BILL NUMBER: AB 279 CHAPTERED 06/22/05 CHAPTER 16 FILED WITH SECRETARY OF STATE JUNE 22, 2005 APPROVED BY GOVERNOR JUNE 22, 2005 PASSED THE ASSEMBLY JUNE 20, 2005 PASSED THE SENATE JUNE 13, 2005 AMENDED IN SENATE JUNE 13, 2005 AMENDED IN SENATE JUNE 7, 2005 AMENDED IN ASSEMBLY MARCH 29, 2005 INTRODUCED BY Assembly Member Calderon FEBRUARY 9, 2005 An act to amend Section 17002 of the Corporations Code, and to amend Section 16430 of the Government Code, relating to limited liability companies, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 279, Calderon Limited liability companies: eligible securities. Under existing law, a limited liability company is authorized to engage in any lawful business activity, with specified exceptions. This bill would authorize a limited liability company to operate as a health care service plan if certain conditions are satisfied. Existing law specifies the types of securities that are eligible for the investment of surplus state funds, including commercial paper, meeting specified conditions, of an issuing corporation or trust. This bill would also include within the types of securities that are eligible for the investment of surplus state funds commercial paper, meeting the conditions specified in existing law, of an issuing limited liability company. This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 17002 of the Corporations Code is amended to read: 17002. (a) Subject to any limitations contained in the articles of organization and to compliance with any other applicable laws, a limited liability company may engage in any lawful business activity, whether or not for profit, except the banking business, the business of issuing policies of insurance and assuming insurance risks, or the trust company business. (b) Notwithstanding subdivision (a) and as specifically provided in this subdivision, a limited liability company may operate as a health care service plan licensed pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code if the limited liability company is a subsidiary of a health care service plan licensed pursuant to those provisions and the limited liability company is established to serve an existing line of business of the parent health care service plan. Notwithstanding any other provision of law, the tort or contract liability of a limited liability company created to operate as a health care service plan under this subdivision and its members is not limited or restricted in any manner because of the limited liability company status of the health care service plan. SEC. 2. Section 16430 of the Government Code is amended to read: 16430. Eligible securities for the investment of surplus moneys shall be any of the following: (a) Bonds or interest-bearing notes or obligations of the United States, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. (b) Bonds or interest-bearing notes on obligations that are guaranteed as to principal and interest by a federal agency of the United States. (c) Bonds and notes of this state, or those for which the faith and credit of this state are pledged for the payment of principal and interest. (d) Bonds or warrants, including, but not limited to, revenue warrants, of any county, city, metropolitan water district, California water district, California water storage district, irrigation district in the state, municipal utility district, or school district of this state. (e) Bonds, consolidated bonds, collateral trust debentures, consolidated debentures, or other obligations issued by federal land banks or federal intermediate credit banks established under the Federal Farm Loan Act, as amended, in debentures and consolidated debentures issued by the Central Bank for Cooperatives and banks for cooperatives established under the Farm Credit Act of 1933, as amended, in bonds or debentures of the Federal Home Loan Bank Board established under the Federal Home Loan Bank Act, in stock, bonds, debentures and other obligations of the Federal National Mortgage Association established under the National Housing Act as amended, and in the bonds of any federal home loan bank established under that act, obligations of the Federal Home Loan Mortgage Corporation, in bonds, notes, and other obligations issued by the Tennessee Valley Authority under the Tennessee Valley Authority Act as amended, and bonds, notes, and other obligations guaranteed by the Commodity Credit Corporation for the export of California agricultural products under the Commodity Credit Corporation Charter Act as amended. (f) (1) Commercial paper of "prime" quality as defined by a nationally recognized organization that rates these securities. Eligible paper is further limited to issuing corporations, trusts, or limited liability companies approved by the Pooled Money Investment Board that meet the conditions in either subparagraph (A) or subparagraph (B): (A) Both of the following: (i) Organized and operating within the United States. (ii) Having total assets in excess of five hundred million dollars ($500,000,000). (B) Both of the following: (i) Organized within the United States as a special purpose corporation, trust, or limited liability company. (ii) Having programwide credit enhancements including, but not limited to, overcollateralization, letters of credit, or surety bond. (2) Purchases of eligible commercial paper may not exceed 180 days' maturity, represent more than 10 percent of the outstanding paper of an issuing corporation, trust, or limited liability company, nor exceed 30 percent of the resources of an investment program. At the request of the Pooled Money Investment Board, this investment shall be secured by the issuer by depositing with the Treasurer securities authorized by Section 53651 of a market value at least 10 percent in excess of the amount of the state's investment. (g) Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers acceptances, which are eligible for purchase by the Federal Reserve System. (h) Negotiable certificates of deposits issued by a federally or state-chartered bank or savings and loan association, a state-licensed branch of a foreign bank, or a federally or state-chartered credit union. For the purposes of this section, negotiable certificates of deposits do not come within the provisions of Chapter 4 (commencing with Section 16500) and Chapter 4.5 (commencing with Section 16600). (i) The portion of bank loans and obligations guaranteed by the United States Small Business Administration or the United States Farmers Home Administration. (j) Bank loans and obligations guaranteed by the Export-Import Bank of the United States. (k) Student loan notes insured under the Guaranteed Student Loan Program established pursuant to the Higher Education Act of 1965, as amended (20 U.S.C. Sec. 1001 and following) and eligible for resale to the Student Loan Marketing Association established pursuant to Section 133 of the Education Amendments of 1972, as amended (20 U.S.C. Sec. 1087-2). (l) Obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the International Finance Corporation, or the Government Development Bank of Puerto Rico. (m) Bonds, debentures, and notes issued by corporations organized and operating within the United States. Securities eligible for investment under this subdivision shall be within the top three ratings of a nationally recognized rating service. SEC. 3. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to provide health plans with adequate time to establish limited liability companies for the transfer of existing contracts, it is necessary that this act take effect immediately.