Amended in Senate September 6, 2013

Amended in Senate August 12, 2013

Amended in Senate July 8, 2013

Amended in Senate June 18, 2013

Amended in Senate June 5, 2013

Amended in Assembly April 17, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1247

Introduced by Assembly begin delete Member end delete begin insert Members end insert Medina begin insert and Bocanegra end insert

begin insert

(Principal coauthor: Senator Hueso)

end insert

February 22, 2013

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, begin delete and end delete to add Chapter 6 (commencing with Section 63088) to Division 1 of Title 6.7 begin delete to, end delete begin insert of, and end insert 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.

LEGISLATIVE COUNSEL’S DIGEST

AB 1247, as amended, Medina. Business investments: Small Business Financial Assistance Act of 2013.

Existing law, the California Small Business Financial Development Corporation Law, creates the California Small Business Board and the California Small Business Expansion Fund, a continuously appropriated fund which includes General Fund moneys. Existing law authorizes the formation of small business financial development corporations to grant loans from, or guarantee loans made by a financial institution or financial company, as defined, against, moneys awarded to the corporation from the expansion fund for the purpose of stimulating small business development. Existing law authorizes a director designated by the Secretary of Business, Transportation and Housing begin insert , the latter office abolished by existing law and the Governor’s Reorganization Plan No. 2 of 2012, effective on July 3, 2012, and operative July 1, 2013, end insert to perform specified duties under that law. A violation of certain conflict-of-interest provisions by the director and other persons, as specified, is a crime.

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) begin insert , located within the Governor’s Office of Business and Economic Development, end insert 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. begin insert The bill would also describe the transition of oversight of the Small Business Loan Guarantee Program from the Business, Transportation and Housing Agency to the I-Bank and compliance with federal and state program requirements. end insert 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.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Because this bill would expand the purposes for which a continuously appropriated fund is expended, the bill would make an appropriation.

This bill would declare that it is to take effect immediately as an urgency statute.

Vote: ²⁄₃. Appropriation: yes. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Chapter 1 (commencing with Section 14000) of
Part 5 of Division 3 of Title 1 of the Corporations Code is repealed.

SEC. 2.  

Chapter 1 (commencing with Section 14000) is added
to Part 5 of Division 3 of Title 1 of the Corporations Code, to read:

 

Chapter  1. California Small Business Financial
Development Corporations

 

Article 1.  Introduction

 

14000.  

This chapter shall be known and may be cited as the
California Small Business Financial Development Corporation
Law.

14001.  

(a) It is the intent of the Legislature in enacting this
chapter to promote the economic development of small businesses
through the California Small Business Finance Center by making
available capital, general management assistance, and other
resources, including financial services, personnel, and business
education to small business entrepreneurs, including women,
veteran, and begin delete minority owned end delete begin insert minority end insert begin insert -owned end insert businesses, for the
purpose of promoting the health, safety, and social welfare of the
citizens of California, to eliminate unemployment of the
economically disadvantaged of the state, and to stimulate economic
development and entrepreneurship.

(b) It is the further intent of the Legislature to provide a flexible
means to mobilize and commit all available and potential resources
in the various regions of the state to fulfill these objectives,
including federal, state, and local public resources, and private
debt and equity investment.

(c) It is the further intent of the Legislature that corporations
operating pursuant to this law, shall to the maximum extent
feasible, coordinate with other job and business development
efforts within their region directed toward implementing the
purpose of this chapter.

(d) It is the further intent of the Legislature to provide expanded
resources allowing participation by small and emerging contractors
in state public works contracts. Increased access to surety bonding
resources will assist in supporting participation by those firms in
public works contracts, and by stimulating increased participation
by small firms, the state will benefit from increased competition
and lower bid costs.

14002.  

If any provision of this chapter or the application thereof
to any person or circumstances is held invalid, this invalidity shall
not affect other provisions or applications of the chapter which
can be given effect without the invalid provision or application,
and to this end the provisions of this chapter are severable.

 

Article 2.  Definitions

 

14003.  

Unless the context otherwise requires, the definitions
in this section shall govern the construction of this chapter.

(a) “Bank” means the California Infrastructure and Economic
Development Bank.

(b) “Bank board” means the board of directors of the California
Infrastructure and Economic Development Bank.

(c) “Board of directors” means the board of directors of the
corporation.

(d) “California Small Business Board” means the advisory board
established pursuant to Section 14004.1 for the purpose of advising
on issues and programs affecting small business.

(e) “California Small Business Finance Center” means the
governmental unit begin insert within the bank, which is located within the
Governor’s Office of Business and Economic Development, end insert with
the administrative responsibility for begin insert the end insert programs begin insert and activities end insert
authorized pursuant to Section begin delete 63088.5 end delete begin insert 8684.2 end insert of the Government
Code begin insert , the Small Business Financial Assistance Act of 2013
(Chapter 6 (commencing with Section 63088) of Division 1 of Title
6.7 of the Government Code), end insert and this chapter.

(f) “Corporation” means any nonprofit California small business
financial development corporation created pursuant to this chapter,
or pursuant to Chapter 1 (commencing with Section 32000) of
Division 15.5 of the Financial Code.

(g) “Directives and requirements” means a document adopted
by the bank board setting forth policy direction as well as key rules
governing a particular subject area.

(h) “Executive director” means the executive director of the
begin insert California end insert Infrastructure and Economic Development Bank.

(i) “Expansion fund” means the California Small Business
Expansion Fund begin insert authorized pursuant to Section 63089.5 of the
Government Code end insert .

(j) “Financial company” means banking organizations, including
national banks and trust companies, savings and loan associations,
certified community development financial institutions,
microbusiness lenders, state insurance companies, mutual insurance
companies, and other public and private banking, lending,
retirement, and insurance organizations.

(k) “Financial institution” means regulated banking
organizations, including national banks and trust companies
authorized to conduct business in the state and state-chartered
commercial banks, trust companies, credit unions, and savings and
loan associations.

(l) “Financial product” means the type of financial assistance
described in Section 63088.5 of the Government Code begin insert or that the
California Small Business Finance Center or a small business
financial development corporation is otherwise authorized to
provide end insert .

(m) “Loan committee” means a committee appointed by the
board of directors of a corporation to determine the course of action
on a loan application pursuant to Chapter 6 (commencing with
Section 63088) of Division 1 of Title 6.7 of the Government Code.

(n) “Microbusiness lender” means a microbusiness lender as
defined in Section 13997.2 of the Government Code.

(o) “Program begin delete Manager” end delete begin insert manager end insert begin insert ” end insert means the manager of the
California Small Business Finance Center as designated to this
title by the executive director of the bank.

(p) “Trust fund” means the money from the expansion fund that
is held in trust by a financial institution or financial company. A
trust fund is not a deposit of state funds and is not subject to the
requirements of Section 16506 of the Government Code.

(q) “Trust fund account” means an account within the trust fund
that is either allocated to a particular corporation or shared by
multiple corporations for the purpose of paying loan defaults and
claims on bond guarantees or other financial products and program
uses provided in this chapter.

 

Article 3.  Program Manager

 

14004.  

(a) The program manager shall do all of the following:

(1) Administer this chapter.

(2) Make recommendations to the executive director and the
bank board on the approval or disapproval of the articles of
incorporation. This determination shall be based upon the
following:

(A) Review of the articles of incorporation and bylaws of the
corporation to determine whether they contain the provisions
required by this chapter and conform with the directives and
requirements adopted by the bank board pursuant to this chapter.

(B) A determination as to whether the legislative intent
expressed in Section 14001 shall be served by the proposed
corporation.

(C) A determination as to whether the responsibility, character,
and general fitness of the individuals who will manage the
corporation are such as to command the confidence of the state
and to warrant the belief that the business of the proposed
corporation will be honestly and efficiently conducted in
accordance with the intent and purpose of this chapter and that
they include representatives of the financial and business
community, as well as the economically disadvantaged.

(D) A determination by the program manager that there is
significant need for a new corporation.

(3) Have the accounts of each corporation formed under this
chapter begin insert examined and end insert audited as of the close of business on June
30 of each year. Material begin delete audit end delete begin insert examination end insert exceptions that are
not corrected by the corporation within a reasonable period of time
may result in the suspension or termination of the corporation
pursuant to Section 63089.3 of the Government Code.

(4) Have the portfolio of each corporation begin delete audited end delete begin insert examined end insert a
minimum of once a year. Material begin delete audit end delete begin insert examination end insert exceptions
that are not corrected by the corporation within a reasonable period
of time may result in the suspension or termination of the
corporation pursuant to Section 63089.3 of the Government Code.

(5) Review reports from the Department of Business Oversight
and inform corporations as to what corrective action is required.

(6) Examine, or cause to be examined, at any reasonable time,
all books, records, and documents of every kind, and the physical
properties of a corporation. The inspection shall include the right
to make copies, extracts, and search records.

(b) The program manager may attend and participate at
corporation meetings. The program manager, or his or her designee,
shall be an ex officio, nonvoting representative on the board of
directors and loan committees of each corporation. The program
manager shall meet through telecommunication or in person with
the board of directors of each corporation at least once each fiscal
year, commencing January 1, 2014.

14004.1.  

(a) The California Small Business Board is hereby
continued and created as an advisory board to the California
Infrastructure and Economic Development Bank Board, the
executive director, and the program manager. The California Small
Business Board may also advise the Governor and the Small
Business Advocate regarding issues and programs affecting
California’s small business community, including, but not limited
to, business innovation and expansion, export finance, state
procurement, management and technical assistance, venture capital,
and financial assistance.

