Source: http://www.leginfo.ca.gov/pub/13-14/bill/asm/ab_1201-1250/ab_1247_bill_20130708_amended_sen_v95.htm
Timestamp: 2019-10-17 13:51:42
Document Index: 130714932

Matched Legal Cases: ['art 5', 'art 2', 'art 2', 'art 5', 'art 5', 'art 121', 'art 5', 'art 5', 'art 5', 'art\n395', 'art 5', 'art 5', 'art 5', 'art 5', 'art 5', 'art 2', 'art 2', 'art 5']

An act to repeal and add Chapter 1 (commencing with Section 14000) of Part 5 of Division 3 of Title 1 of the Corporations Code, and to amend Section 8684.2 of, and to add Chapter 6 (commencing with Section 63088) to Division 1 of Title 6.7 to, to repeal Sections 63089.5, 63089.60, 63089.61, and 63089.62 of, the Government Code, relating to business, making an appropriation therefor, and declaring the urgency thereof to take effect immediately.
This bill would revise and recast these provisions, and would transfer the administration of the California Small Business Financial Development Corporation Law to the California Infrastructure and Economic Development Bank (I-Bank) and a program manager designated by the executive director of the I-Bank, as specified. The bill would expand the definitions of “financial institution” and “financial company” for those purposes. Because the above-described conflict-of-interest provisions would apply to the members of the I-Bank’s board of directors, the program manager, the executive director, and other officers and employees, as specified, the bill would extend the application of a crime, and impose a state-mandated local program.
11through the California Small Business Finance Center by making
13resources, including financial services, personnel, and business
14education to small business entrepreneurs, including women,
15veteran, and minority owned businesses, for the purpose of
16promoting the health, safety, and social welfare of the citizens of
17California, to eliminate unemployment of the economically
18disadvantaged of the state, and to stimulate economic development,
19employment, minority group, women, and disabled persons
20entrepreneurship.
10(b) “Bank board” means the board of directors of the California
11Infrastructure and Economic Development Bank.
12(c) “Board of directors” means the board of directors of the
13corporation.
14(d) “California Small Business Finance Center” means the
15governmental unit with the administrative responsibility for
16programs authorized pursuant to Section 63088.5 of the
17Government Code and this chapter.
18(e) “Corporation” means any nonprofit California small business
19financial development corporation created pursuant to this chapter,
20or pursuant to Chapter 1 (commencing with Section 32000) of
21Division 15.5 of the Financial Code.
22(f) “Directives and requirements” means a document adopted
23by the bank board setting forth policy direction as well as key rules
24governing a particular subject area.
25(g) “Executive director” means the executive director of the
26Infrastructure and Economic Development Bank.
27(h) “Expansion fund” means the California Small Business
28Expansion Fund.
29(i) “Financial company” means banking organizations, including
30national banks and trust companies, savings and loan associations,
31certified community development financial institutions,
32microbusiness lenders, state insurance companies, mutual insurance
33companies, and other public and private banking, lending,
34retirement, and insurance organizations.
35(j) “Financial institution” means regulated banking
36organizations, including national banks and trust companies
37authorized to conduct business in the state and state-chartered
38commercial banks, trust companies, credit unions, and savings and
39loan associations.
P5 1(k) “Financial product” means the type of financial assistance
2described in Section 63088.5 of the Government Code.
3(l) “Loan committee” means a committee appointed by the board
4of directors of a corporation to determine the course of action on
5a loan application pursuant to Chapter 6 (commencing with Section
663088) of Division 1 of Title 6.7 of the Government Code.
7(m) “Microbusiness lender” means a microbusiness lender as
8defined in Section 13997.2 of the Government Code.
15 9(m)
10begin insert(n)end insert “Program Manager” means the manager of the California
11Small Business Finance Center as designated to this title by the
12executive director of the bank.
20 13(n)
14begin insert(o)end insert “Trust fund” means the money from the expansion fund that
15is held in trust by a financial institution or financial company. A
16trust fund is not a deposit of state funds and is not subject to the
17requirements of Section 16506 of the Government Code.
25 18(o)
19begin insert(p)end insert “Trust fund account” means an account within the trust fund
20that is either allocated to a particular corporation or shared by
21multiple corporations for the purpose of paying loan defaults and
22claims on bond guarantees or other financial products and program
23uses provided in this chapter.
25Article 3. Program Manager
28(1) Administer this chapter.
29(2) Make recommendations to the executive director and the
30bank board on the approval or disapproval of the articles of
31incorporation. This determination shall be based upon the
33(A) Review of the articles of incorporation and bylaws of the
34corporation to determine whether they contain the provisions
35required by this chapter and conform with the directives and
36requirements adopted by the bank board pursuant to this chapter.
37(B) A determination as to whether the legislative intent
38expressed in Section 14001 shall be served by the proposed
39corporation.
P6 1(C) A determination as to whether the responsibility, character,
2and general fitness of the individuals who will manage the
3corporation are such as to command the confidence of the state
4and to warrant the belief that the business of the proposed
5 corporation will be honestly and efficiently conducted in
6accordance with the intent and purpose of this chapter and that
7they include representatives of the financial and business
8community, as well as the economically disadvantaged.
9(D) A determination by the program manager that there is
10significant need for a new corporation.
11(3) Have the accounts of each corporation formed under this
12chapter audited as of the close of business on June 30 of each year.
13Material audit exceptions that are not corrected by the corporation
14within a reasonable period of time may result in the suspension or
15termination of the corporation pursuant to Section 63089.3 of the
16Government Code.
17(4) Have the portfolio of each corporation audited a minimum
18of once a year. Material audit exceptions that are not corrected by
19the corporation within a reasonable period of time may result in
20the suspension or termination of the corporation pursuant to Section
2163089.3 of the Government Code.
22(5) Review reports from the Department of Business Oversight
23and inform corporations as to what corrective action is required.
24(6) Examine, or cause to be examined, at any reasonable time,
25all books, records, and documents of every kind, and the physical
26properties of a corporation. The inspection shall include the right
27to make copies, extracts, and search records.
28(b) The program manager may attend and participate at
29corporation meetings. The program manager, or his or her designee,
30shall be an ex officio, nonvoting representative on the board of
31directors and loan committees of each corporation. The program
32manager shall meet through telecommunication or in person with
33the board of directors of each corporation at least once each fiscal
34year, commencing January 1, 2014.
36continued and created as an advisory board to the California
37Infrastructure and Economic Development Bank Board, the
38executive director, and the program manager. The California Small
39Business Board may also advise the Governor and the Small
40Business Advocate regarding issues and programs affecting
P7 1California’s small business community, including, but not limited
2to, business innovation and expansion, export finance, state
3procurement, management and technical assistance, venture capital,
4and financial assistance.
5(b) The California Small Business Board consists of the
6following membership:
7(1) The Director of Finance or his or her designee.
8(2) The Director of the Office of the Small Business Advocate
9or his or her designee.
10(3) The Treasurer or his or her designee.
11(4) A representative from two different corporations selected
12by the corporations.
13(5) Two members appointed by the Governor, one of whom
14will serve as chair of the California Small Business Board, who
15are actively involved in the California small business community.
16(6) Two persons actively involved in the business or agricultural
17communities, one appointed by the Speaker of the Assembly and
18one appointed by the Senate Committee on Rules.
19(7) Two Members of the Legislature, or their designees, one
20appointed by the Speaker of the Assembly and one appointed by
21the Senate Committee on Rules, so long as it does not conflict with
22the duties of their duties as legislators.
23(c) The California Small Business Board shall advise the
24program manager on matters regarding this chapter and Chapter
256 (commencing with Section 63088) of Division 1 of Title 6.7 of
27(d) The public members of the California Small Business Board,
28at the discretion of the bank board, may be reimbursed per diem
29and travel expenses pursuant to state law.
31recommended by the program manager, based on an examination
32of each of the following:
37(b) Determination as to whether the legislative intent expressed
38in Section 14001 will be served by the proposed corporation.
39(c) Determination as to whether the responsibility, character,
40and general fitness of the individuals who will manage the
P8 1corporation are able to command the confidence of the state and
2to warrant the belief that the business of the proposed corporation
3will be honestly and efficiently conducted in accordance with the
4intent and purpose of this chapter and that they include
5representatives of the financial and business community, as well
6as the economically disadvantaged.
7(d) Determination of the program manager that there is
8significant need for a new corporation.
