SB 1188 of 1991

Senate Bill 1188 (Davis-1991) Chapter 545, Statutes of 1991

The Special Consent analysis prepared by the Office of Senate Floor Analyses summarizes Senate Bill 1188 as follows:

. . . The provisions of this bill as it left the Senate were deleted in the Assembly and the author changed from Maddy to Davis. The bill as it left the Senate would have shifted the Department of Finance's cash accounting system for the handling of public money to an accrual system basing credit transactions in the year in which they occur.

This bill now contains the provisions of SB 451 as it passed the Senate 37-0 on consent. SB 1188 authorizes causes of actions against dissolved corporations (and shareholders), whether arising before or after the dissolution, if brought within the applicable statute of limitations, or within four years of dissolution, whichever is sooner. (See Exhibit A, #5b, page 1)

An analysis prepared by the Department of Finance on the July 3, 1991 version of Senate Bill 1188 provides this background on the measure:

This bill is sponsored by the State Bar in response to a court ruling (Pacific Scene, Inc. v. Penasquitos, Inc. 1988) which held that a lawsuit could be brought against a dissolved corporation only for causes of actions arising prior to the dissolution of a corporation. Prior to that court ruling, a dissolved corporation or its shareholders could be held liable for post-dissolution claims under common law known as the “trust fund theory”. This bill seeks to establish in statute the authority for post-dissolution claims.

(See Exhibit #11, document PE-4)

The Unfinished Business analysis of Senate Bill 1188 prepared by the Office of Senate Floor Analyses offers this additional commentary:

SB 1188 enacts a comprehensive system regulating the manner in which claims, whether they arise pre-dissolution or post-dissolution, may be pursued. Moreover, the sponsor notes that this bill is based on the Model Business Corporations Act, which, in fact, provides a five year statute of limitations after dissolution. [Note that SB 1188 contains a four year period in which to bring these actions.] (See Exhibit #11, document PE-9)

The complete Legislative History Report and Analysis and documents with authenticating declaration expands upon the information above. In addition to available legislative file materials from the Assembly and Senate Committees, the author and the Governor, our research typically includes review for competitor and predecessor bills, interim reports, hearings, studies and other relevant background documentation unique to this legislation. To order a complete report, please contact us at Legislative Intent Service or by calling us toll free at 1-800-666-1917.