The California legislature is currently in recess and is scheduled to reconvene on January 4.  However, some bills have already been introduced, including AB 83 (Lee & Kalra), which would enact the "Get Foreign Money Out of California Elections Act".    The California Political Reform Act already forbids a foreign government or foreign principal from making any contribution, expenditure, or independent expenditure in connection with the qualification or support of, or opposition to, a state or local ballot measure or an election for a state or local office.   Cal. Gov't Code § 85320.  This bill would, among other things, extend this prohibition to foreign-influenced business entities.   The bill would also impose a filing requirement disavowing foreign-influenced entity status if a business entity makes a political contribution.

As a corporate lawyer, I am interested in the bill's definition of "foreign-influenced business entity".  As proposed the term  means a business entity (defined in Cal. Gov't Code § 82005) in which any of the following occur:

• A single foreign principal holds, owns, controls, or otherwise has direct or indirect beneficial  ownership of one percent or more of the total equity, outstanding voting shares, membership units, or other applicable ownership interests of the entity.

• Two or more foreign principals, in aggregate, hold, own, control, or otherwise have direct or indirect beneficial ownership of equity or voting shares in an amount that is equal to or greater than 5 percent of the total equity, outstanding voting shares, membership units, or other applicable ownership interests of the entity.

• One or more foreign principals participate in any way, directly or indirectly, in the business entity’s decisionmaking process with respect to contributions or expenditures of funds in connection with a ballot measure or election.

As defined in the bill, a "foreign principal" would include, among others, a partnership, association, corporation, organization, or other combination of persons organized under the laws of or having its principal place of business in a foreign country.   

The 1% ownership threshold seems to be extraordinarily low.  As an initial matter, it is not even require voting power.  Even if limited to voting power, it would be a rare situation in which a 1% shareholder could wield significant influence over corporate decisionmaking.