10Article 4. New Corporations
Upon approval by the bank board to become a
13corporation, an entity shall adopt or amend its articles of
14incorporation to comply with the following:
15(a) The name of the corporation shall include the words “small
16business financial development corporation,” except for those
17corporations formed pursuant to this chapter prior to 2002, which
18may also be called “small business development corporations,” or
19those formed prior to 1985, which may also be called “rural or
20urban development corporations.”
21(b) The purposes for which the corporation is formed, which
22shall be those specified in Section 14001. This requirement shall
23not be deemed to preclude a statement of powers.
24(c) A geographical description of the corporation’s primary
25service area.
26(d) The name and addresses of seven or more persons who are
27to act in the capacity of directors until the selection of their
28successors.
29(e) That the corporation is organized pursuant to the California
30Small Business Financial Development Corporation Law.
If the bank board concurs with the findings of the
32program manager pursuant to Section 14004, the bank board shall
33direct the program manager to approve the articles of incorporation
34and endorse the approval thereon and forward the same to the
35Secretary of State for his or her approval and filing. Likewise, the
36program manager shall review all amendments to the articles of
37incorporation to ensure consistency with the purposes of this
40development corporation begins upon the filing of the articles with
P9 1the Secretary of State and continues perpetually, unless otherwise
2expressly provided for by law.
3(b) If a corporation is terminated from participation in all
4programs, in order to continue its existence as a nonprofit
5corporation pursuant to the Nonprofit Public Benefit Corporation
6Law (Part 2 (commencing with Section 5110) of Division 2 of
7Title 1 of the Corporations Code), the corporation shall amend its
8articles of incorporation in accordance with Chapter 8
9(commencing with Section 5180) of Part 2 of Division 2 of Title
101 to remove the provisions required by Section 14005, including
11an amendment to remove the words “small business financial
12development corporation,” “small business development
13corporation,” or “rural or urban development corporation,” as
14applicable, from the corporate name, and shall no longer be
15registered with the Secretary of State as a small business financial
16development corporation. A corporation shall not enjoy any of the
17benefits of a small business financial development corporation
18following suspension.
(a) Each corporation shall have provisions establishing
20a grievance procedure for employees, clients, or potential clients,
21to appeal a decision or obtain redress of an action done by the staff
22or loan committee of the corporation. The procedures shall be
23established in writing during the probationary period of a new
24corporation.
25(b) The bylaws of the corporation shall authorize the removal
26of officers only by a two-thirds vote of the directors of the
292 (commencing with Section 5110) of Division 2 of this title)
30applies to corporations formed under this chapter, except as to
31matters otherwise provided for in this chapter.
33corporation, commencing upon filing of the articles of
34incorporation with the Secretary of State, a corporation shall be
35on probation. While on probation, a corporation may be suspended
36if suspension is recommended by the program manager and
37affirmed by the executive director. This suspension is
38nonappealable and not subject to the procedures for suspension
39applicable to a corporation not on probation.
P10 1Article 5. Corporation Board
4by the board of directors.
The bank shall enter into a contract with each
6corporation that shall require that:
7(a) A person may not serve on a board of directors who is not
8a resident of, or person conducting business in, the primary service
9area described in the articles of incorporation.
10(b) A board of directors shall include representatives from all
12(1) The financial community.
13(2) The business community.
14(3) The economically disadvantaged.
15(c) Not more than one employee of the corporation may serve
16on the board of directors at any one time.
17(d) A person who has a financial interest related to a matter over
18which the board of directors has authority may not make,
19participate in making, or in any way attempt to influence that
20matter.
22established in Section 14014, he or she shall immediately vacate
23his or her position as a director and the position shall be deemed
24vacant.
26the board of directors through death, resignation, or otherwise, the
27remaining directors shall elect a person representing the appropriate
28category to fill the vacancy for the unexpired term.
The bank board shall direct the program manager to
30establish new small business financial development corporations
31pursuant to the directives and requirements. The directives and
32requirements shall include steps to achieve a goal of ensuring that
33small businesses in all areas of the state would have reasonable
34access to the financial products authorized by Chapter 6
35(commencing with Section 63088) of Division 1 of Title 6.7 of
36the Government Code for which they are eligible.
P10 1Article 6. Corporations, Miscellaneous
4central staff to perform, all administrative requirements of the
5corporation, including all those functions required of a corporation
6by the contract and this chapter.
8creation and maintenance of a central staff shall be paid to the
9corporation from state funds, including a portion of the interest
10earned on the expansion fund and the corporation’s trust fund
11account, if the corporation has a trust fund account, otherwise, on
12the expansion fund.
14his or her designated representative, all statistical and other reports
15required by this chapter and Chapter 6 (commencing with Section
1663088) of Division 1 of Title 6.7 of the Government Code,
17including responses to audit reports, budget requirements, and
18other information relating to the establishment, monitoring, and
19suspension or termination of a corporation.
21manager, as required by Chapter 6 (commencing with Section
2263088) of Division 1 of Title 6.7 of the Government Code.
24Article 7. Conflict of Interest
It shall be unlawful for a member of the bank board or
27for the executive director, program manager, or any person who
28is an officer, director, contractor, or employee of a corporation, or
29who is a member of a loan committee, or who is an employee of
30the California Infrastructure and Economic Development Bank to
31do any of the following:
32(a) Ask for, consent, or agree to receive, any commission,
33emolument, gratuity, money, property, or thing of value for his or
34her own use, benefit, or personal advantage, for procuring or
35endeavoring to procure for any person, partnership, joint venture,
36association, or corporation, any loan, guarantee, financial, or other
37assistance from any corporation.
38(b) Borrow money, property, or to benefit knowingly, directly
39or indirectly, from the use of the money, credit, or property of any
40corporation.
P12 1(c) Make, maintain, or attempt to make or maintain, a deposit
2of the funds of a corporation with any other corporation or
3association on condition, or with the understanding, expressed or
4implied, that the corporation or association receiving the deposit
5shall pay any money or make a loan or advance, directly or
6indirectly, to any person, partnership, joint venture, association,
7or corporation, other than to a corporation formed under this
10for the executive director, program manager, or any person who
11is an officer or director of a corporation, or who is an employee
12of the California Infrastructure and Economic Development Bank
13to purchase or receive, or to be otherwise interested in the purchase
14or receipt, directly or indirectly, of any asset of a corporation,
15without paying to the corporation the fair market value of the asset
16at the time of the transaction.
18a felony.
Section 8684.2 of the Government Code is amended
22(1) To provide the Governor with appropriate emergency powers
23in order to enable utilization of available emergency funding to
24provide guarantees for interim loans to be made by lending
25institutions, in connection with relief provided for those persons
26affected by disasters or a state of emergency in affected areas
27during periods of disaster relief assistance, for the purpose of
28supplying interim financing to enable small businesses to continue
29operations pending receipt of federal disaster assistance.
30(2) That the Governor should utilize this authority to prevent
31business insolvencies and loss of employment in areas affected by
32these disasters.
33(b) In addition to the allocations authorized by Section 8683
34and the loan guarantee provisions of Section 63089.90, the
35Governor may allocate funds made available for the purposes of
36this chapter, in connection with relief provided, in affected areas
37during the period of federal disaster relief, to the Small Business
38Expansion Fund for use by the California Infrastructure and
39Economic Development Bank, pursuant to Chapter 1 (commencing
40with Section 14000) of Part 5 of Division 3 of Title 1 of the
P13 1Corporations Code and Chapter 6 (commencing with Section
2 63088) of Division 1 of Title 6.7 of this code, to provide guarantees
3for low-interest interim loans to be made by lending institutions
4for the purpose of providing interim financing to enable small
5businesses that have suffered actual physical damage or significant
6economic losses, as a result of the disaster or state of emergency
7for which funding under this section is made available, to continue
8or resume operations pending receipt of loans made or guaranteed
9by the federal Small Business Administration. The maximum
10amount of any loan guarantee funded under this paragraph shall
11be limited by the directives and requirements and shall not exceed
12two hundred thousand dollars ($200,000). Each loan guarantee
13shall not exceed 95 percent of the loan amount, except that a loan
14guarantee may be for 100 percent of the loan amount if the
15applicant can demonstrate that access to business records pertinent
16to the loan application has been precluded by official action
17prohibiting necessary reentry into the affected business premises
18or that those business records pertinent to the loan application have
19been destroyed. The term of the loan shall be determined by the
20lending institution providing the loan or shall be made payable on
21the date the proceeds of a loan made or guaranteed by the federal
22Small Business Administration with respect to the same damage
23or loss are made available to the borrower, whichever event first
24occurs.