(b) The California Small Business Board consists of the
following membership:

(1) The Director of Finance or his or her designee.

(2) The Director of the Office of the Small Business Advocate
or his or her designee.

(3) The Treasurer or his or her designee.

(4) A representative from two different corporations selected
by the corporations.

(5) Four members appointed by the Governor, one of whom
will serve as chair of the California Small Business Board, who
are actively involved in the California small business community.

(6) Two persons actively involved in the business or agricultural
communities, one appointed by the Speaker of the Assembly and
one appointed by the Senate Committee on Rules.

(7) Two Members of the Legislature, or their designees, one
appointed by the Speaker of the Assembly and one appointed by
the Senate Committee on Rules, so long as it does not conflict with
begin delete the duties of end delete their duties as legislators.

(c) The California Small Business Board shall advise the
program manager on matters regarding this chapter and Chapter
6 (commencing with Section 63088) of Division 1 of Title 6.7 of
the Government Code.

(d) The public members of the California Small Business Board,
at the discretion of the bank board, may be reimbursed per diem
and travel expenses pursuant to state law.

14004.2.  

The bank board shall approve new corporations
recommended by the program manager, based on an examination
of each of the following:

(a) Review of the articles of incorporation and bylaws of the
corporation to determine whether they contain the provisions
required by this chapter and conform with the directives and
requirements adopted by the bank board pursuant to this chapter.

(b) Determination as to whether the legislative intent expressed
in Section 14001 will be served by the proposed corporation.

(c) Determination as to whether the responsibility, character,
and general fitness of the individuals who will manage the
corporation are able to command the confidence of the state and
to warrant the belief that the business of the proposed corporation
will be honestly and efficiently conducted in accordance with the
intent and purpose of this chapter and that they include
representatives of the financial and business community, as well
as the economically disadvantaged.

(d) Determination of the program manager that there is
significant need for a new corporation.

 

Article 4.  New Corporations

 

14005.  

Upon approval by the bank board to become a
corporation, an entity shall adopt or amend its articles of
incorporation to comply with the following:

(a) The name of the corporation shall include the words “small
business financial development corporation,” except for those
corporations formed pursuant to this chapter prior to 2002, which
may also be called “small business development corporations,” or
those formed prior to 1985, which may also be called “rural or
urban development corporations.”

(b) The purposes for which the corporation is formed, which
shall be those specified in Section 14001. This requirement shall
not be deemed to preclude a statement of powers.

(c) A geographical description of the corporation’s primary
service area.

(d) The name and addresses of seven or more persons who are
to act in the capacity of directors until the selection of their
successors.

(e) That the corporation is organized pursuant to the California
Small Business Financial Development Corporation Law.

14006.  

If the bank board concurs with the findings of the
program manager pursuant to Section 14004, the bank board shall
direct the program manager to approve the articles of incorporation
and endorse the approval thereon and forward the same to the
Secretary of State for his or her approval and filing. Likewise, the
program manager shall review all amendments to the articles of
incorporation to ensure consistency with the purposes of this
chapter.

14007.  

(a) The corporation’s existence as a small business
begin insert financial end insert development corporation begins upon the filing of the
articles with the Secretary of State and continues perpetually,
unless otherwise expressly provided for by law.

(b) If a corporation is terminated from participation in all
programs, in order to continue its existence as a nonprofit
corporation pursuant to the Nonprofit Public Benefit Corporation
Law (Part 2 (commencing with Section 5110) of Division 2 of
Title 1 of the Corporations Code), the corporation shall amend its
articles of incorporation in accordance with Chapter 8
(commencing with Section 5180) of Part 2 of Division 2 of Title
1 to remove the provisions required by Section 14005, including
an amendment to remove the words “small business financial
development corporation,” “small business development
corporation,” or “rural or urban development corporation,” as
applicable, from the corporate name, and shall no longer be
registered with the Secretary of State as a small business financial
development corporation. A corporation shall not enjoy any of the
benefits of a small business financial development corporation
following begin delete suspension end delete begin insert termination end insert .

14009.  

(a) Each corporation shall have provisions establishing
a grievance procedure for employees, clients, or potential clients,
to appeal a decision or obtain redress of an action done by the staff
or loan committee of the corporation. The procedures shall be
established in writing during the probationary period of a new
corporation.

(b) The bylaws of the corporation shall authorize the removal
of officers only by a two-thirds vote of the directors of the
corporation.

14011.  

The Nonprofit Public Benefit Corporation Law (Part
2 (commencing with Section 5110) of Division 2 of this title)
applies to corporations formed under this chapter, except as to
matters otherwise provided for in this chapter.

14012.  

For six months following the establishment of a
corporation, commencing upon filing of the articles of
incorporation with the Secretary of State, a corporation shall be
on probation. While on probation, a corporation may be suspended
if suspension is recommended by the program manager and
affirmed by the executive director. This suspension is
nonappealable and not subject to the procedures for suspension
applicable to a corporation not on probation.

 

Article 5.  Corporation Board

 

14013.  

The corporate powers of a corporation shall be exercised
by begin delete the end delete begin insert its end insert board of directors.

14014.  

The bank shall enter into a contract with each
corporation that shall require that:

(a) A person may not serve on a begin insert corporation’s end insert board of directors
who is not a resident of, or person conducting business in, the
primary service area described in the articles of incorporation.

(b) A begin insert corporation’s end insert board of directors shall include
representatives from all of the following:

(1) The financial community.

(2) The business community.

(3) The economically disadvantaged.

begin delete

(c) Not more than one employee of the corporation may serve
on the board of directors at any one time.

end delete begin insert

(c) The chief executive officer of a corporation, or his or her
designee, is the only employee of the corporation who may serve
on its board of directors.

end insert

(d) A person who has a financial interest related to a matter over
which the board of directors has authority may not make,
participate in making, or in any way attempt to influence that
matter.

14015.  

If any director ceases to meet the qualifications
established in Section 14014, he or she shall immediately vacate
his or her position as a director and the position shall be deemed
vacant.

14016.  

If any vacancy occurs in the elective membership of
the board of directors through death, resignation, or otherwise, the
remaining directors shall elect a person representing the appropriate
category to fill the vacancy for the unexpired term.

14017.  

The bank board shall direct the program manager to
establish new small business financial development corporations
pursuant to the directives and requirements. The directives and
requirements shall include steps to achieve a goal of ensuring that
small businesses in all areas of the state would have reasonable
access to the financial products authorized by Chapter 6
(commencing with Section 63088) of Division 1 of Title 6.7 of
the Government Code for which they are eligible.

 

Article 6.  Corporations, Miscellaneous

 

14018.  

Every corporation shall provide for, and maintain a
central staff to perform, all administrative requirements of the
corporation, including all those functions required of a corporation
by the contract and this chapter.

14019.  

Reasonable costs incurred by a corporation in the
creation and maintenance of a central staff shall be paid to the
corporation from state funds, including a portion of the interest
earned on the expansion fund and the corporation’s trust fund
account, if the corporation has a trust fund account, otherwise, on
the expansion fund.

14020.  

A corporation shall report to the program manager, or
his or her designated representative, all statistical and other reports
required by this chapter and Chapter 6 (commencing with Section
63088) of Division 1 of Title 6.7 of the Government Code,
including responses to audit reports, budget requirements, and
other information relating to the establishment, monitoring, and
suspension or termination of a corporation.

14021.  

A corporation shall make a report to the program
manager, as required by Chapter 6 (commencing with Section
63088) of Division 1 of Title 6.7 of the Government Code.

 

Article 7.  Conflict of Interest

 

14022.  

It shall be unlawful for a member of the bank board or
for the executive director, program manager, or any person who
is an officer, director, contractor, or employee of a corporation, or
who is a member of a loan committee, or who is an employee of
the California Infrastructure and Economic Development Bank to
do any of the following:

(a) Ask for, consent, or agree to receive, any commission,
emolument, gratuity, money, property, or thing of value for his or
her own use, benefit, or personal advantage, for procuring or
endeavoring to procure for any person, partnership, joint venture,
association, or corporation, any loan, guarantee, financial, or other
assistance from any corporation.

(b) Borrow money, property, or to benefit knowingly, directly
or indirectly, from the use of the money, credit, or property of any
corporation.

(c) Make, maintain, or attempt to make or maintain, a deposit
of the funds of a corporation with any other corporation or
association on condition, or with the understanding, expressed or
implied, that the corporation or association receiving the deposit
shall pay any money or make a loan or advance, directly or
indirectly, to any person, partnership, joint venture, association,
or corporation, other than to a corporation formed under this
chapter.

14023.  

It shall be unlawful for a member of the bank board or
for the executive director, program manager, or any person who
is an officer or director of a corporation, or who is an employee
of the California Infrastructure and Economic Development Bank
to purchase or receive, or to be otherwise interested in the purchase
or receipt, directly or indirectly, of any asset of a corporation,
without paying to the corporation the fair market value of the asset
at the time of the transaction.

14024.  

Violation of any provision of this article shall constitute
a felony.

SEC. 3.  

Section 8684.2 of the Government Code is amended
to read:

8684.2.  

(a) It is the intent of the Legislature:

(1) To provide the Governor with appropriate emergency powers
in order to enable utilization of available emergency funding to
provide guarantees for interim loans to be made by lending
institutions, in connection with relief provided for those persons
affected by disasters or a state of emergency in affected areas
during periods of disaster relief assistance, for the purpose of
supplying interim financing to enable small businesses to continue
operations pending receipt of federal disaster assistance.

(2) That the Governor should utilize this authority to prevent
business insolvencies and loss of employment in areas affected by
these disasters.

