On February 15th, 2024, SB 1201¹ was introduced in the California legislature. The purpose of this bill is to increase corporate transparency within the state. If passed, most corporations and limited liability companies registered to do business in California would be required to submit beneficial ownership information directly to the California Secretary of State. This information, which includes the name and address (business or residential) of all beneficial owners, will be added to the already required Statement of Information (“SOI”) due within 90 days of formation or registration. More importantly, this information will be made publicly available upon filing.

Corporate transparency has been a major push over the last few years, both nationally and abroad. Many European countries began such initiatives shortly after the publishing of the Panama Papers in 2016, and the United States passed the Corporate Transparency Act (“CTA”) in 2021.² The CTA is enforced by the Financial Crimes Enforcement Network (“FinCEN”) and went into effect on January 1, 2024. New York was the first state to implement similar legislation with its version of the CTA, the New York Limited Liability Company Transparency Act (“NYLLCTA”),³ being signed into law in late 2023.

Unfortunately, SB 1201 as currently drafted is out of step with both the CTA and the NYLLCTA in regards to privacy. What makes SB 1201 problematic is not that it simply seeks to increase corporate transparency, but that it will make such disclosures publicly available. While this may be a victory for total transparency, it’s a huge blow for individual privacy. With many small businesses operating out of a personal residence, an argument could even be made that SB 1201 is detrimental to personal safety. Individuals without a physical business location will be forced to list their residential address on the SOI filing for all to see.

Further, SB 1201 even seems out of step with recent California legislation. The California Consumer Privacy Act of 2018, along with the California Privacy Rights Act of 2020, expanded the privacy rights of consumers by giving them more control over their personal information and data in the consumer context.⁴ The idea that a business’s consumers are deserving of privacy but its owners are not is incredibly misguided.

FinCEN, when promulgating its Final Rule related to Beneficial Ownership Information Reporting Requirements under the CTA, was acutely aware of the need to keep such reporting information private. FinCEN even stated the following in its Final Rule on the subject:

“In general, FinCEN recognizes the sensitivity inherent in collecting any personal identifying information and takes seriously the need to maintain the highest standards for information security protections for information reported to FinCEN to prevent the loss of confidentiality, integrity, and availability of information that may have a severe or catastrophic adverse effect.”⁵ In line with that statement, all information submitted to FinCEN under the CTA will be housed on a private database and inaccessible to the general public.⁶

The NYLLCTA when first introduced also intended to make beneficial ownership information publicly available.⁷ However, that act was amended prior to passage to more closely mirror the CTA.⁸ Now, when the NYLLCTA goes into effect on January 1, 2026, all provided beneficial ownership information will also be stored on a private database.

As a state with such progressive ideals, SB 1201’s regressivism is staggering. The language of the bill makes the clear assumption that all entities have a physical place of business. This position is even more baffling given California’s history as a haven for tech companies that helped pioneer remote employment and decentralized organizations. As more businesses do away with brick and mortar establishments in favor of reduced overhead and decentralization, legislation needs to be cognizant of these trends and follow suit.

Further, California is home to one of the more robust address confidentiality programs in the country. The California Safe at Home program provides a substitute address to “victims of domestic violence, sexual assault, stalking, human trafficking, and elder or dependent adult abuse, as well as reproductive health care workers and public entity employees who are in fear for their safety.”⁹ While the need to provide protections to these groups is obvious, it seems odd that the PII of another group would be so publicly and recklessly displayed.

While SB 1201 may be a cause for concern, there is still hope. As of this writing, it has not yet been signed into law, meaning the California legislature may still engage in the same course correction that the New York legislature did with the NYLLCTA. While corporate transparency may be a divisive issue, ensuring residential privacy and safety should not be.

1 S.B. 1201, 2023-2024 Reg. Sess. (Ca. 2024).

2 31 U.S.C. § 5336 (2021).

3 N.Y. Legis. Assemb. S995B. Reg. Sess. 2022-2024 (2023). https://www.nysenate.gov/legislation/bills/2023/S995/amendment/B

4 Cal. Civ. Code Tit. 1.81.5.

5 Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498 (codified as 31 C.F.R. § 1010.380).

6 Id. at 59,582.

7 N.Y. Legis. Assemb. S8439B. Reg. Sess. 2021-2022 (2021).

8 Compare supra note 3 with supra note 2.

9 Safe at Home, California Secretary of State, https://www.sos.ca.gov/registries/safe-home.