25(c) Loan guarantees for which the initial 12-month term has
26expired and for which an application for disaster assistance funding
27from the federal Small Business Administration is still pending
28may be extended until the Small Business Administration has
29 reached a final decision on the application. Applications for interim
30loans shall be processed in an expeditious manner. Wherever
31possible, lending institutions shall fund nonconstruction loans
32within 60 calendar days of application. Loan guarantees for loans
33that have been denied funding by the federal Small Business
34Administration, may be extended by the financial institution
35provided that the loan is for no longer than a maximum of seven
36years, if the business demonstrates the ability to repay the loan
37with an extended loan term, and a new credit analysis is provided.
38All loans extended under this provision shall be repaid in
39installments of principal and interest, and be fully amortized over
40the term of the loan. Nothing in this section shall preclude the
P14 1lender from charging reasonable administrative fees in connection
2with the loan.
3(d) Allocations pursuant to this section shall, for purposes of
4all provisions of law, be deemed to be for extraordinary emergency
5or disaster response operation costs, as provided in Section 8690.6,
6incurred by state employees assigned to work on the financial
7development corporation program.
8(e) The California Infrastructure and Economic Development
9Bank may adopt directives and requirements to implement the loan
10guarantee program authorized by this section.
11(f) As long as there are any outstanding small business disaster
12loan guarantees, as authorized by Section 8684.2 or 63089.90, the
13bank shall provide a report to the Legislature on loan guarantees
14approved and rejected by gender, ethnic group, type of business
15and location, and each participating loan institution. The report
16may be combined with the report required in Section 63089.98.
18to Division 1 of Title 6.7 of the Government Code , to read:
20Chapter 6. Small Business Financial Assistance Act of
23Article 1. Introduction
26the Small Business Financial Assistance Act of 2013.
27(b) Notwithstanding any other provision of this division, this
28chapter shall not apply to any other activities, powers, and duties
29of the bank under any of the other chapters of this division.
31(a) Small businesses form the core of the California economy
32and that it is in the interest of the state to increase opportunities
33for entrepreneurs, the self-employed, and microbusiness and small
34business owners to have better access to capital and other technical
35resources.
36(b) Unemployment in California is a matter of statewide concern
37requiring concerted public and private action to develop
38employment opportunities for the disadvantaged, unemployed
39persons, veterans, and youth.
P15 1(c) It is necessary to direct additional capital, general
2management assistance, business education, and other resources
3to encourage the development of small business opportunities,
4particularly for minorities, women, and disabled persons, to
5alleviate unemployment.
7Article 2. Definitions
10in this section shall govern the construction of this chapter. The
11definitions provided in this section shall only apply to this chapter
12and not to any other chapter of this division.
13(a) “Bank” means the California Infrastructure and Economic
14Development Bank.
15(b) “Bank board” means the board of directors of the California
16Infrastructure and Economic Development Bank.
17(c) “Board of directors” means the board of directors of a
18corporation.
19(d) “California Small Business Finance Center” means the
20governmental unit with the administrative responsibility for
21programs authorized pursuant to Section 63088.5 and this chapter.
22(e) “Corporation” means any nonprofit California small business
23financial development corporation created pursuant to Chapter 1
24(commencing with Section 14000) of Part 5 of Division 3 of Title
251 of the Corporations Code, or pursuant to Chapter 1 (commencing
26with Section 32000) of Division 15.5 of the Financial Code.
27(f) “Directives and requirements” means a document adopted
28by the bank board setting forth policy direction as well as key rules
29governing a particular subject area.
30(g) “Employment incentive loan” means a loan to a qualified
31 business or to a business located within an enterprise zone, as
32defined in subdivision (d) of Section 7072.
33(h) “Executive director” means the executive director of the
34California Infrastructure and Economic Development Bank.
35(i) “Expansion fund” means the California Small Business
36Expansion Fund.
37(j) “Financial company” means banking organizations, including
38national banks and trust companies, savings and loan associations,
39certified community development financial institutions,
40microbusiness lenders, state insurance companies, mutual insurance
P16 1companies, and other public and private banking, lending,
2retirement, and insurance organizations.
3(k) “Financial institution” means regulated banking
4organizations, including national banks and trust companies
5authorized to conduct business in California and state-chartered
6commercial banks, trust companies, credit unions, and savings and
7loan associations.
8(l) “Financial product” means the type of financial assistance
9described in Section 63088.5.
10(m) “Loan committee” means a committee appointed by the
11board of directors of a corporation to determine the course of action
12on a loan application pursuant to this chapter.
13(n) “Microbusiness lender” means a microbusiness lender as
14defined in Section 13997.2 of the Government Code.
26 15(n)
16begin insert(o)end insert “Program manager” means the manager of the California
17Small Business Finance Center as designated to this title by the
18executive director of the California Infrastructure and Economic
19Development Bank.
32 20(o)
21begin insert(p)end insert “Small business loan” means a loan to a business defined
22as an eligible small business as set forth in Section 121.3-10 of
23Part 121 of Chapter 1 of Title 13 of the Code of Federal
24Regulations, including those businesses organized for agricultural
25purposes that create or retain employment as a result of the loan
26 unless otherwise defined by the executive director by regulation.
27Directives and requirements shall provide guidelines as to the
28preferred ratio of jobs created or retained to total funds borrowed
29for guidance to the corporations.
4 30(p)
31begin insert(q)end insert “Trust fund” means the moneys from the expansion fund
32that is held in trust by a financial institution or financial company.
33A trust fund is not a deposit of state funds and is not subject to the
34requirements of Section 16506.
9 35(q)
36begin insert(r)end insert “Trustee” means the lending institution or financial company
37selected by the bank board to hold and invest the trust funds, or
38selected by a predecessor agency to the bank, if applicable. An
39agreement made pursuant to this chapter and the trustee shall not
40be construed to be a deposit of state funds.
15 P17 1(r)
2begin insert(s)end insert “Trust fund account” means an account within the trust fund
3that is either allocated to a particular corporation or shared by
4multiple corporations for the purpose of paying loan defaults and
5claims on bond guarantees or other financial products and program
6uses provided in this chapter.
8Article 3. Purpose
11and Economic Development the California Infrastructure and
12Economic Development Bank, which shall, among other things,
13administer the California Small Business Financial Center that
14administers programs to assist businesses seeking new capital
15resources.
16(b) Pursuant to this chapter and Chapter 1 (commencing with
17Section 14000) of Part 5 of Title 1 of the Corporations Code, the
18bank board may continue programs funded by the Small Business
19Expansion Fund or establish one or more programs administered
20under contract with small business financial development
21corporations. Programs established pursuant to this chapter or
22Chapter 1 (commencing with Section 14000) of Part 5 of Title 1
23of the Corporations Code may include the following types of
24financial products:
25(1) Loan guarantees and other credit enhancements.
26(2) Direct loans and other debit instruments.
27(3) Disaster loan guarantees.
28(4) Surety bond guarantees.
29(c) In all of their state-funded programs, the corporations shall,
30to the extent practicable, be complementary to, and not competitive
31with, commercial lenders and other state and federal programs.
32(d) In carrying out this chapter the program manager, the
33executive director, and the bank board may call on the California
34Small Business Board for advice and recommendations. All actions
35by the California Small Business Board are advisory.
36(e) The California Small Business Board may also advise the
37Governor and the Small Business Advocate regarding issues and
38programs affecting California’s small business community,
39including, but not limited to, business innovation and expansion,
P18 1export finance, state procurement, management and technical
2assistance, venture capital, and financial assistance.
4undertake program activities that shall include, but not be limited
5to, the following:
6(a) Outreach to low-resource small businesses and
7microbusinesses. The corporations located in rural areas shall give
8priority to low-resource farmers and rural and agriculturally related
9businesses.
10(b) Collaboration with other organizations and lenders to identify
11and assist those businesses that are creditworthy but face
12impediments to accessing conventional sources because of reasons,
13such as low equity, inadequate collateral, unacceptable legal
14structure (such as a co-op or nonprofit organization), management
15inadequacies, and language problems.
16(c) To the extent possible, bringing all possible financial
17resources (low-interest lenders, BIDCOs, MESBICs, other
18guarantors, etc.) to bear on the borrower’s problems.
19(d) Technical assistance to businesses receiving loans or
20guarantees that will maximize the probability of loan repayment.
21(e) Ongoing strategies for increasing program resources through
22private sector involvement and nonstate funds.
23(f) A program for collecting and liquidating defaulted loans so
24that the corporations can qualify to become full-service lenders
25under the Small Business Administration. Corporations located in
26rural areas shall, in addition, try to qualify for lender status under
27the United States Department of Agriculture’s Rural Development
28and Farm Services Agency.