(b) In addition to the allocations authorized by Section 8683
and the loan guarantee provisions of Section 63089.90, the
Governor may allocate funds made available for the purposes of
this chapter, in connection with relief provided, in affected areas
during the period of federal disaster relief, to the Small Business
Expansion Fund for use by the California Infrastructure and
Economic Development Bank, pursuant to Chapter 1 (commencing
with Section 14000) of Part 5 of Division 3 of Title 1 of the
Corporations Code and Chapter 6 (commencing with Section
63088) of Division 1 of Title 6.7 of this code, to provide guarantees
for low-interest interim loans to be made by lending institutions
for the purpose of providing interim financing to enable small
businesses that have suffered actual physical damage or significant
economic losses, as a result of the disaster or state of emergency
for which funding under this section is made available, to continue
or resume operations pending receipt of loans made or guaranteed
by the federal Small Business Administration. The maximum
amount of any loan guarantee funded under this paragraph shall
be limited by the directives and requirements . Each loan guarantee
shall not exceed 95 percent of the loan amount, except that a loan
guarantee may be for 100 percent of the loan amount if the
applicant can demonstrate that access to business records pertinent
to the loan application has been precluded by official action
prohibiting necessary reentry into the affected business premises
or that those business records pertinent to the loan application have
been destroyed. The term of the begin insert interim end insert loan shall be determined
by the lending institution providing the loan or shall be made
payable on the date the proceeds of a loan made or guaranteed by
the federal Small Business Administration with respect to the same
damage or loss are made available to the borrower, whichever
event first occurs.

(c) Loan guarantees for which the initial 12-month term has
expired and for which an application for disaster assistance funding
from the federal Small Business Administration is still pending
may be extended until the federal Small Business Administration
has reached a final decision on the application. Applications for
begin insert guarantees of end insert interim loans shall be processed in an expeditious
manner. Wherever possible, lending institutions shall fund
nonconstruction loans within 60 calendar days of application. Loan
guarantees for loans that have been denied funding by the federal
Small Business Administration, may be extended by the financial
institution provided that the loan is for no longer than a maximum
of seven years, if the business demonstrates the ability to repay
the loan with an extended loan term, and a new credit analysis is
provided. All begin delete loans end delete begin insert loan guarantees whose term has been end insert extended
under this provision shall be repaid in installments of principal
and interest, and be fully amortized over the term of the loan.
Nothing in this section shall preclude the lender from charging
reasonable administrative fees in connection with the loan.

(d) Allocations pursuant to this section shall, for purposes of
all provisions of law, be deemed to be for extraordinary emergency
or disaster response operation costs, as provided in Section 8690.6,
incurred by state employees assigned to work on the begin delete financial
development corporation program end delete begin insert guarantees authorized by this
section end insert .

(e) The California Infrastructure and Economic Development
Bank begin insert , which is located within the Governor end insert begin insert ’s Office of Business
and Economic Development, end insert may adopt directives and requirements
to implement the begin insert disaster end insert loan guarantee program authorized by
this section.

(f) As long as there are any outstanding small business disaster
loan guarantees, as authorized by Section 8684.2 or 63089.90, the
bank shall provide a report to the Legislature on loan guarantees
approved and rejected by gender, ethnic group, type of business
and location, and each participating loan institution. The report
may be combined with the report required in Section 63089.98.

SEC. 4.  

Chapter 6 (commencing with Section 63088) is added
to Division 1 of Title 6.7 of the Government Code, to read:

 

Chapter  6. Small Business Financial Assistance Act of
2013

 

Article 1.  Introduction

 

63088.  

(a) This chapter shall be known, and may be cited, as
the Small Business Financial Assistance Act of 2013.

(b) Notwithstanding any other provision of this division, this
chapter shall not apply to any other activities, powers, and duties
of the bank under any of the other chapters of this division.

63088.1.  

The Legislature finds all of the following:

(a) Small businesses form the core of the California economy
and that it is in the interest of the state to increase opportunities
for entrepreneurs, the self-employed, and microbusiness and small
business owners to have better access to capital and other technical
resources.

(b) Unemployment in California is a matter of statewide concern
requiring concerted public and private action to develop
employment opportunities for the disadvantaged, unemployed
persons, veterans, and youth.

(c) It is necessary to direct additional capital, general
management assistance, business education, and other resources
to encourage the development of small business opportunities,
particularly for minorities, women, and disabled persons, to
alleviate unemployment.

 

Article 2.  Definitions

 

63088.3.  

Unless the context otherwise requires, the definitions
in this section shall govern the construction of this chapter. The
definitions provided in this section shall only apply to this chapter
and not to any other chapter of this division.

(a) “Bank” means the California Infrastructure and Economic
Development Bank.

(b) “Bank board” means the board of directors of the California
Infrastructure and Economic Development Bank.

(c) “Board of directors” means the board of directors of a
corporation.

(d) “California Small Business Board” means the advisory board
established pursuant to Section 14004.1 of the Corporations Code
for the purpose of advising on issues and programs affecting small
business.

(e) “California Small Business Finance Center” means the
governmental unit begin insert within the bank, which is located within the
Governor’s Office of Business and Economic Development, end insert with
the administrative responsibility for programs begin insert and activities end insert
authorized pursuant to begin insert Section 8684.2 of this code, end insert Chapter 1
(commencing with Section 14000) of Part 5 of Division 3 of Title
1 of the Corporations Code begin insert , end insert and this chapter.

(f) “Corporation” means any nonprofit California small business
financial development corporation created pursuant to Chapter 1
(commencing with Section 14000) of Part 5 of Division 3 of Title
1 of the Corporations Code, or pursuant to Chapter 1 (commencing
with Section 32000) of Division 15.5 of the Financial Code.

(g) “Directives and requirements” means a document adopted
by the bank board setting forth policy direction as well as key rules
governing a particular subject area.

(h) “Executive director” means the executive director of the
California Infrastructure and Economic Development Bank.

(i) “Expansion fund” means the California Small Business
Expansion Fund begin insert authorized pursuant to Section 63089.5 end insert .

(j) “Financial company” means banking organizations, including
national banks and trust companies, savings and loan associations,
certified community development financial institutions,
microbusiness lenders, state insurance companies, mutual insurance
companies, and other public and private banking, lending,
retirement, and insurance organizations.

(k) “Financial institution” means regulated banking
organizations, including national banks and trust companies
authorized to conduct business in California and state-chartered
commercial banks, trust companies, credit unions, and savings and
loan associations.

(l) “Financial product” means the type of financial assistance
described in Section begin delete 63088.5. end delete begin insert 63088.5, authorized by this chapter,
or that the California Small Business Finance Center or a small
business financial development corporation is otherwise authorized
to provide. end insert

(m) “Loan committee” means a committee appointed by the
board of directors of a corporation to determine the course of action
on a loan application pursuant to this chapter.

(n) “Microbusiness lender” means a microbusiness lender as
defined in Section 13997.2.

(o) “Program manager” means the manager of the California
Small Business Finance Center as designated to this title by the
executive director of the California Infrastructure and Economic
Development Bank.

(p) “Small business loan” means a loan to a business defined
as an eligible small business as set forth in Section 121.3-10 of
Part 121 of Chapter 1 of Title 13 of the Code of Federal
Regulations, including those businesses organized for agricultural
purposes that create or retain employment as a result of the loan
unless otherwise defined by the directives and requirements.
Directives and requirements shall provide guidelines as to the
preferred ratio of jobs created or retained to total funds borrowed
for guidance to the corporations.

(q) “Trust fund” means the moneys from the expansion fund
that is held in trust by a financial institution or financial company.
A trust fund is not a deposit of state funds and is not subject to the
requirements of Section 16506.

(r) “Trustee” means the lending institution or financial company
selected by the bank board to hold and invest the trust funds, or
selected by a predecessor agency to the bank, if applicable. An
agreement made pursuant to this chapter and the trustee shall not
be construed to be a deposit of state funds.

(s) “Trust fund account” means an account within the trust fund
that is either allocated to a particular corporation or shared by
multiple corporations for the purpose of paying loan defaults and
claims on bond guarantees or other financial products and program
uses provided in this chapter.

 

Article 3.  Purpose

 

63088.5.  

(a) There is within the Governor’s Office of Business
and Economic Development the California Infrastructure and
Economic Development Bank, which shall, among other things,
administer the California Small Business begin delete Financial end delete begin insert Finance end insert Center
that administers programs to assist businesses seeking new capital
begin delete resources end delete begin insert resources, including, but not limited to, the Small
Business Loan Guarantee Program end insert .

(b) Pursuant to this chapter and Chapter 1 (commencing with
Section 14000) of Part 5 of Division 3 of Title 1 of the
Corporations Code, the bank board may continue programs funded
by the Small Business Expansion Fund or establish one or more
programs administered begin insert by the bank or end insert under contract with small
business financial development corporations. Programs established
pursuant to this chapter or Chapter 1 (commencing with Section
14000) of Part 5 of Division 3 of Title 1 of the Corporations Code
may include the following types of financial products:

(1) Loan guarantees and other credit enhancements.

(2) Direct loans and other debt instruments.

(3) Disaster loan guarantees.

(4) Surety bond guarantees.

(c) In all of their state-funded programs, the corporations shall,
to the extent practicable, be complementary to, and not competitive
with, commercial lenders and other state and federal programs.

(d) In carrying out this chapter the program manager, the
executive director, and the bank board may call on the California
Small Business Board for advice and recommendations. All actions
by the California Small Business Board are advisory.

(e) The California Small Business Board may also advise the
Governor and the Small Business Advocate regarding issues and
programs affecting California’s small business community,
including, but not limited to, business innovation and expansion,
export finance, state procurement, management and technical
assistance, venture capital, and financial assistance.

