Did The Secretary Of State Break The Law By Amending The Corporate Disclosure Form?
California's Administrative Procedure Act requires that a state agency follow a rigorous notice and comment process when adopting a regulation. Although the APA broadly defines "regulation", forms are excepted. Gov't Code §11340.9(c). This exception, however, is not as broad as it may seem. As the Office of Administrative Law has explained:
"This legislative language creates a limited statutory exemption relating to forms. A regulation is not needed if the form's contents consist only of existing, specific legal requirements.
By contrast, if an agency adds any language which satisfies the definition of 'regulation' to the existing legal requirements, then, under Government Code section 11340.9(c), a formal regulation is 'needed to implement the law under which the form is issued.' Section 11340.9(c) cannot be interpreted as permitting state agencies to avoid mandatory APA rulemaking requirements by simply typing regulatory language into a form because this interpretation would allow state agencies to ignore the APA at will."
As discussed in yesterday's post, the Secretary of State recently amended the form of Corporate Disclosure Statement to address California's new board gender quota law. The amended form includes an instruction that states "California Corporation Code sections 301.3 and 2155.5 require every publicly held corporation that lists a California principal executive address . . .". However, this is not exactly what Section 301.3 provides: "a publicly held domestic or foreign corporation whose principal executive offices". The statute is ambiguous. Does the principal executive office requirement only apply to foreign corporations or does it apply to both domestic corporations and foreign corporations? The Secretary of State's form adopts the latter interpretation and thus constitutes an interpretation of the statute.
What does this all mean? Government Code § 11340.5(a) provides:
"No state agency shall issue, utilize, enforce, or attempt to enforce any guideline, criterion, bulletin, manual, instruction, order, standard of general application, or other rule, which is a regulation as defined in Section 11342.600, unless the guideline, criterion, bulletin, manual, instruction, order, standard of general application, or other rule has been adopted as a regulation and filed with the Secretary of State pursuant to this chapter."