29(g) Become an agent for other financial institutions and financial
30companies.
32Article 4. Administrative Structure
The bank board shall adopt directives and requirements
35concerning the implementation of this chapter and pursuant to
36Chapter 1 (commencing with Section 14000) of Part 5 of Division
373 of Title 1 of the Corporations Code. Any regulations adopted
38pursuant to Chapter 1 (commencing with Section 14000) of Part
395 of Division 3 of Title 1 of the Corporations Code, as that chapter
40read on January 1, 2013, shall remain in effect until the bank board
P19 1adopts directives and requirements relating to the specific policy
2or activity, but in no case beyond June 1, 2015.
The program manager acting under the guidance of
4the executive director shall do all of the following:
5(a) Administer this chapter.
6(b) Enter into a contract between the bank and each corporation
7for services to be provided by the corporations for one or more
8programs under this chapter and Chapter 1 (commencing with
9Section 14000) of Part 5 of Division 3 of Title 1 of the
10Corporations Code.
11(c) In accordance with available resources, allow the use of
12branch offices for the purposes of making these programs under
13this chapter accessible to all areas of the state.
14(d) Require each corporation to submit an annual written plan
15of operation.
16(e) Authorize the distribution, transfer, and withholding of
17moneys in the expansion fund and trust funds.
18(f) Authorize the investment of expansion and trust fund moneys.
19(g) Oversee the operations of one or more programs authorized
20pursuant to this chapter.
21(h) Act as liaison between corporations, other state and federal
22agencies, lenders, and the Legislature.
23(i) Act as secretary to the California Small Business Board, and
24attend meetings of the California Small Business Board and the
25bank board.
26(j) Attend and participate at corporation meetings. The program
27manager or his or her designee shall be an ex officio, nonvoting
28representative on the board of directors and loan committees of
29each corporation. The program manager shall confer with the board
30of directors of each corporation as appropriate and necessary to
31carry out his or her duties, but in no case shall the program manager
32confer less than once each fiscal year.
33(k) Assist corporations in applying for public and private funding
34opportunities, and in obtaining program support from the business
35community.
37the return on those funds from investment pursuant to Section
3863089.56 is conditional pursuant to Sections 63089.3 and 63089.57.
39Each corporation shall enter into a written signed agreement with
40the bank to provide program management services for one or more
P20 1programs authorized under this chapter and Chapter 1 (commencing
2with Section 14000) of Part 5 of Division 3 of Title 1 of the
3Corporations Code. Agreements with the corporations entered into
4pursuant to this chapter are exempt from the requirements of
5Sections 10295, and 10335 to 10381, inclusive, of the Public
6Contracts Code. The agreement shall, at a minimum, govern the
7activities in which the corporation engages, the investment of state
8funds and its return, and the budgeted administrative expenses the
9corporations may incur. In the event the program manager and
10corporation do not reach an agreement, or the program manager
11finds the corporation has violated the terms of an active agreement,
12the program manager may take any action under Section 63089.3
13or 63089.57, or any other action as appropriate. In the event the
14program manager and corporation do not reach agreement or the
15program manager finds the corporation has violated the terms of
16an active agreement, the corporation shall have no authority to
17withdraw or encumber the moneys in the trust fund or the return
18of those funds by the issuance of guarantees, commitments for
19other financial products, or by incurring expenses against the fund
20and its return in any manner whatsoever, and the program manager
21may take any action under Section 63089.3 or 63089.57, or any
22other action as appropriate. Any guarantee or other encumbrance
23made by the corporation in violation of this section shall be null
24and void, and the state, the bank, the expansion fund, or the trust
25fund will not be liable therefor.
27the guarantee authority or other financial product authority of a
28corporation if in the determination of the program manager a
29corporation has substantially failed to comply with any of the
30requirements in subdivision (b) causing irreparable harm to the
31program, the corporation’s guarantee or any other financial
32products authority. The notice of temporary suspension sent to the
33corporation shall specify the reasons for the action.
34(1) As used in this section, “guarantee or any other financial
35products authority” means the authority to make or guarantee or
36administer any other financial products that encumber funds in a
37trust fund account, any account or subaccount under the direct
38control of the bank or other state entity, or the expansion fund.
39(2) The program manager shall make one of the determinations
40specified in subdivision (b) within 30 days of the effective date of
P21 1the temporary suspension, unless the corporation and the program
2manager mutually agree to an extension. The corporation shall
3have the opportunity to submit written material to the program
4manager addressing the items stated in the temporary suspension
5notice. If the program manager does not make any determinations
6within 30 days, the temporary suspension shall be reversed. The
7corporation’s yearly contract shall remain in effect during the
8period of temporary suspension, and the corporation shall continue
9to receive reimbursement of necessary operating expenses.
10(b) Failure of a corporation to substantially comply with the
11following may result in the suspension or termination of a
12corporation:
13(1) Directives and requirements adopted by the bank board, for
14implementing the California Small Business Development
15Corporation Law (Chapter 1 (commencing with Section 14000)
16of Part 5 of Division 3 of Title 1 of the Corporations Code) and
18(2) Failure to meet any fiscal, audit, or portfolio requirement,
19as contained in the directives and requirements.
20(3) Failure to significantly meet any milestones or scope of work
21as contained in the performance contract between the corporation
22and the bank.
23(4) Any other action in the opinion of the program manager that
24causes irreparable harm to the corporation, the expansion fund, or
25the trust fund.
26(c) Pursuant to subdivisions (a) and (b), the program manager
27may take any of the following actions:
28(1) Terminate the temporary suspension.
29(2) Terminate the temporary suspension subject to the
30corporation’s adoption of a specified remedial action plan approved
31by the program manager.
32(3) Continue the temporary suspension of guarantee and other
33financial product authority until a specified time.
34(4) Terminate the corporation’s authority to administer specified
35loan guarantees or other financial products.
36(5) Terminate the corporation’s authority to remain a corporation
37authorized pursuant to the California Small Business Development
38Corporation Law (Chapter 1 (commencing with section 14000) of
39Part 5 of Division 3 of Title 1 of the Corporations Code) and this
40chapter.
P22 1(d) The program manager shall make one of the determinations
2specified in subdivision (c) within 30 days of the effective date of
3the temporary suspension notice, unless the corporation and the
4program manager mutually agree to an extension. If the program
5manager does not make any determinations within 30 days, the
6temporary suspension shall be negated. The corporation’s yearly
7contract shall remain in effect during the period of temporary
8suspension, and the corporation shall continue to receive
9reimbursement of necessary operating expenses.
10(e) The actions contained in paragraphs (3) to (5), inclusive, of
11subdivision (c) require a finding that irreparable harm will occur
12unless the action is taken, and a finding that the corporation has
13failed to comply with the California Small Business Development
14Corporation Law (Chapter 1 (commencing with Section 14000)
15of Part 5 of Division 3 of Title 1 of the Corporations Code) and
16this chapter.
17(f) In considering any action specified in subdivision (c), the
18program manager shall consider, along with other criteria as
19specified in subdivision (b), the corporation’s history and past
20performance.
21(g) If the program manager decides to take any action pursuant
22to paragraphs (3) to (5), inclusive, of subdivision (c), the program
23manager shall transfer all funds subject to the action, whether
24encumbered or not, in the trust fund account of the suspended or
25terminated corporation into either the expansion fund, or either
26permanently or temporarily transfer the funds to the trust fund
27account of another corporation, unless an appeal is received from
28the corporation pursuant to subdivision (h).
29(h) If the program manager intends to transfer funds as specified
30in paragraph (g), the corporation shall be notified of the funds
31transfer 10 days before the effective date of the transfer. The
32corporation shall have the right to appeal the program manager’s
33decision to the executive director within that 10-day period by
34sending written notice to the executive director. Once the executive
35director receives notice that the action is being appealed, the
36program manager’s funds transfer shall be stayed.
37(i) The corporation shall have the opportunity to submit written
38material to the executive director addressing the actions and
39findings stated in the program manager’s determination. The
40executive director shall consider and make a final determination
P23 1on the appeal within 30 days of receiving the appeal notice from
2the corporation, or such longer time as agreed to by the executive
3director and the corporation. The executive director may elect to
4take any of the actions listed in subdivision (j). The action of the
5program manager shall remain in effect until the executive director
6issues a decision. The corporation’s performance contract shall
7remain in effect during the appeal period, and the corporation shall
8continue to receive reimbursement of necessary operating expenses.