63088.6.  

To implement its responsibilities, a corporation shall
undertake program activities that shall include, but not be limited
to, the following:

(a) Outreach to low-resource small businesses and
microbusinesses. The corporations located in rural areas shall give
priority to low-resource farmers and rural and agriculturally related
businesses.

(b) Collaboration with other organizations and lenders to identify
and assist those businesses that are creditworthy but face
impediments to accessing conventional sources because of reasons,
such as low equity, inadequate collateral, unacceptable legal
structure (such as a co-op or nonprofit organization), management
inadequacies, and language problems.

(c) To the extent possible, bringing all possible financial
resources begin delete (low-interest lenders, BIDCOs, MESBICs, other
guarantors, etc.) end delete to bear on the borrower’s problems begin insert , including,
but not limited to, low end insert begin insert -interest lenders, business and industrial
development corporations (BIDCOs), minority enterprise small
business investment companies (MESBICs), and other financial
institutions, financial companies, and grantors end insert .

(d) Technical assistance to businesses receiving loans or
guarantees that will maximize the probability of loan repayment.

(e) Ongoing strategies for increasing program resources through
private sector involvement and nonstate funds.

(f) A program for collecting and liquidating defaulted loans so
that the corporations can qualify to become full-service lenders
under the Small Business Administration. Corporations located in
rural areas shall, in addition, try to qualify for lender status under
the United States Department of Agriculture’s Rural Development
and Farm Services Agency.

(g) Become an agent for other financial institutions and financial
companies.

begin insert

(h) Become an agent for other state or federal governmental
agencies that need a qualified financial service provider, including,
but not limited to, the State Energy Resources Conservation and
Development Commission.

end insert

 

Article 4.  Administrative Structure

 

63089.  

The bank board shall adopt directives and requirements
concerning the implementation of this chapter and pursuant to
Chapter 1 (commencing with Section 14000) of Part 5 of Division
3 of Title 1 of the Corporations Code. Any regulations adopted
pursuant to Chapter 1 (commencing with Section 14000) of Part
5 of Division 3 of Title 1 of the Corporations Code, as that chapter
read on January 1, 2013, shall remain in effect until the bank board
adopts directives and requirements relating to the specific policy
or activity, but in no case beyond June 1, 2015.

63089.1.  

begin insert (a) end insert begin insert   end insert The program manager acting under the guidance
of the executive director shall do all of the following:

begin delete

(a)

end delete

begin insert (1) end insert  Administer this chapter.

begin delete

(b)

end delete

begin insert (2) end insert  Enter into a contract between the bank and each corporation
for services to be provided by the corporations for one or more
programs begin insert or financial products end insert under this chapter and Chapter 1
(commencing with Section 14000) of Part 5 of Division 3 of Title
1 of the Corporations Code.

begin delete

(c)

end delete

begin insert (3) end insert  In accordance with available resources, allow the use of
branch offices for the purposes of making these programs under
this chapter accessible to all areas of the state.

begin delete

(d)

end delete

begin insert (4) end insert  Require each corporation to submit an annual written plan
of operation.

begin delete

(e)

end delete

begin insert (5) end insert  Authorize the distribution, transfer, and withholding of
moneys in the expansion fund and trust funds.

begin delete

(f)

end delete

begin insert (6) end insert  Authorize the investment of expansion and trust fund
moneys.

begin delete

(g)

end delete

begin insert (7) end insert  Oversee the operations of one or more programs authorized
pursuant to this chapter begin insert and by Section 8684.2 end insert .

begin delete

(h)

end delete

begin insert (8) end insert  Act as liaison between corporations, other state and federal
agencies, lenders, and the Legislature.

begin delete

(i)

end delete

begin insert (9) end insert  Act as secretary to the California Small Business Board, and
attend meetings of the California Small Business Board and the
bank board.

begin delete

(j) Attend

end delete

begin insert (b) end insert begin insert   end insert begin insert The program manager may attend end insert and participate at
corporation meetings. The program manager or his or her designee
shall be an ex officio, nonvoting representative on the board of
directors and loan committees of each corporation. The program
manager shall confer with the board of directors of each corporation
as appropriate and necessary to carry out his or her duties, but in
no case shall the program manager confer less than once each fiscal
year.

begin delete

(k) Assist

end delete

begin insert (c) end insert begin insert   end insert begin insert In accordance with available resources, assist end insert corporations
in applying for public and private funding opportunities, and in
obtaining program support from the business community.

63089.2.  

(a) The use of state funds paid out to the trust fund
and the return on those funds from investment pursuant to Section
63089.56 is conditional pursuant to Sections 63089.3 and 63089.57.
Each corporation shall enter into a written signed agreement with
the bank to provide program management services for one or more
programs begin insert or activities of the California Small Business Finance
Center end insert authorized under begin delete this chapter end delete begin insert Section 8684.2, this chapter, end insert
and Chapter 1 (commencing with Section 14000) of Part 5 of
Division 3 of Title 1 of the Corporations Code.

(b) Agreements with the corporations entered into pursuant to
this chapter are exempt from the requirements of begin delete Sections end delete begin insert Section end insert
10295, and Sections 10335 to 10381, inclusive, of the Public
Contract Code. The agreement shall, at a minimum, govern the
activities in which the corporation engages, the investment of state
funds and its return, and the budgeted administrative expenses the
corporations may incur.

(c) In the event the program manager and corporation do not
reach an agreement, the corporation may appeal one or more
conditions of the contract to the executive director or the bank
board by providing written notice to the executive director within
10 days of the final written contract proposal from the program
manager. The executive director or the bank board shall make a
determination within 30 days of receiving written notice.

(d) In the event that the program manager finds the corporation
has violated the terms of an active agreement, the program manager
may take any action under Section 63089.3 or 63089.57, or any
other action as appropriate. In the event the program manager finds
the corporation has substantively violated the terms of an active
agreement, the corporation shall have no authority to withdraw or
encumber the moneys in the trust fund or the return of those funds
by the issuance of guarantees, commitments for other financial
products, or by incurring expenses against the fund and its return
in any manner whatsoever, and the program manager may take
any action under Section 63089.3 or 63089.57, or any other action
as appropriate. Any guarantee or other encumbrance made by the
corporation in violation of this section shall be null and void, and
the state, the bank, the expansion fund, or the trust fund will not
be liable therefor.

63089.3.  

(a) The program manager may temporarily suspend
the guarantee authority or other financial product authority of a
corporation if in the determination of the program manager a
corporation has substantially failed to comply with any of the
requirements in subdivision (b), causing irreparable harm to the
program, the corporation’s begin delete guarantee end delete begin insert guarantee, end insert or any other
financial products authority. The notice of temporary suspension
sent to the corporation shall specify the reasons for the action.

(1) As used in this section, “guarantee or any other financial
products authority” means the authority to make or guarantee or
administer any other financial products that encumber funds in a
trust fund account, any account or subaccount under the direct
control of the bank or other state entity, or the expansion fund.

(2) The program manager shall make one of the determinations
specified in subdivision (b) within 30 days of the effective date of
the temporary suspension, unless the corporation and the program
manager mutually agree to an extension. The corporation shall
have the opportunity to submit written material to the program
manager addressing the items stated in the temporary suspension
notice. If the program manager does not make any determinations
within 30 days, the temporary suspension shall be reversed. The
corporation’s yearly contract shall remain in effect during the
period of temporary suspension, and the corporation shall continue
to receive reimbursement of necessary operating expenses.

(b) Failure of a corporation to substantially comply with the
following may result in the suspension or termination of a
corporation:

(1) Directives and requirements adopted by the bank board, for
implementing the California Small Business Development
Corporation Law (Chapter 1 (commencing with Section 14000)
of Part 5 of Division 3 of Title 1 of the Corporations Code) and
this chapter.

(2) Failure to meet any fiscal, audit, begin insert examination, end insert or portfolio
requirement, as contained in the directives and requirements begin insert and
examination reports end insert .

(3) Failure to significantly meet any milestones or scope of work
as contained in the performance contract between the corporation
and the bank.

(4) Any other action in the opinion of the program manager that
causes irreparable harm to the corporation, the expansion fund, or
the trust fund.

(c) Pursuant to subdivisions (a) and (b), the program manager
may take any of the following actions:

(1) Terminate the temporary suspension.

(2) Terminate the temporary suspension subject to the
corporation’s adoption of a specified remedial action plan approved
by the program manager.

(3) Continue the temporary suspension of guarantee and other
financial product authority until a specified time.

(4) Terminate the corporation’s authority to administer specified
loan guarantees or other financial products.

(5) Terminate the corporation’s authority to remain a corporation
authorized pursuant to the California Small Business Development
Corporation Law (Chapter 1 (commencing with Section 14000)
of Part 5 of Division 3 of Title 1 of the Corporations Code) and
this chapter.

(d) The program manager shall make one of the determinations
specified in subdivision (c) within 30 days of the effective date of
the temporary suspension notice, unless the corporation and the
program manager mutually agree to an extension. If the program
manager does not make any determinations within 30 days, the
temporary suspension shall be negated. The corporation’s yearly
contract shall remain in effect during the period of temporary
suspension, and the corporation shall continue to receive
reimbursement of necessary operating expenses.

(e) The actions contained in paragraphs (3) to (5), inclusive, of
subdivision (c) require a finding that irreparable harm will occur
unless the action is taken, and a finding that the corporation has
failed to comply with the California Small Business Development
Corporation Law (Chapter 1 (commencing with Section 14000)
of Part 5 of Division 3 of Title 1 of the Corporations Code) and
this chapter.

