California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 2 - Corporate Securities › Article 4 - Standards for the Exercise of the Commissioner's Authority › Subarticle 7.1 - Mutual Water Companies › Section 260.140.71.2 - Application for Qualification by Permit Pursuant to Section 25113 of the Corporate Securities Law of 1968

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
An application for qualification by permit of the offer
						and sale of securities proposed to be issued by a mutual water company must
						contain the information required by Sections
						260.110 and
						260.113 of the Commissioner's
						Rules.
In addition, the following information must be filed as
						an exhibit to the application in response to the items of Rule 260.113 found
						below:
(a) Item 20(iii):
(1) A statement of the purposes of the
					 company indicating the scope and variety of its proposed operations.
(2) A description of the service area in
					 which the mutual water company proposes to deliver water, and a representation
					 that the mutual water company contacted the Public Utilities Commission (PUC)
					 and the county local agency formation commission (LAFCO) to determine if the
					 proposed service area will overlap an existing water service area or if an
					 existing water service area could more appropriately serve the subdivision. In
					 the case of a proposed subdivision, contact with the PUC and the LAFCO should
					 be made at the time of initial contact with the local planning department. If a
					 water company is reorganizing to become a mutual water company, contact with
					 the PUC and the LAFCO should be made at the time initial contact with the local
					 or state department of health.
(3)
					 A description of the method by which the company is to acquire the water
					 supply, distribution and fire protection system. If a mutual water company
					 being formed in connection with subdivided lands or a subdivision of land is to
					 acquire its water supply, distribution and fire protection system from the
					 subdivider, copies of the contract and other documents relating to the
					 acquisition of the system must be filed. These contracts and documents must
					 evidence the mutual water company's title to the water supply, distribution and
					 fire protection system. For example: a bill of sale transferring all personal
					 property used and usable in the operation of the mutual water company; a copy
					 of the recorded deed to the wells and water tanks to be used by the mutual
					 water company in the supply, distribution and fire protection system; copies of
					 recorded deeds granting easements for construction, repair, maintenance and
					 improvements of the water supply, distribution and fire protection system.
Additionally, the subdivider must file a copy of an
						executed written contract entered into with the mutual water company whereby
						the subdivider agrees with the mutual water company to pay monthly a
						proportional part of the repair and replacement fund (as required by Rule
						260.140.71.2(b)(3)) according to the following ratio: number of lots owned or
						controlled by the subdivider to total number of lots in the subdivision. The
						written contract may also provide that, in consideration of transfer by the
						subdivider to the mutual water company of the water supply, distribution and
						fire protection system, the mutual water company agrees to:
(A) take all necessary action to apply for
					 subsequent permits from the Department of Business Oversight, provided the
					 subdivider agrees to pay all expenses of the mutual water company associated
					 with obtaining the permit, and provided further the extension of the water
					 supply, distribution and fire protection system is to a contiguous subdivision
					 and is completely integrated into the present system so that there exists, in
					 effect, one water supply, distribution and fire protection system which will
					 not create conflicts between present and future users;
(B) sell and issue securities to purchasers
					 of remaining lots in the subdivision on the same terms (except for price, if
					 the difference is justified) for the initial purchasers;
(C) cooperate with the subdivider in the
					 operation, maintenance, and improvement of the present and contemplated water
					 supply, distribution and fire protection system; and
(D) contract with the subdivider or a
					 successor in interest, if a reasonable request is made to do so, for the
					 management of the mutual water company for as long as lots in the subdivision
					 remain unsold, provided at all times the board of directors of the mutual water
					 company shall approve or disapprove the terms of the contract including
					 compensation to the subdivider or successor in interest, if
					 any.
(4) An engineer's
					 report prepared as required by Section
					 260.150 and Sections
					 260.504.2 -
					 260.504.2.4.
(5) If the company proposes to distribute
					 water for human consumption, a copy of the certificate of the Director of
					 Public Health as required by Sections
					 4010-
					 4024
					 of the Health and Safety Code must be filed.
(6) If a mutual water company is being formed
					 in connection with subdivided lands or a subdivision of land, as defined in
					 Sections
					 11000,
					 11000.1,
					 11000.5,
					 and
					 11004.5
					 of the Business and Professions Code, the application must state that the
					 securities will be sold or issued only to purchasers of lots in the
					 subdivision, or to successors in interest of purchasers of lots in the
					 subdivision, and not sold or issued to the subdivider or to the successor in
					 interest of the subdivider. Moreover, the application must state that the
					 securities will be sold or issued only after a public report for the
					 subdivision has been issued by the Department of Real Estate. The mutual water
					 company must file one additional copy of the application to be referred for
					 comment to the Commissioner of Real Estate.
(7) A statement undertaking to comply with
					 the requirements of Corporations Code Section
					 14300
					 for making the security issued by the mutual water company appurtenant to the
					 land.
(8) If the water supply and
					 distribution system will be completed prior to the issuance of a permit by the
					 Commissioner, the application should include either a statement of the engineer
					 preparing the engineer's report submitted with the application, or of a person
					 employed or acting on behalf of a public agency or other independent qualified
					 person, that the system has been examined and tested and that the system
					 operates in accordance with the design standards of the system described in the
					 application.