9(j) Pursuant to subdivision (i), the executive director may
10independently take action or seek the advice and recommendation
11of the small business board prior to taking any of the following
12actions:
13(1) Rescind the action taken by the program manager.
14(2) Modify the action taken by the program manager subject to
15the adoption by the corporation of a specified remedial action plan
16approved by the executive director.
17(3) Affirm the action taken by the program manager.
18(k) Following the executive director’s concurrence any action
19pursuant to paragraphs (3) to (5), inclusive, of subdivision (c), the
20program manager shall transfer all funds subject to the action,
21whether encumbered or not, in the trust fund account of the
22suspended or terminated corporation into either the expansion
23fund, or either permanently or temporarily transfer the funds to
24the trust fund account of another corporation. The corporation shall
25be notified of the funds transfer 10 days before the effective date
26of the transfer. The corporation shall have the right to appeal the
27executive director’s decision to the bank board within that 10-day
28period by sending written notice to the chair of the bank board.
29Once the chair of the bank board receives notice that the executive
30director’s determination is being appealed, the program manager’s
31funds transfer shall be stayed.
32(l) The corporation shall have the opportunity to submit written
33material to the bank board addressing the actions and findings
34stated in the executive director’s determination. The bank board
35shall consider and make a final determination on the appeal within
3630 days of receiving the appeal notice from the corporation, or
37such longer time as agreed to by the chair of the bank board and
38the corporation. The action of the executive director shall remain
39in effect until the bank board issues a decision. The corporation’s
40performance contract shall remain in effect during the appeal
P24 1period, and the corporation shall continue to receive reimbursement
2of necessary operating expenses.
3(m) Pursuant to subdivision (l), the bank board may
4independently take action or seek the advice and recommendation
5of the California Small Business Board prior to taking any of the
6following actions:
7(1) Rescind the action taken by the executive director.
8(2) Modify the action taken by the executive director subject to
9the adoption by the corporation of a specified remedial action plan
10acceptable to the executive director.
11(3) Affirm the action taken by the executive director. The
12decision of the bank board is final.
13(n) Following the bank board’s concurrence with the executive
14director’s determination consistent with any action pursuant to
15paragraphs (3) to (5), inclusive, of subdivision (c), transfer all
16funds subject to the action, whether encumbered or not, in the trust
17fund account of the suspended or terminated corporation into either
18the expansion fund, or either permanently or temporarily transfer
19the funds to the trust fund account of another corporation. The
20corporation shall be notified of the funds transfer 10 days before
21the effective date of the transfer.
22(o) Notwithstanding Section 63089.53, in the event a final
23determination was made by the program manager, the executive
24director or the bank board, whichever is applicable, to temporarily
25transfer the funds of the corporation to the expansion fund or to
26the trust fund account of another corporation, upon compliance
27with all requirements of that final determination as determined by
28the executive director, the transferred funds shall be returned to
29the corporations trust fund account. While the funds of a
30corporation’s trust fund account reside in the expansion fund, use
31of the principal on the funds shall be governed by the implementing
32directives and requirements specifying use of funds in the
33expansion fund. Interest on the funds moved from a corporation’s
34trust fund account upon temporary withdrawal shall be limited to
35 payment of the corporation’s administrative expenses, as contained
36in the contract between the corporation and the bank pursuant to
37this chapter.
38(p) Following a final determination of termination of all
39activities of an active corporation, in order to continue its existence
40as a nonprofit corporation pursuant to the Nonprofit Public Benefit
P25 1Corporation Law (Part 2 (commencing with Section 5110) of
2Division 2 of Title 1 of the Corporations Code), the corporation
3must amend its articles of incorporation in accordance with Chapter
48 of Part 2 of Division 2 of the Corporations Code to remove the
5provisions required by Section 14005 of the Corporations Code,
6including an amendment to remove the words “small business
7financial development corporation,” “small business development
8corporation,” or “rural or urban development corporation,” as
9applicable, from the corporate name and shall no longer be
10registered with the Secretary of State as a small business financial
11development corporation. A corporation shall not enjoy any of the
12benefits of a small business financial development corporation
13following suspension.
15(a) Approve new corporations recommended by the program
16manager.
17(b) Enter into contracts with corporations for program
18management services.
19(c) Select a financial institution or financial company to act as
20trustee of the trust fund as specified in this chapter.
21(d) Invest expansion fund and trust fund moneys as specified
22in this chapter.
23(e) Affirm, modify, or rescind the determinations of the program
24manager and the executive director as specified in this chapter.
25(f) Adopt directives and requirements as specified in this chapter.
26(g) Authorize new financial product programs pursuant to the
27provisions of this chapter.
29Article 5. Expansion Fund and Trust Fund
32Treasury the California Small Business Expansion Fund. All or a
33portion of the funds in the expansion fund may be paid out, with
34the approval of the Department of Finance, to a financial institution
35or financial company that will establish a trust fund and act as
36trustee of the funds.
37(b) The expansion fund and the trust fund shall be used for the
38following purposes:
39(1) To pay defaulted loan guarantee or surety bond losses, or
40other financial product defaults or losses.
P26 1(2) To fund direct loans and other debt instruments.
2(3) To pay administrative costs of corporations.
3(4) To pay state support and administrative costs.
4(5) To pay those costs necessary to protect a real property
5interest in a financial product default.
6(c) The expansion fund and trust fund are created solely for the
7purpose of receiving state, federal, or local government moneys,
8and other public or private moneys to make loans, guarantees, and
9other financial products pursuant to this chapter.
10(d) One or more accounts in the expansion fund and the trust
11fund may be created by the program manager for corporations
12participating in one or more programs authorized under this
13 chapter. Each account is a legally separate account, and shall not
14be used to satisfy loan guarantees or other financial product
15obligations of another corporation except when the expansion fund
16or trust fund is shared by multiple corporations.
17(e) The amount of guarantee liability outstanding at any one
18time shall not exceed five times the amount of funds on deposit in
19the expansion fund plus any receivables due from funds loaned
20from the expansion fund to another fund in state government as
21directed by the Department of Finance pursuant to a statute enacted
22by the Legislature, including each of the trust fund accounts within
23the trust fund.
24(f) This section shall remain in effect only until January 1, 2018,
26is enacted before January 1, 2018, deletes or extends that date.
28Treasury the California Small Business Expansion Fund. All or a
29portion of the funds in the expansion fund may be paid out, with
30the approval of the Department of Finance, to a financial institution
31or financial company that will establish a trust fund and act as
32trustee of the funds.
33(b) The expansion fund and the trust fund shall be used for the
34following purposes:
35(1) To pay defaulted loan guarantee or surety bond losses, or
36other financial product defaults or losses.
37(2) To fund direct loans and other debt instruments.
38(3) To pay administrative costs of corporations.
39(4) To pay state support and administrative costs.
P27 1(5) To pay those costs necessary to protect a real property
2interest in a financial product default.
3(c) The expansion fund and trust fund are created solely for the
4purpose of receiving state, federal, or local government moneys,
5and other public or private moneys to make loans, guarantees, and
6other financial products pursuant to this chapter.
7(d) One or more accounts in the expansion fund and the trust
8fund may be created by the program manager for corporations
9participating in one or more programs authorized under this
10chapter. Each account is a legally separate account, and shall not
11be used to satisfy loan guarantees or other financial product
12obligations of another corporation except when the expansion fund
13or trust fund is shared by multiple corporations.
14(e) The amount of guarantee liability outstanding at any one
15time shall not exceed four times the amount of funds on deposit
16in the expansion fund plus any receivables due from funds loaned
21(f) This section shall become operative on January 1, 2018.
23hereby continuously appropriated, without regard to fiscal years,
24for the purposes of this chapter.
25(b) Except as specified in subdivision (b) of Section 63089.54,
26the state or the bank shall not be liable or obligated in any way
27beyond the state money that is allocated in the expansion fund
28from moneys from the General Fund appropriated for those
(a) The programbegin delete managerend deletebegin insert manager,end insert at his or her
31discretion, with the approval of the executive director, may request
32the trustee to invest those moneys in the trust fund in any of the
33securities described in Section 16430. Returns from these
34investments shall be deposited in the expansion fund and shall be
35used to support the programs of this chapter.
36(b) Any investments made in securities described in Section
3716430 shall be governed by the investment policy approved by the
38bank board.
begin delete(a)end deletebegin delete end deleteThe state Except as specified in subdivision (b)
40of Section 63089.54, the state or the bank shall not be liable or
P28 1obligated in any way beyond the money that is allocated and
2deposited in the trust fund accounts.