(f) In considering any action specified in subdivision (c), the
program manager shall consider, along with other criteria as
specified in subdivision (b), the corporation’s history and past
performance.

(g) If the program manager decides to take any action pursuant
to paragraphs (3) to (5), inclusive, of subdivision (c), the program
manager shall transfer all funds subject to the action, whether
encumbered or not, in the trust fund account of the suspended or
terminated corporation into either the expansion fund, or either
permanently or temporarily transfer the funds to the trust fund
account of another corporation begin insert or a holding account in the
expansion fund or trust fund established for this purpose end insert , unless
an appeal is received from the corporation pursuant to subdivision
(h).

(h) If the program manager intends to transfer funds as specified
in paragraph (g), the corporation shall be notified of the funds
transfer 10 days before the effective date of the transfer. The
corporation shall have the right to appeal the program manager’s
decision to the executive director within that 10-day period by
sending written notice to the executive director. Once the executive
director receives notice that the action is being appealed, the
program manager’s funds transfer shall be stayed.

(i) The corporation shall have the opportunity to submit written
material to the executive director addressing the actions and
findings stated in the program manager’s determination. The
executive director shall consider and make a final determination
on the appeal within 30 days of receiving the appeal notice from
the corporation, or such longer time as agreed to by the executive
director and the corporation. The executive director may elect to
take any of the actions listed in subdivision (j). The action of the
program manager shall remain in effect until the executive director
issues a decision. The corporation’s performance contract shall
remain in effect during the appeal period, and the corporation shall
continue to receive reimbursement of necessary operating expenses.

(j) Pursuant to subdivision (i), the executive director may
independently take action or seek the advice and recommendation
of the California Small Business Board prior to taking any of the
following actions:

(1) Rescind the action taken by the program manager.

(2) Modify the action taken by the program manager subject to
the adoption by the corporation of a specified remedial action plan
approved by the executive director.

(3) Affirm the action taken by the program manager.

(k) Following the executive director’s concurrence any action
pursuant to paragraphs (3) to (5), inclusive, of subdivision (c), the
program manager shall transfer all funds subject to the action,
whether encumbered or not, in the trust fund account of the
suspended or terminated corporation into either the expansion
fund, or either permanently or temporarily transfer the funds to
the trust fund account of another corporation begin insert or a holding account
in the expansion fund or trust fund established for this purpose end insert .
The corporation shall be notified of the funds transfer 10 days
before the effective date of the transfer. The corporation shall have
the right to appeal the executive director’s decision to the bank
board within that 10-day period by sending written notice to the
chair of the bank board. Once the chair of the bank board receives
notice that the executive director’s determination is being appealed,
the program manager’s funds transfer shall be stayed.

(l) The corporation shall have the opportunity to submit written
material to the bank board addressing the actions and findings
stated in the executive director’s determination. The bank board
shall consider and make a final determination on the appeal within
30 days of receiving the appeal notice from the corporation, or
such longer time as agreed to by the chair of the bank board and
the corporation. The action of the executive director shall remain
in effect until the bank board issues a decision. The corporation’s
performance contract shall remain in effect during the appeal
period, and the corporation shall continue to receive reimbursement
of necessary operating expenses.

(m) Pursuant to subdivision (l), the bank board may
independently take action or seek the advice and recommendation
of the California Small Business Board prior to taking any of the
following actions:

(1) Rescind the action taken by the executive director.

(2) Modify the action taken by the executive director subject to
the adoption by the corporation of a specified remedial action plan
acceptable to the executive director.

(3) Affirm the action taken by the executive director.

(n) Following the bank board’s concurrence with the executive
director’s determination consistent with any action pursuant to
paragraphs (3) to (5), inclusive, of subdivision (c), the program
manager shall transfer all funds subject to the action, whether
encumbered or not, in the trust fund account of the suspended or
terminated corporation into either the expansion fund, or either
permanently or temporarily transfer the funds to the trust fund
account of another corporation begin insert or a holding account in the
expansion fund or trust fund established for this purpose end insert . The
corporation shall be notified of the funds transfer 10 days before
the effective date of the transfer.

(o) Notwithstanding Section 63089.56, in the event a final
determination was made by the program manager, the executive
director or the bank board, whichever is applicable, to temporarily
transfer the funds of the corporation to the expansion fund or to
the trust fund account of another corporation begin insert or a holding account
in the expansion fund or trust fund established for this purpose end insert ,
upon compliance with all requirements of that final determination
as determined by the executive director, the transferred funds shall
be returned to the corporation’s trust fund account. While the funds
of a corporation’s trust fund account reside in the expansion fund,
use of the principal on the funds shall be governed by the
implementing directives and requirements specifying use of funds
in the expansion fund. Interest on the funds moved from a
corporation’s trust fund account upon temporary withdrawal shall
be limited to payment of the corporation’s administrative expenses,
as contained in the contract between the corporation and the bank
pursuant to this chapter.

(p) Following a final determination of termination of all
activities of an active corporation, in order to continue its existence
as a nonprofit corporation pursuant to the Nonprofit Public Benefit
Corporation Law (Part 2 (commencing with Section 5110) of
Division 2 of Title 1 of the Corporations Code), the corporation
must amend its articles of incorporation in accordance with Chapter
8 of Part 2 of Division 2 of the Corporations Code to remove the
provisions required by Section 14005 of the Corporations Code,
including an amendment to remove the words “small business
financial development corporation,” “small business development
corporation,” or “rural or urban development corporation,” as
applicable, from the corporate name and shall no longer be
registered with the Secretary of State as a small business financial
development corporation. A corporation shall not enjoy any of the
benefits of a small business financial development corporation
following suspension.

63089.4.  

The bank is authorized to:

(a) Approve new corporations recommended by the program
manager.

(b) Enter into contracts with corporations for program
management begin insert and other financial product-related end insert services.

(c) Select a financial institution or financial company to act as
trustee of the trust fund as specified in this chapter.

(d) Invest expansion fund and trust fund moneys as specified
in this chapter.

(e) Affirm, modify, or rescind the determinations of the program
manager and the executive director as specified in this chapter.

(f) Adopt directives and requirements as specified in this chapter.

(g) Authorize new financial product programs begin insert and activities end insert
pursuant to begin delete the provisions of end delete this chapter.

 

Article 5.  Expansion Fund and Trust Fund

 

63089.5.  

(a) There is hereby continued in existence in the State
Treasury the California Small Business Expansion Fund. All or a
portion of the funds in the expansion fund may be paid out, with
the approval of the Department of Finance, to a financial institution
or financial company that will establish a trust fund and act as
trustee of the funds.

(b) The expansion fund and the trust fund shall be used for the
following purposes:

(1) To pay defaulted loan guarantee or surety bond losses, or
other financial product defaults or losses.

(2) To fund direct loans and other debt instruments.

(3) To pay administrative costs of corporations.

(4) To pay state support and administrative costs.

(5) To pay those costs necessary to protect a real property
interest in a financial product default.

(c) The expansion fund and trust fund are created solely for the
purpose of receiving state, federal, or local government moneys,
and other public or private moneys to make loans, guarantees, and
other financial products begin delete pursuant to this chapter end delete begin insert that the California
Small Business Finance Center or a financial development
corporation is authorized to provide end insert . The program manager shall
provide written notice to the Joint Legislative Budget Committee
and to the Chief Clerk of the Assembly and the Secretary of the
Senate who shall provide a copy of the notice to the relevant policy
committees within 10 days of any nonstate funds being deposited
in the expansion fund. The notice shall include the source, purpose,
timeliness, and other relevant information as determined by the
bank board.

(d)  begin insert (1) end insert begin insert   end insert One or more accounts in the expansion fund and the
trust fund may be created by the program manager for corporations
participating in one or more programs authorized under this chapter
begin insert and Section 8684.2 end insert . Each account is a legally separate account,
and shall not be used to satisfy loan guarantees or other financial
product obligations of another corporation except when the
expansion fund or trust fund is shared by multiple corporations.

begin insert

(2) The program manager may create one or more holding
accounts in the expansion fund or the trust fund, or in both, to
accommodate the temporary or permanent transfers of funds
pursuant to Section 63089.3.

end insert

(e) The amount of guarantee liability outstanding at any one
time shall not exceed five times the amount of funds on deposit in
the expansion fund plus any receivables due from funds loaned
from the expansion fund to another fund in state government as
directed by the Department of Finance pursuant to a statute enacted
by the Legislature, including each of the trust fund accounts within
the trust fund.

(f) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

63089.5.  

(a) There is hereby continued in existence in the State
Treasury the California Small Business Expansion Fund. All or a
portion of the funds in the expansion fund may be paid out, with
the approval of the Department of Finance, to a financial institution
or financial company that will establish a trust fund and act as
trustee of the funds.

(b) The expansion fund and the trust fund shall be used for the
following purposes:

(1) To pay defaulted loan guarantee or surety bond losses, or
other financial product defaults or losses.

(2) To fund direct loans and other debt instruments.

(3) To pay administrative costs of corporations.

(4) To pay state support and administrative costs.

(5) To pay those costs necessary to protect a real property
interest in a financial product default.

(c) The expansion fund and trust fund are created solely for the
purpose of receiving state, federal, or local government moneys,
and other public or private moneys to make loans, guarantees, and
other financial products begin delete pursuant to this chapter end delete begin insert that the California
Small Business Finance Center and a small business financial
development corporation are authorized to provide end insert .

