the last few weeks, you should have noticed that not only could you not file a “No Change” statement, but they also added some new language that each filer must now acknowledge. The “new language” is the result of Assembly Bill Number 3075 (“AB 3075”) which passed on September 30, 2020. 

What Is the Purpose of AB 3075?

The general purpose of AB 3075 is to prevent a business owner from selling his or her business in an attempt to avoid paying labor and wage claims. AB 3075 amends the California Corporations and Labor codes to include, among other things, the following new requirements:

  1. AB 3075 provides that “a successor to any judgment debtor shall be liable for any wages, damages, and penalties owed to any of the judgment debtor’s former workforce pursuant to a final judgment.” In other words, subject to certain requirements set forth in AB 3075, if you buy a business that has a judgment against it for wage or labor violations, you’re on the hook. 
  2. Starting January 1, 2022, while filing an annual (or biannual for LLC’s) statement of information, the entity must now check a box attesting whether “any officer or any director [has] an outstanding final judgment issued by the Division of Labor Standards Enforcement or a court of law, for which no appeal therefrom is pending, for the violation of any wage order or provision of the Labor Code.”

What Is The Impact?

From a corporate compliance/ reporting standpoint, the impact is minimal – there is simply one additional box you must now “check.” There does not appear to be any additional reporting requirements in connection with an affirmative attestation of outstanding judgments. As such, it appears that the goal of the updated statement of information is simply to encourage transparency. But remember, when you complete the form, either online or by paper, the person submitting and signing the form is making the affirmative statement that the information is true and correct. So be cautious and aware what you are signing before you check the box.

Madison’s practice is focused primarily on commercial transactional matters and insolvency. Oberg Law Group.