4the Small Business Disaster Recovery Loan Loss Reserve Account,
5as part of the expansion fund. This account shall be used to pay
6for losses resulting from loan guarantees issued pursuant to
7subdivision (a) of Section 63089.90 or subdivision (b) of this
8section, and disaster loan guarantees and other credit enhancement
9defaults issued prior to the effective date of this section that are in
10default.
11(b) Any lending institution that issues a loan that is guaranteed
12by resources in this account shall be fully reimbursed for the
13guaranteed portion of principal and interest that result from a loan
14or loans that are in default. If there are insufficient funds in this
15account to fully satisfy all claimants, the full faith of the resources
16in the General Fund are pledged to satisfy the obligations of this
17account. This account may only guarantee as much loan dollar
18value as is specifically authorized by the Director of Finance with
19the concurrence of the Governor. This account shall receive all
20moneys transferred pursuant to Section 63089.55, and any
21unencumbered balances transferred to the California Small
22Business Expansion Fund pursuant to Chapters 11 and 12 of the
23First Extraordinary Session of the Statutes of 1989, and Chapter
241525 of the Statutes of 1990, as of July 1, 1992.
25(c) The Governor may utilize this authority to prevent business
26insolvencies and loss of employment in an area affected by a state
27of emergency within the state and declared a disaster by the
28President of the United States, by the Administrator of the United
29States Small Business Administration, or by the United States
30Secretary of Agriculture, or declared to be in a state of emergency
31by the Governor of California.
33Governor, may transfer moneys in the Special Fund for Economic
34Uncertainties to the California Small Business Expansion Fund
35for use as authorized by the bank board, in an amount necessary
36to make loan guarantees pursuant to Section 8684.2 and this
37chapter.
39out to trust fund accounts by the Treasurer on funds drawn by the
40Controller and requisitioned by the program manager, pursuant to
P29 1the purposes of this chapter. The program manager may transfer
2funds allocated from the expansion fund to accounts, established
3solely to receive the funds, in financial institutions or financial
4companies designated by the bank to act as trustee. The financial
5institutions or financial companies so designated shall be approved
6by the state for the receipt of state deposits. Interest earned on the
7trust fund accounts in financial institutions or financial companies
8may be utilized by the corporations or the bank pursuant to the
9purposes of this chapter.
10(b) The program manager may reallocate funds held within a
11corporation’s trust fund account.
12(1) The program manager shall reallocate funds based on which
13corporation is most effectively using its guarantee funds. If funds
14are withdrawn from a less effective corporation as part of a
15reallocation, the program manager shall make that withdrawal only
16after giving consideration to that corporation’s fiscal solvency, its
17ability to honor loan guarantee defaults, and its ability to maintain
18a viable presence within the region it serves. Reallocation of funds
19shall occur no more frequently than once per fiscal year. Any
20decision made by the program manager pursuant to this subdivision
21may be appealed to the executive director unless otherwise
22specified. The executive director has the authority to repeal or
23modify any decision to reallocate funds.
24(2) The program manager may authorize a corporation to exceed
25the leverage ratio specified in Section 63089.5 or subdivision (a)
26of Section 63089.62, pending the annual reallocation of funds
27pursuant to this section. However, no corporation shall be permitted
28to exceed an outstanding guarantee liability of more than specified
29in subdivision (a) of Section 63089.62 after a reallocation is made.
30(c) Except as specified in subdivision (e), the program manager
31shall allocate and transfer money to trust fund accounts based on
32performance-based criteria. The criteria shall include, but not be
33limited to, the following:
34(1) The default record of the corporation.
35(2) The number and amount of loans guaranteed by a
37(3) The number and amount of loans made by a corporation if
38state funds were used to make those loans.
39(4) The number and amount of surety bonds guaranteed by a
P30 1(5) The number and amount of other financial product activity.
2(6) The number of jobs created or retained due to the financial
3product activity.
4(d) The criteria specified in subdivision (c) shall not apply to a
5corporation that has been in existence for five years or less. If not
6already adopted, the bank board shall develop directives and
7requirements specifying the basis for transferring account funds
8to those corporations that have been in existence for five years or
9less.
10(e) Any decision made by the program manager pursuant to this
11section may be appealed to the executive director within 15 days
12of notice of the proposed action. The executive director may repeal
13or modify any reallocation and transfer decisions made by the
14program manager. The appealing corporation shall submit, in
15writing, the specific area or areas of appeal and set forth any
16recommendation to the executive director for consideration. The
17 executive director shall render a final decision within five business
18days of receiving the written appeal.
19(f) Any decision made by the executive director shall be
20appealable in writing to the bank board within 15 days of the
21executive director’s decision, or such longer period as agreed to
22between the executive director and the corporation. The bank board
23shall make a final reallocation or transfer decision within 30 days
24of receiving the appeal, or such longer period agreed to between
25the executive director and the corporation.
26(g) In the event of an appeal under this section, all allocations
27or transfers of money to trust fund accounts shall be on hold
28pending resolution by the executive director or bank board, as
29applicable.
Pursuant to this chapter and any directives and
31requirements adopted pursuant to this chapter, the state has residual
32interest in the funds deposited by the state to a trust fund account
33and to the return on these funds from investments. On dissolution,
34suspension, or termination of the corporation, these funds shall be
35withdrawn by the program manager from the trust fund account
36and returned to the expansion fund or temporarily transferred to
37another trust fund account. This provision shall be contained in
38the trust instructions to the trustee.
40guarantee account, and, upon recommendation by the program
P31 1manager, a bond guarantee account or other financial product
2account, each of which is a legally separate account, and the assets
3of one account shall not be used to satisfy loan guarantees or other
4financial product obligations of another corporation, except when
5a trust fund account is designated by the program manager to be
6shared by multiple corporations. The amount of funds allocated
7to a bond guarantee account shall be pursuant to the directives and
8requirements. A corporation shall not use trust fund accounts to
9secure a corporate indebtedness. State funds deposited in the trust
10fund accounts, with the exception of guarantees established
11pursuant to this chapter, shall not be subject to liens or
12encumbrances of the corporation or its creditors.
(a) The financial institution or financial company
14that is to act as trustee of the trust fund shall be designated by the
15bank. The corporation shall not receive money on deposit to
16support guarantees or other financial products issued under this
17chapter without the approval of the program manager.
18(b) State funds may not be used to finance an expense incurred
19by a corporation in a location not approved pursuant to the contract
20between the bank and the corporation. The prohibition against use
21of state funds also applies to the location of satellite offices, and
22the area served from a corporation office.
23(c) Except as otherwise provided in this chapter, the trust fund
24account shall be used solely to make loans, guarantee bonds and
25loans, and provide other financial products approved by the
26 corporation that meet the financial product criteria of the directives
27and requirements. Except as provided in subdivision (b) of Section
2863089.54, the state or the bank shall not be liable or obligated in
29any way as a result of the allocation of state moneys to a trust fund
30account beyond the state moneys that are allocated and deposited
31in the fund pursuant to this chapter, and that are not otherwise
32withdrawn by the state pursuant to this chapter.
34the expansion fund and trust fund accounts are to be leveraged,
35and if so, by how much. Upon the request of the corporation, the
36program manager’s decision may be repealed or modified by the
37executive director or the bank board.
38(b) The amount of guarantee liability outstanding at any one
39time shall not exceed five times the amount of funds on deposit in
40the expansion fund plus any receivables due from funds loaned
P32 1from the expansion fund to another fund in state government as
2directed by the Department of Finance pursuant to a statute enacted
3by the Legislature, including each of the trust fund accounts within
4 the trust fund.
5(c) This section shall remain in effect only until January 1, 2018,
7is enacted before January 1, 2018, deletes or extends that date.
9the expansion fund and trust fund accounts are to be leveraged,
10and if so, by how much. Upon the request of the corporation, the
11program manager’s decision may be repealed or modified by the
12executive director or the bank board.
13(b) The amount of guarantee liability outstanding at any one
14time shall not exceed four times the amount of funds on deposit
15in the expansion fund plus any receivables due from funds loaned
16from the expansion fund to another fund in state government as
17directed by the Department of Finance pursuant to a statute enacted
18by the Legislature, including each of the trust fund accounts within
19the trust fund, unless the program manager has permitted a higher
20leverage ratio for an individual corporation pursuant to subdivision
21(b) of Section 63089.56.
22(c) This section shall become operative on January 1, 2018.
24funds on deposit in the corporation’s trust fund account, or by
25receivables due from funds loaned from the corporation’s trust
26fund account to another fund in state government, as directed by
27the Department of Finance pursuant to a statute enacted by the
28Legislature.