(d) One or more accounts in the expansion fund and the trust
fund may be created by the program manager for corporations
participating in one or more programs authorized under this
chapter. Each account is a legally separate account, and shall not
be used to satisfy loan guarantees or other financial product
obligations of another corporation except when the expansion fund
or trust fund is shared by multiple corporations.

(e) The amount of guarantee liability outstanding at any one
time shall not exceed four times the amount of funds on deposit
in the expansion fund plus any receivables due from funds loaned
from the expansion fund to another fund in state government as
directed by the Department of Finance pursuant to a statute enacted
by the Legislature, including each of the trust fund accounts within
the trust fund.

(f) This section shall become operative on January 1, 2018.

63089.51.  

(a) All money deposited in the expansion fund is
hereby continuously appropriated, without regard to fiscal years,
for the purposes of this chapter.

(b) Except as specified in subdivision (b) of Section 63089.54,
the state or the bank shall not be liable or obligated in any way
beyond the state money that is allocated in the expansion fund
from moneys from the General Fund appropriated for those
purposes.

63089.52.  

(a) The program manager, at his or her discretion,
with the approval of the executive director, may request the trustee
to invest those moneys in the trust fund in any of the securities
described in Section 16430. Returns from these investments shall
be deposited in the expansion fund and shall be used to support
the programs of this chapter.

(b) Any investments made in securities described in Section
16430 shall be governed by the investment policy approved by the
bank board.

63089.53.  

Except as specified in subdivision (b) of Section
63089.54, the state or the bank shall not be liable or obligated in
any way beyond the money that is allocated and deposited in the
trust fund accounts.

63089.54.  

(a) There is hereby created in the State Treasury
the Small Business Disaster Recovery Loan Loss Reserve Account,
as part of the expansion fund. This account shall be used to pay
for losses resulting from loan guarantees issued pursuant to
subdivision (a) of Section 63089.90 or subdivision (b) of this
section, and disaster loan guarantees and other credit enhancement
defaults issued prior to the effective date of this section that are in
default.

(b) Any lending institution that issues a loan that is guaranteed
by resources in this account shall be fully reimbursed for the
guaranteed portion of principal and interest that result from a loan
or loans that are in default. If there are insufficient funds in this
account to fully satisfy all claimants, the full faith of the resources
in the General Fund are pledged to satisfy the obligations of this
account. This account may only guarantee as much loan dollar
value as is specifically authorized by the Director of Finance with
the concurrence of the Governor. This account shall receive all
moneys transferred pursuant to Section 63089.55, and any
unencumbered balances transferred to the California Small
Business Expansion Fund pursuant to Chapters 11 and 12 of the
First Extraordinary Session of the Statutes of 1989, and Chapter
1525 of the Statutes of 1990, as of July 1, 1992.

(c) The Governor may utilize this authority to prevent business
insolvencies and loss of employment in an area affected by a state
of emergency within the state and declared a disaster by the
President of the United States, by the Administrator of the United
States Small Business Administration, or by the United States
Secretary of Agriculture, or declared to be in a state of emergency
by the Governor of California.

63089.55.  

The Director of Finance, with the approval of the
Governor, may transfer moneys in the Special Fund for Economic
Uncertainties to the California Small Business Expansion Fund
for use as authorized by the bank board, in an amount necessary
to make loan guarantees pursuant to Section 8684.2 and this
chapter.

63089.56.  

(a) The funds in the expansion fund shall be paid
out to trust fund accounts by the Treasurer on funds drawn by the
Controller and requisitioned by the program manager, pursuant to
the purposes of this chapter. The program manager may transfer
funds allocated from the expansion fund to accounts, established
solely to receive the funds, in financial institutions or financial
companies designated by the bank to act as trustee. The financial
institutions or financial companies so designated shall be approved
by the state for the receipt of state deposits. Interest earned on the
trust fund accounts in financial institutions or financial companies
may be utilized by the corporations or the bank pursuant to the
purposes of this chapter.

(b) The program manager may reallocate funds held within a
corporation’s trust fund account.

(1) The program manager begin delete shall end delete begin insert may end insert reallocate funds based on
which corporation is most effectively using its guarantee funds. If
funds are withdrawn from a less effective corporation as part of a
reallocation, the program manager shall make that withdrawal only
after giving consideration to that corporation’s fiscal solvency, its
ability to honor loan guarantee defaults, and its ability to maintain
a viable presence within the region it serves. Reallocation of funds
shall occur no more frequently than once per fiscal year. Any
decision made by the program manager pursuant to this subdivision
may be appealed to the executive director unless otherwise
specified. The executive director has the authority to repeal or
modify any decision to reallocate funds.

(2) The program manager may authorize a corporation to exceed
the leverage ratio specified in Section 63089.5 or subdivision (a)
of Section 63089.62, pending the annual reallocation of funds
pursuant to this section. However, no corporation shall be permitted
to exceed an outstanding guarantee liability of more than specified
in subdivision (a) of Section 63089.62 after a reallocation is made.

(c) Except as specified in subdivision (e), the program manager
shall allocate and transfer money to trust fund accounts based on
performance-based criteria. The criteria shall include, but not be
limited to, the following:

(1) The default record of the corporation.

(2) The number and amount of loans guaranteed by a
corporation.

(3) The number and amount of loans made by a corporation if
state funds were used to make those loans.

(4) The number and amount of surety bonds guaranteed by a
corporation.

(5) The number and amount of other financial product activity.

(6) The number of jobs created or retained due to the financial
product activity.

(d) The criteria specified in subdivision (c) shall not apply to a
corporation that has been in existence for five years or less. If not
already adopted, the bank board shall develop directives and
requirements specifying the basis for transferring account funds
to those corporations that have been in existence for five years or
less.

(e) Any decision made by the program manager pursuant to this
section may be appealed to the executive director within 15 days
of notice of the proposed action. The executive director may repeal
or modify any reallocation and transfer decisions made by the
program manager. The appealing corporation shall submit, in
writing, the specific area or areas of appeal and set forth any
recommendation to the executive director for consideration. The
executive director shall render a final decision within five business
days of receiving the written appeal.

(f)  Any decision made by the executive director shall be
appealable in writing to the bank board within 15 days of the
executive director’s decision, or such longer period as agreed to
between the executive director and the corporation. The bank board
shall make a final reallocation or transfer decision within 30 days
of receiving the appeal, or such longer period agreed to between
the executive director and the corporation.

(g) In the event of an appeal under this section, all allocations
or transfers of money to trust fund accounts shall be on hold
pending resolution by the executive director or bank board, as
applicable.

63089.57.  

Pursuant to this chapter and any directives and
requirements adopted pursuant to this chapter, the state has residual
interest in the funds deposited by the state to a trust fund account
and to the return on these funds from investments. On dissolution,
suspension, or termination of the corporation, these funds shall be
withdrawn by the program manager from the trust fund account
and returned to the expansion fund or temporarily transferred to
another trust fund account. This provision shall be contained in
the trust instructions to the trustee.

63089.58.  

Each trust fund account shall consist of a loan
guarantee account, and, upon recommendation by the program
manager, a bond guarantee account or other financial product
account, each of which is a legally separate account, and the assets
of one account shall not be used to satisfy loan guarantees or other
financial product obligations of another corporation, except when
a trust fund account is designated by the program manager to be
shared by multiple corporations. The amount of funds allocated
to a bond guarantee account shall be pursuant to the directives and
requirements. A corporation shall not use trust fund accounts to
secure a corporate indebtedness. State funds deposited in the trust
fund accounts, with the exception of guarantees established
pursuant to this chapter, shall not be subject to liens or
encumbrances of the corporation or its creditors.

63089.59.  

(a) The financial institution or financial company
that is to act as trustee of the trust fund shall be designated by the
bank. The corporation shall not receive money on deposit to
support guarantees or other financial products issued under this
chapter without the approval of the program manager.

(b) State funds may not be used to finance an expense incurred
by a corporation in a location not approved pursuant to the contract
between the bank and the corporation. The prohibition against use
of state funds also applies to the location of satellite offices, and
the area served from a corporation office.

(c) Except as otherwise provided in this chapter, the trust fund
account shall be used solely to make loans, guarantee bonds and
loans, and provide other financial products approved by the
corporation that meet the financial product criteria of the directives
and requirements. Except as provided in subdivision (b) of Section
63089.54, the state or the bank shall not be liable or obligated in
any way as a result of the allocation of state moneys to a trust fund
account beyond the state moneys that are allocated and deposited
in the fund pursuant to this chapter, and that are not otherwise
withdrawn by the state pursuant to this chapter.

63089.60.  

(a) The program manager shall recommend whether
the expansion fund and trust fund accounts are to be leveraged,
and if so, by how much. Upon the request of the corporation, the
program manager’s decision may be repealed or modified by the
executive director or the bank board.

(b) The amount of guarantee liability outstanding at any one
time shall not exceed five times the amount of funds on deposit in
the expansion fund plus any receivables due from funds loaned
from the expansion fund to another fund in state government as
directed by the Department of Finance pursuant to a statute enacted
by the Legislature, including each of the trust fund accounts within
the trust fund.

(c) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

63089.60.  

(a) The program manager shall recommend whether
the expansion fund and trust fund accounts are to be leveraged,
and if so, by how much. Upon the request of the corporation, the
program manager’s decision may be repealed or modified by the
executive director or the bank board.

(b) The amount of guarantee liability outstanding at any one
time shall not exceed four times the amount of funds on deposit
in the expansion fund plus any receivables due from funds loaned
from the expansion fund to another fund in state government as
directed by the Department of Finance pursuant to a statute enacted
by the Legislature, including each of the trust fund accounts within
the trust fund, unless the program manager has permitted a higher
leverage ratio for an individual corporation pursuant to subdivision
(b) of Section 63089.56.

