BILL ANALYSIS                                                                                                                                                                                                    



                                                          SB 261
                                                         Page 1

Date of Hearing:  March 4, 1996

             ASSEMBLY COMMITTEE ON BANKING AND FINANCE
                       Jan Goldsmith, Chair

         SB 261 (Beverly) - As Amended:  February 20, 1996


 SUMMARY:  Makes miscellaneous changes to the California Corporate  
Securities Law of 1968 ("CSL").  Specifically,  this bill:

1) Establishes an exemption for employee stock purchase plans and  
   stock option plans meeting the requirements of Rule 701 of the  
   Securities and Exchange Commission ("SEC") and the Department  
   of Corporations ("DOC") employee stock option plan and stock  
   purchase plan rules (proposed Corporations Code Section  
   25102(o)).

2) Requires that SEC Regulation A offerings be processed by the  
   DOC on an expedited basis similar to fully-registered SEC  
   offerings under the Securities Act of 1933 and filed by  
   "coordination" with the DOC for review and approval (proposed  
   Corporations Code Section 25111).

3) Amends the Small Company Offering Registration ("SCOR")  
   provisions of the CSL to authorize issuance of preferred stock,  
   reduce the initial offering price to $2 per share from $5 per  
   share, and allow for the majority (instead of all) of the board  
   of directors to approve the filing of a SCOR application  
   (proposed Corporations Code Section 25113).

4) Establishes a new exemption for merger, consolidation and sale  
   of assets transactions for issuers that could rely on the small  
   business Section 25102(f) securities issuance exemption  
   (proposed Corporations Code Section 25103).

5) Repeals the restrictions on the transfer legend imposed upon  
   securities issued pursuant to the small offering transaction  
   exemption (Section 25102(h)) and adds purchase representation  
   language to the exemption (proposed Corporations Code Sections  
   25102(h), 25133 and 25141).

6) Specifies that the transfer restriction legend on all  
   outstanding stock previously issued under the small offering  
   transaction exemption will be removed by operation of law  
   (proposed Corporations Code Sections 25102(h), 25133 and  
   25141).
   
7) Incorporates technical clean-up amendments (unrelated to the  
   above) into this bill as a result of the enactment of the  
   Limited Liability Company Act in 1995.

 FISCAL EFFECT:  Unknown

 EXISTING LAW: 








                                                          SB 261
                                                         Page 2

1) Makes it unlawful to offer or sell a security unless it is  
   qualified or exempt from the DOC qualification requirements  
   (Corporations Code Sections 25102 and 25110).

2) Exempts certain transactions from the qualification requirement  
   applicable to offers or sales in an issuer transaction or in  
   connection with certain reorganizations (Corporations Code  
   Sections 25102 and 25103).                               

3) Exempts certain exchanges incident to a merger or sale of  
   corporate assets from qualification requirements of federal law  
   applicable to limited offers or certain compensatory benefit  
   plans (Corporations Code Section 25100(n).

4) Permits a security for which a registration statement has been  
   filed under the federal Securities Act of 1933 in connection  
   with the same offering to be qualified under a specified  
   federal securities regulation (Corporations Code Section  
   25111).

5) Provides for the qualification of certain securities by a  
   permit issued by the DOC and provides for the filing of a small  
   company application for permit if it meets certain statutory  
   requirements.  These requirements include a minimum offering  
   price of voting common stock of $5 per share and the submission  
   to the DOC of an application and a disclosure document which  
   has been reviewed and signed by each member of the board of  
   directors of the company (Corporations Code Section 25113).

 BACKGROUND:  This bill has undergone a number of metamorphoses  
since its inception in the Senate, including a change in authors  
from former Senator Campbell to Senator Beverly.  In its original  
form, the bill (then solely sponsored by Mr. Petillon) created an  
exemption from the registration requirements for the sales of a  
security in an offering for certain compensatory benefit plans  
(such as company stock option plans) which comply with the  
requirements of federal securities laws.  The Department of  
Corporations has essentially co-opted this bill by making  
additional, related and unrelated changes to California's CSL laws  
while retaining the sponsor's original idea to provide an  
exemption for stock-option benefit type plan sales. 

 ARGUMENTS IN SUPPORT:  This bill will increase the options for  
small businesses in accessing and raising investment capital.   
This bill will simplify private offerings and bring California  
more into conformity with federal securities law and with the  
securities laws of other states.  The bill helps the DOC in  
enacting miscellaneous clean-up amendments.

 ARGUMENTS IN OPPOSITION:  There is no opposition to this bill.

 REGISTERED SUPPORT / OPPOSITION:

 Sponsor

Lee Petillon, private attorney with Petillon & Hansen, Torrance,  







                                                          SB 261
                                                         Page 3

CA

 Support

Department of Corporations
State Bar of California, Business Law Section

 Opposition

None received as of February 28, 1996.


 Analysis prepared by:  Blake Campbell  / abf / 324-7317