29(b) Loan guarantees shall be secured by a reserve of at least 20
30percent to be determined by the program manager unless a higher
31leverage ratio for an individual corporation has been approved
32pursuant to subdivision (b) of Section 63089.56.
33(c) The expansion fund and trust fund accounts shall be used to
34guarantee obligations and other financial product obligations, to
35pay the administrative costs of the corporations, and for other uses
36pursuant to this chapter.
37(d) This section shall remain in effect only until January 1, 2018,
39is enacted before January 1, 2018, deletes or extends that date.
2funds on deposit in the corporation’s trust fund account, or by
3receivables due from funds loaned from the corporation’s trust
4fund account to another fund in state government, as directed by
5the Department of Finance pursuant to a statute enacted by the
6Legislature.
7(b) Loan guarantees shall be secured by a reserve of at least 25
8percent to be determined by the program manager, unless a higher
9leverage ratio has been approved for an individual corporation
10pursuant to subdivision (b) of Section 63089.56.
11(c) The expansion fund and trust fund accounts shall be used to
12guarantee obligations and other financial product obligations, to
13pay the administrative costs of the corporations, and for other uses
14pursuant to this chapter.
15(d) This section shall become operative on January 1, 2018.
17corporations make maximum use of their statutory authority to
18guarantee loans and surety bonds, and administer other financial
19products, including the authority to secure loans with a minimum
20loan loss reserve of only 20 percent, unless the program manager
21authorizes a higher leverage ratio for an individual corporation
22pursuant to subdivision (b) of Section 63089.56, so that the
23financing needs of small business may be met as fully as possible
24within the limits of corporations’ trust fund account balance.
25(b) Any corporation that serves an area declared to be in a state
26of emergency by the Governor or a disaster area by the President
27of the United States, the Administrator of the United States Small
28Business Administration, or the United States Secretary of
29Agriculture shall increase the portfolio of loan guarantees where
30the dollar amount of the loan is less than one hundred thousand
31dollars ($100,000), so that at least 15 percent of the dollar value
32of loans guaranteed by the corporation is for those loans. The
33corporation shall comply with this requirement within one year of
34the date the emergency or disaster is declared. Upon application
35of a corporation, the executive director may waive or modify the
36rule for the corporation if the corporation demonstrates that it made
37a good faith effort to comply and failed to locate lending
38institutions in the region that the corporation serves that are willing
39to make guaranteed loans in that amount.
P34 1(c) This section shall remain in effect only until January 1, 2018,
3is enacted before January 1, 2018, deletes or extends that date.
5corporations make maximum use of their statutory authority to
6guarantee loans and surety bonds, and administer other financial
7products, including the authority to secure loans with a minimum
8loan loss reserve of only 25 percent, unless the program manager
9authorizes a higher leverage ratio for an individual corporation
10pursuant to subdivision (b) of Section 63089.56, so that the
11financing needs of small business may be met as fully as possible
12within the limits of corporations’ trust fund account balance.
13(b) Any corporation that serves an area declared to be in a state
14of emergency by the Governor or a disaster area by the President
15of the United States, the Administrator of the United States Small
16Business Administration, or the United States Secretary of
17Agriculture shall increase the portfolio of loan guarantees where
18the dollar amount of the loan is less than one hundred thousand
19dollars ($100,000), so that at least 15 percent of the dollar value
20of loans guaranteed by the corporation is for those loans. The
21corporation shall comply with this requirement within one year of
22the date the emergency or disaster is declared. Upon application
23of a corporation, the program manager may waive or modify the
24rule for the corporation if the corporation demonstrates that it made
25a good faith effort to comply and failed to locate lending
26institutions in the region that the corporation serves that are willing
27to make guaranteed loans in that amount.
28(c) This section shall become operative on January 1, 2018.
30Article 6. Corporations, Miscellaneous
33committees, each of which shall be composed of five or more
34persons, a majority of whom shall be experienced in banking and
35lending operations.
36(b) A loan committee shall review applications to the corporation
37for a loan or guarantee and shall do each of the following:
38(1) Determine the feasibility of the proposed transaction. The
39loan committee shall recommend approval of the application only
P35 1upon a determination that there is a reasonable chance that the loan
2will be repaid.
3(2) On the basis of that determination, recommend to the board
4of directors any action that the loan committee deems appropriate
5under the circumstances, or, in the event that approval authority
6has been delegated to the loan committee by the board of directors,
7approve or disapprove the loan application.
8(c) A loan committee shall expeditiously act to accept or reject
9loan applications.
10(d) A person who has a financial interest related to a matter over
11which the loan committee has authority may not make, participate
12in making, or in any way attempt to influence that matter.
14corporation’s board of directors, upon a recommendation from its
15loan committee, shall do all of the following:
16(a) Emphasize consideration to applications that will increase
17employment of disadvantaged, disabled, or unemployed persons,
18or increase employment of youth residing in areas of high youth
19unemployment and high youth delinquency.
20(b) Give consideration to applications from traditional and
21safety-net providers of Medi-Cal services that will promote access
22to quality medical care for individuals enrolled in Medi-Cal
23managed health care networks that are contracting with or owned
24or operated by a county board of supervisors, a county health
25commission, or a county health authority organized pursuant to
26Section 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, or
2714087.9605 of the Welfare and Institutions Code.
29institution a loan fee or credit enhancement fee on all loans made
30or guaranteed by the corporation to defray the operating expenses
31of the corporation. The amount of the fee shall be determined by
32the directives and requirements.
34Article 7. Loan Guarantees
37hereby continued in existence, shall, among other things, provide
38guarantees to loans offered by financial institutions and financial
39companies to small businesses.
P36 1(b) The Legislature finds and declares that the Small Business
2Loan Guarantee Program has enabled participating small businesses
3that do not qualify for conventional business loans or Small
4Business Administration loans to secure funds to expand their
5businesses. These small businesses would not have been able to
6expand their businesses in the absence of the program. The program
7has also provided valuable technical assistance to small businesses
8to ensure growth and stability. The study commissioned by former
9Section 14069.6 of the Corporations Code, as added by Chapter
10919 of the Statutes of 1997, documented the return on investment
11of the program and the need for its services. The value of the
12program has also been recognized by the Governor through
13proposals contained in the May Revision to the Budget Act of
142000 for the 2000-01 fiscal year.
15(c) A corporation shall not issue a loan or guarantee, unless it
16determines that the following conditions are satisfied:
17(1) There is no probability that the loan would be granted by a
18financial company or financial institution under reasonable terms
19and conditions and the borrower has demonstrated a reasonable
20prospect of repayment.
21(2) The loan proceeds will be used exclusively in this state.
22(3) The loan qualifies as a small business loan or an employment
23incentive loan.
24(4) The borrower has a minimum equity interest in the business
25as determined by the directives and requirements.
26(5) As a result of the loan, the jobs generated or retained
27demonstrate reasonable conformance to any directives and
28requirements specifying employment criteria.
30high priority to the issuance of loan guarantees to small business
31incubators and to businesses that lease space in incubators.
32(b) For the purposes of this section, “incubator” means a facility
33that allows new small businesses to increase their probability of
34success by sharing needed capital equipment, services, and
35facilities, which may include, but are not limited to, the following:
36(1) Reception and meeting area.
37(2) Secretarial services, such as collating, telephone answering,
38or mailhandling.
39(3) Accounting and bookkeeping services.
40(4) Research libraries.
P37 1(5) Onsite financial and management counseling.
2(6) Parking.
3(7) Flexible lease arrangements for flexible space.
4(8) Computer or word processing facilities.
5(9) Day care facilities.
6(10) Office furniture rentals.
7(11) A graduation policy sometimes requiring firms to leave
8after three to five years in a subsidized, nurturing environment.
9(12) Employee training and placement services.
10(c) Among other priorities, corporations shall give high priority
11to marketing their services to Phase 1 or Phase 2 Small Business
12Innovation Research (SBIR) recipients and providing loan
13guarantees, whenever possible.
15Article 8. Direct Lending and Other Debt Instruments
18lending or other debt instruments pursuant to the directives and
19requirements.
20(b) The amount of funds available for direct lending and other
21debt instruments shall be determined by the directives and
22requirements. In its capacity as a direct lender, the corporation
23may sell in the secondary market the guaranteed portion of each
24loan, if guaranteed, so as to raise additional funds for direct lending.
25(c) To execute the direct loan and other debt instrument
26 programs established in this chapter, the bank may loan trust funds
27to a corporation for the express purpose of lending those funds to
28an identified borrower. The loan authorized by the bank to the
29corporation shall be on terms similar to the loan between the
30corporation and the borrower.