(c) This section shall become operative on January 1, 2018.

63089.61.  

(a) The corporate guarantee shall be backed by
funds on deposit in the corporation’s trust fund account, or by
receivables due from funds loaned from the corporation’s trust
fund account to another fund in state government, as directed by
the Department of Finance pursuant to a statute enacted by the
Legislature.

(b) Loan guarantees shall be secured by a reserve of at least 20
percent to be determined by the program manager unless a higher
leverage ratio for an individual corporation has been approved
pursuant to subdivision (b) of Section 63089.56.

(c) The expansion fund and trust fund accounts shall be used to
guarantee obligations and other financial product obligations, to
pay the administrative costs of the corporations, and for other uses
pursuant to this chapter begin insert and Section 8684.2 end insert .

(d) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

63089.61.  

(a) The corporate guarantee shall be backed by
funds on deposit in the corporation’s trust fund account, or by
receivables due from funds loaned from the corporation’s trust
fund account to another fund in state government, as directed by
the Department of Finance pursuant to a statute enacted by the
Legislature.

(b) Loan guarantees shall be secured by a reserve of at least 25
percent to be determined by the program manager, unless a higher
leverage ratio has been approved for an individual corporation
pursuant to subdivision (b) of Section 63089.56.

(c) The expansion fund and trust fund accounts shall be used to
guarantee obligations and other financial product obligations, to
pay the administrative costs of the corporations, and for other uses
pursuant to this chapter begin insert and Section 8684.2 end insert .

(d) This section shall become operative on January 1, 2018.

63089.62.  

(a) It is the intent of the Legislature that the
corporations make maximum use of their statutory authority to
guarantee loans and surety bonds, and administer other financial
products, including the authority to secure loans with a minimum
loan loss reserve of only 20 percent, unless the program manager
authorizes a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 63089.56, so that the
financing needs of small business may be met as fully as possible
within the limits of corporations’ trust fund account balance.

(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President
of the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where
the dollar amount of the loan is less than one hundred thousand
dollars ($100,000), so that at least 15 percent of the dollar value
of loans guaranteed by the corporation is for those loans. The
corporation shall comply with this requirement within one year of
the date the emergency or disaster is declared. Upon application
of a corporation, the executive director may waive or modify the
rule for the corporation if the corporation demonstrates that it made
a good faith effort to comply and failed to locate lending
institutions in the region that the corporation serves that are willing
to make guaranteed loans in that amount.

(c) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

63089.62.  

(a) It is the intent of the Legislature that the
corporations make maximum use of their statutory authority to
guarantee loans and surety bonds, and administer other financial
products, including the authority to secure loans with a minimum
loan loss reserve of only 25 percent, unless the program manager
authorizes a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 63089.56, so that the
financing needs of small business may be met as fully as possible
within the limits of corporations’ trust fund account balance.

(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President
of the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where
the dollar amount of the loan is less than one hundred thousand
dollars ($100,000), so that at least 15 percent of the dollar value
of loans guaranteed by the corporation is for those loans. The
corporation shall comply with this requirement within one year of
the date the emergency or disaster is declared. Upon application
of a corporation, the program manager may waive or modify the
rule for the corporation if the corporation demonstrates that it made
a good faith effort to comply and failed to locate lending
institutions in the region that the corporation serves that are willing
to make guaranteed loans in that amount.

(c) This section shall become operative on January 1, 2018.

 

Article 6.  Corporations, Miscellaneous

 

63089.65.  

(a) A corporation shall establish one or more loan
committees, each of which shall be composed of five or more
persons, a majority of whom shall be experienced in banking and
lending operations.

(b) A loan committee shall review applications to the corporation
for a loan or guarantee and shall do each of the following:

(1) Determine the feasibility of the proposed transaction. The
loan committee shall recommend approval of the application only
upon a determination that there is a reasonable chance that the loan
will be repaid.

(2) On the basis of that determination, recommend to the board
of directors any action that the loan committee deems appropriate
under the circumstances, or, in the event that approval authority
has been delegated to the loan committee by the board of directors,
approve or disapprove the loan application.

(c) A loan committee shall expeditiously act to accept or reject
loan applications.

(d) A person who has a financial interest related to a matter over
which the loan committee has authority may not make, participate
in making, or in any way attempt to influence that matter.

63089.66.  

Unless delegated to its loan committee, the
corporation’s board of directors, upon a recommendation from its
loan committee, shall do all of the following:

(a) Emphasize consideration to applications that will increase
employment of disadvantaged, disabled, or unemployed persons,
or increase employment of youth residing in areas of high youth
unemployment and high youth delinquency.

(b) Give consideration to applications from traditional and
safety-net providers of Medi-Cal services that will promote access
to quality medical care for individuals enrolled in Medi-Cal
managed health care networks that are contracting with or owned
or operated by a county board of supervisors, a county health
commission, or a county health authority organized pursuant to
Section 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, or
14087.9605 of the Welfare and Institutions Code.

63089.67.  

A corporation may charge the borrower or financial
institution a loan fee or credit enhancement fee on all loans made
or guaranteed by the corporation to defray the operating expenses
of the corporation. The amount of the fee shall be determined by
the directives and requirements.

 

Article 7.  Loan Guarantees

 

63089.70.  

(a) The Small Business Expansion Fund, which is
hereby continued in existence, shall, among other things, provide
guarantees to loans offered by financial institutions and financial
companies to small businesses.

(b) The Legislature finds and declares that the Small Business
Loan Guarantee Program has enabled participating small businesses
that do not qualify for conventional business loans or Small
Business Administration loans to secure funds to expand their
businesses. These small businesses would not have been able to
expand their businesses in the absence of the program. The program
has also provided valuable technical assistance to small businesses
to ensure growth and stability. The study commissioned by former
Section 14069.6 of the Corporations Code, as added by Chapter
919 of the Statutes of 1997, documented the return on investment
of the program and the need for its services. The value of the
program has also been recognized by the Governor through
proposals contained in the May Revision to the Budget Act of
2000 for the 2000-01 fiscal year.

(c) A corporation shall not issue a begin delete loan or guarantee, end delete begin insert guarantee
under this section end insert unless it determines that the following conditions
are satisfied:

(1) There is begin delete no end delete begin insert a low end insert probability that the loan begin insert being guaranteed end insert
would be granted by a financial company or financial institution
under reasonable terms and conditions and the borrower has
demonstrated a reasonable prospect of repayment.

(2) The loan proceeds will be used exclusively in this state.

(3) The loan qualifies as a small business loan or an employment
incentive loan.

(4) The borrower has a minimum equity interest in the business
as determined by the directives and requirements.

(5) As a result of the begin delete loan, end delete begin insert loan being guaranteed, end insert the jobs
generated or retained demonstrate reasonable conformance to any
directives and requirements specifying employment criteria.

63089.71.  

(a) Among other priorities, corporations shall give
high priority to the issuance of loan guarantees to small business
incubators and to businesses that lease space in incubators.

(b) For the purposes of this section, “incubator” means a facility
that allows new small businesses to increase their probability of
success by sharing needed capital equipment, services, and
facilities, which may include, but are not limited to, the following:

(1) Reception and meeting area.

(2) Secretarial services, such as collating, telephone answering,
or mailhandling.

(3) Accounting and bookkeeping services.

(4) Research libraries.

(5) Onsite financial and management counseling.

(6) Parking.

(7) Flexible lease arrangements for flexible space.

(8) Computer or word processing facilities.

(9) Day care facilities.

(10) Office furniture rentals.

(11) A graduation policy sometimes requiring firms to leave
after three to five years in a subsidized, nurturing environment.

(12) Employee training and placement services.

(c) Among other priorities, corporations shall give high priority
to marketing their services to Phase 1 or Phase 2 Small Business
Innovation Research (SBIR) recipients and providing loan
guarantees, whenever possible.

 

Article 8.  Direct Lending and Other Debt Instruments

 

63089.80.  

(a) A corporation may utilize funds for direct
lending or other debt instruments pursuant to the directives and
requirements.

(b) The amount of funds available for direct lending and other
debt instruments shall be determined by the directives and
requirements. In its capacity as a direct lender, the corporation
may sell in the secondary market the guaranteed portion of each
loan, if guaranteed, so as to raise additional funds for direct lending.

(c) To execute the direct loan and other debt begin delete instrument
programs established in this chapter, end delete begin insert instruments authorized
pursuant to this chapter, including, but not limited to, those
authorized pursuant to Section 63088.5, end insert the bank may loan trust
funds to a corporation for the express purpose of lending those
funds to an identified borrower. The loan authorized by the bank
to the corporation shall be on terms similar to the loan between
the corporation and the borrower.

(d) The amount of the loan begin insert , made to the corporation by the
bank, end insert may be in excess of the amount of a loan to any individual
borrower, but actual disbursements pursuant to the bank loan
agreement shall be required to be supported by a loan agreement
between the borrower and the corporation in an amount at least
equal to the requested disbursement. The loan between the bank
and the corporation shall be evidenced by a credit agreement. In
the event that any loan between the corporation and borrower is
not guaranteed by a governmental agency, the portion of the credit
agreement attributable to that loan shall be secured by assignment
of any note, executed in favor of the corporation by the borrower
to the bank. The terms and conditions of the credit agreement shall
be similar to the loan agreement between the corporation and the
borrower, which shall be collateralized by the note between the
corporation and the borrower.