31(d) The amount of the loan may be in excess of the amount of
32a loan to any individual borrower, but actual disbursements
33 pursuant to the bank loan agreement shall be required to be
34supported by a loan agreement between the borrower and the
35corporation in an amount at least equal to the requested
36disbursement. The loan between the bank and the corporation shall
37be evidenced by a credit agreement. In the event that any loan
38between the corporation and borrower is not guaranteed by a
39governmental agency, the portion of the credit agreement
40attributable to that loan shall be secured by assignment of any note,
P38 1executed in favor of the corporation by the borrower to the bank.
2The terms and conditions of the credit agreement shall be similar
3to the loan agreement between the corporation and the borrower,
4which shall be collateralized by the note between the corporation
5and the borrower.
6(e) In the absence of fraud on the part of the corporation, the
7liability of the corporation to repay the loan to the bank is limited
8to the repayment received by the corporation from the borrower,
9except in a case where the United States Department of Agriculture
10requires exposure by the corporation in rule or regulation. The
11corporation may use trust funds for loan repayment to the bank if
12the corporation has exhausted a loan loss reserve created for this
13purpose. Interest and principal received by the bank from the
14corporation shall be deposited into the same account from which
15the funds were originally borrowed.
16(f) Upon the approval of the program manager, a corporation
17shall be authorized to borrow trust funds from the bank for the
18purpose of relending those funds to small businesses. A corporation
19shall demonstrate to the program manager that it has the capacity
20to administer a direct loan program, and has procedures in place
21to limit the default rate for loans to startup businesses. The
22percentage of any trust fund account to be used for the direct
23lending pursuant to this subdivision shall be established in the
24directives and requirements.
25(g) A corporation shall not issue a direct loan or other financial
26product, unless and until it determines that all of the following
27conditions are satisfied:
28(1) The direct loan or other financial product assistance would
29not be granted by a financial company or financial institution under
30reasonable terms and conditions and the borrower has demonstrated
31a reasonable prospect of repayment.
32(2) The loan or financial product proceeds will be used
33 exclusively in this state.
34(3) The direct loan or financial product qualifies as a small
35business loan or employment incentive loan.
36(4) The borrower has a minimum equity interest in the business
37as determined by the directives and requirements.
38(5) As a result of the direct loan or other debt instrument, the
39jobs generated or retained demonstrate reasonable conformance
40to any directives and requirements specifying employment criteria.
P39 1(h) The maximum loan or other debt instrument amount to a
2small business shall be set by the directives and requirements. In
3the absence of fraud on the part of the corporation, the repayment
4obligation pursuant to the loan or other debt instrument to the
5corporation shall be limited to the amount of funds received by
6the corporation for the loan or other debt instrument to the small
7business and any other funds received from the bank that are not
8disbursed. The corporation shall be authorized to charge a fee to
9the small business borrower, in an amount determined pursuant to
10the directives and requirements. The programs provided for in this
11subdivision shall be available in all geographic areas of the state.
13Article 9. Disaster Loan Guarantees
(a) Pursuant to Section 8684.2 and the contract
16between a corporation and the bank, a corporation may, in an area
17affected by a state of emergency within the state and declared a
18disaster by the President of the United States, the Administrator
19of the United States Small Business Administration, or the United
20States Secretary of Agriculture, or declared to be in a state of
21emergency by the Governor of California, provide loan guarantees
22from funds allocated in Section 63089.55 to small businesses,
23small farms, nurseries, and agriculture-related enterprises that have
24suffered actual physical damage or significant economic injury as
25a result of the disaster.
26(b) The bank board may adopt directives and requirements to
27implement the disaster loan guarantee program authorized by this
28section. Any regulations adopted under Chapter 1 (commencing
29with Section 14000) of Part 5 of Division 3 of Title 1 of the
30Corporations Code shall remain in effect until the bank adopts
31directives and requirements.
32(c) A corporation shall not issue a disaster loan guarantee unless
33and until it determines that the following conditions are satisfied:
34(1) The borrower cannot reasonably obtain a loan without some
35form of credit enhancement.
36(2) The borrower has demonstrated a reasonable prospect of
37repayment.
38(3) The guaranteed loan will be used exclusively in this state.
39(4) The disaster loan qualifies as a small business loan or
40employment incentive loan.
P40 1(d) Allocations pursuant to subdivision (a) shall be deemed to
2be for extraordinary emergency or disaster response operations
3costs incurred by the issuance of disaster loan guarantees.
5Article 10. Surety Bond Guarantees
863088.1 of this code and Section 14001 of the Corporations Code,
9a corporation may do any one or more of the following activities,
10but only to the extent that the activities are authorized pursuant to
11the contract between the bank and corporation: guarantee, endorse,
12or act as surety on the bonds, notes, contracts, or other obligations
13of, or assist financially, any person, firm, corporation, or
14association, and may establish and regulate the terms and
15conditions with respect to any such loans or financial assistance
16and the charges for interest and service connected therewith, except
17that the corporation shall not make or guarantee any loan, unless
18and until it determines:
19(a) There is no probability that the loan or other financial
20assistance would be granted by a financial institution or financial
21company under reasonable terms or conditions, and the borrower
22has demonstrated a reasonable prospect of repayment of the loan.
23(b) The loan proceeds will be used exclusively in this state.
24(c) The loan qualifies as a small business loan or an employment
26(d) The borrower has a minimum equity interest in the business
28(e) As a result of the loan, the jobs generated or retained
29demonstrate reasonable conformance to the directives and
3263089.95, pursuant to the directives and requirements a corporation
33may act as guarantor on a surety bond for any small business
34contractor, including, but not limited to, women, minority, and
35disabled veteran contractors.
36(b) The provisions of subdivision (a) allowing a corporation to
37act as a guarantor on surety bonds may be funded through
38appropriate state or federal funding sources. Federal funds shall
39be deposited in the Federal Trust Fund in the State Treasury in
40accordance with Section 16360, for transfer to the expansion fund.
P41 1Article 11. Reporting
Each corporation shall provide to the program
4manager, in a format prescribed by him or her, the following data
5and reports:
6(a) A summary of all outstanding loans, bonds, and other credit
7enhancements to which a corporation guarantee, as authorized by
8this chapter, is attached, on a schedule determined by the program
9manager.
10(b) A summary of all outstanding loans and other debt
11instruments made by a corporation, as authorized by this chapter,
12on a schedule determined by the program manager.
13(c) A summary of all outstanding other financial project
14obligations made by a corporation, as authorized by this chapter,
15on a schedule of determined by the program manager.
16(d) Statement of economic interests from each designated person
17pursuant to Section 87302.
18(e) No later than July 31 of each fiscal year, commencing
19January 1, 2014, each of the following documents:
20(1) A copy of the corporation board approved budget for the
21current fiscal year.
22(2) Projected fiscal year summary of authorized program
23activities including loans, loan guarantees, bond guarantees, and
24other financial product activity supported by the expansion fund.
25(3) A copy of the written plan of operation or strategic plan for
26the current fiscal year as approved by the corporations board of
28(4) A copy of the current and valid articles of incorporation and
29bylaws of the corporation with noted amendments from the prior
30fiscal year.
31(f) No later than October 31 of each year commencing January
321, 2014, a copy of the corporation’s prior fiscal year audit, auditor
33findings, if any, and finding responses.
34(g) Any other statistical and other data, reports, or other
35information required by the directives and requirements or the
36program manager.
38commencing January 1, 2014, the program manager shall prepare
39and submit to the Governor and the Legislature, pursuant to Section
409795, a report for the preceding fiscal year ending June 30,
P42 1containing the expansion fund and trust fund financial product
2activity of each corporation, including all of the following:
3(1) Loans, guarantees, and other financial products awarded
4and outstanding balances.
5(2) Default and loss statistics.
6(3) Employment data.
7 (4) Ethnicity and gender data of participating contractors and
8other entities, and experience of surety insurer participants in the
9bond guarantee program.
10(5) Significant events.
11(b) The program manager shall post the report on the bank’s
23immediate preservation of the public peace, health, or safety within
24the meaning of Article IV of the Constitution and shall go into
25immediate effect. The facts constituting the necessity are:
26It is necessary that this bill take effect immediately in order to
27provide, as is necessary to timely implement the Governor’s
28reorganization plan, for a better managed and more efficient
29transition of small business assistance programs from the soon to
30be defunct Business, Transportation and Housing Agency to the
31 California Infrastructure and Economic Development Bank within
32the Governor’s Office of Business and Economic Development.