(e) In the absence of fraud on the part of the corporation, the
liability of the corporation to repay the loan to the bank is limited
to the repayment received by the corporation from the borrower,
except in a case where the United States Department of Agriculture
requires exposure by the corporation in rule or regulation. The
corporation may use trust funds for loan repayment to the bank if
the corporation has exhausted a loan loss reserve created for this
purpose. Interest and principal received by the bank from the
corporation shall be deposited into the same account from which
the funds were originally borrowed.

(f) Upon the approval of the program manager, a corporation
shall be authorized to borrow trust funds from the bank for the
purpose of relending those funds to small businesses. A corporation
shall demonstrate to the program manager that it has the capacity
to administer a direct loan program, and has procedures in place
to limit the default rate for loans to startup businesses. The
percentage of any trust fund account to be used for the direct
lending pursuant to this subdivision shall be established in the
directives and requirements.

(g) A corporation shall not issue a direct loan or other begin delete financial
product, end delete begin insert debt instrument end insert unless and until it determines that all of
the following conditions are satisfied:

(1) The direct loan or other begin delete financial product end delete begin insert debt instrument end insert
assistance would not be granted by a financial company or financial
institution under reasonable terms and conditions and the borrower
has demonstrated a reasonable prospect of repayment.

(2) The begin delete loan or financial product end delete begin insert direct loan or debt instrument end insert
proceeds will be used exclusively in this state.

(3) The direct loan or begin delete financial product end delete begin insert debt instrument end insert qualifies
as a small business loan or employment incentive loan.

(4) The borrower has a minimum equity interest in the business
as determined by the directives and requirements.

(5) As a result of the direct loan or other debt instrument, the
jobs generated or retained demonstrate reasonable conformance
to any directives and requirements specifying employment criteria.

(h) The maximum begin insert direct end insert loan or other debt instrument amount
to a small business shall be set by the directives and requirements.
In the absence of fraud on the part of the corporation, the repayment
obligation pursuant to the loan or other debt instrument to the
corporation shall be limited to the amount of funds received by
the corporation for the begin insert direct end insert loan or other debt instrument to the
small business and any other funds received from the bank that
are not disbursed. The corporation shall be authorized to charge a
fee to the small business borrower, in an amount determined
pursuant to the directives and requirements. The programs begin insert and
debt instruments end insert provided for in this begin delete subdivision end delete begin insert article end insert shall be
available in all geographic areas of the state.

 

Article 9.  Disaster Loan Guarantees

 

63089.90.  

(a) Pursuant to Section 8684.2 and the contract
between a corporation and the bank, a corporation may, in an area
affected by a state of emergency within the state and declared a
disaster by the President of the United States, the Administrator
of the United States Small Business Administration, or the United
States Secretary of Agriculture, or declared to be in a state of
emergency by the Governor of California, provide loan guarantees
from funds allocated in Section 63089.55 to small businesses,
small farms, nurseries, and agriculture-related enterprises that have
suffered actual physical damage or significant economic injury as
a result of the disaster.

(b) The bank board may adopt directives and requirements to
implement the disaster loan guarantee program authorized by this
section. Any regulations adopted under Chapter 1 (commencing
with Section 14000) of Part 5 of Division 3 of Title 1 of the
Corporations Code shall remain in effect until the bank adopts
directives and requirements begin insert , however, these regulations shall have
no effect after June 1, 2015 end insert .

(c) A corporation shall not issue a disaster loan guarantee unless
and until it determines that the following conditions are satisfied:

(1) The borrower cannot reasonably obtain a begin insert disaster end insert loan
without some form of credit enhancement.

(2) The borrower has demonstrated a reasonable prospect of
repayment.

(3) The guaranteed loan will be used exclusively in this state.

(4) The disaster loan qualifies as a small business loan or
employment incentive loan.

(d) Allocations pursuant to subdivision (a) shall be deemed to
be for extraordinary emergency or disaster response operations
costs incurred by the issuance of disaster loan guarantees.

 

Article 10.  Surety Bond Guarantees

 

63089.95.  

In furtherance of the purposes set forth in Section
63088.1 of this code and Section 14001 of the Corporations Code,
a corporation may do any one or more of the following activities,
but only to the extent that the activities are authorized pursuant to
the contract between the bank and corporation: guarantee, endorse,
or act as surety on the bonds, notes, contracts, or other obligations
of, or assist financially, any person, firm, corporation, or
association, and may establish and regulate the terms and
conditions with respect to any such begin delete loans end delete begin insert guarantees end insert or financial
assistance and the charges for interest and service connected
therewith, except that the corporation shall not make or guarantee
any loan, unless and until it determines:

(a) There is begin delete no end delete begin insert a low end insert probability that the begin delete loan or other financial
assistance end delete begin insert surety bond end insert would be granted by a financial institution
or financial company under reasonable terms or conditions, and
the begin delete borrower end delete begin insert beneficiary end insert has demonstrated a reasonable prospect
of begin delete repayment of the loan end delete begin insert successful completion of the project end insert .

(b) The begin delete loan proceeds end delete begin insert surety bond project coverage end insert will be used
exclusively in this state.

begin delete

(c) The loan qualifies as a small business loan or an employment
incentive loan.

end delete begin delete

(d)

end delete

begin insert (c) end insert  The begin delete borrower end delete begin insert beneficiary end insert has a minimum equity interest in
the business as determined by the directives and requirements.

begin delete

(e)

end delete

begin insert (d) end insert  As a result of the begin delete loan, end delete begin insert surety bond, end insert the jobs generated or
retained demonstrate reasonable conformance to the directives and
requirements specifying employment criteria.

63089.96.  

(a) In addition to the authority granted by Section
63089.95, pursuant to the directives and requirements a corporation
may act as guarantor on a surety bond for any small business
contractor, including, but not limited to, women, minority, and
disabled veteran contractors.

(b) The provisions of subdivision (a) allowing a corporation to
act as a guarantor on surety bonds may be funded through
appropriate state or federal funding sources. Federal funds shall
be deposited in the Federal Trust Fund in the State Treasury in
accordance with Section 16360, for transfer to the expansion fund.

 

Article 11.  Reporting

 

63089.97.  

Each corporation shall provide to the program
manager, in a format prescribed by him or her, the following data
and reports:

(a) A summary of all outstanding loans, bonds, and other credit
enhancements to which a corporation guarantee, as authorized by
this chapter, is attached, on a schedule determined by the program
manager.

(b) A summary of all outstanding begin insert direct end insert loans and other debt
instruments made by a corporation, as authorized by this chapter,
on a schedule determined by the program manager.

(c) A summary of all outstanding other financial project
obligations made by a corporation, as authorized by this chapter,
on a schedule determined by the program manager.

(d) Statement of economic interests from each designated person
pursuant to Section 87302.

(e) No later than July 31 of each fiscal year, commencing
January 1, 2014, each of the following documents:

(1) A copy of the corporation board approved budget for the
current fiscal year.

(2) Projected fiscal year summary of authorized program
activities including begin insert direct end insert loans, loan guarantees, bond guarantees,
and other financial product activity supported by the expansion
fund.

(3) A copy of the written plan of operation or strategic plan for
the current fiscal year as approved by the corporations board of
directors.

(4) A copy of the current and valid articles of incorporation and
bylaws of the corporation with noted amendments from the prior
fiscal year.

(f) No later than October 31 of each year commencing January
1, 2014, a copy of the corporation’s prior fiscal year audit, auditor
findings, if any, and finding responses.

(g) Any other statistical and other data, reports, or other
information required by the directives and requirements or the
program manager.

63089.98.  

(a) Annually, not later than January 1 of each year
commencing January 1, 2014, the program manager shall prepare
and submit to the Governor and the Legislature, pursuant to Section
9795, a report for the preceding fiscal year ending June 30,
containing the expansion fund and trust fund financial product
activity of each corporation, including all of the following:

(1)  begin delete Loans, end delete begin insert Direct loans, end insert guarantees, and other financial products
awarded and outstanding balances.

(2) Default and loss statistics.

(3) Employment data.

(4) Ethnicity and gender data of participating contractors and
other entities, and experience of surety insurer participants in the
bond guarantee program.

(5) Significant events.

(b) The program manager shall post the report on the bank’s
Internet Web site.

begin insert

begin insert SEC. 5. end insert   

end insert begin insert

Pursuant to the Governor’s Reorganization Plan No. 2
of 2012, the Governor’s Office of Business and Economic
Development is the successor entity for purposes of small business
assistance programs previously administered by the Business,
Transportation and Housing Agency, including the Small Business
Loan Guarantee Program, and is one of the implementing
authorities for the federal State Small Business Credit Initiative
Act (Title III of the Small Business Jobs Act of 2010, Public Law
111-240).

end insert begin insert

Placing the Small Business Loan Guarantee Program within
the California Small Business Finance Center within the California
Infrastructure and Economic Development Bank within the
Governor’s Office of Business and Economic Development does
not alter or impair any control or oversight of the Governor’s
Office of Business and Economic Development relating to funds
allocated to this state pursuant to the federal State Small Business
Credit Initiative Act (Title III of the Small Business Jobs Act of
2010, Public Law 111-240). The placement of the Small Business
Loan Guarantee Program is intended to improve program delivery,
enhance oversight in order to ensure compliance with federal and
state program requirements, and facilitate commitment of funds
allocated to the state pursuant to the federal State Small Business
Credit Initiative Act of 2010.

end insert

begin delete SEC. 5. end delete
begin insert SEC. 6. end insert   

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.

begin delete SEC. 6. end delete
begin insert SEC. 7. end insert   

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:

It is necessary that this bill take effect immediately in order to
provide, as is necessary to timely implement the Governor’s
reorganization plan, for a better managed and more efficient
transition of small business assistance programs from the soon to
be defunct Business, Transportation and Housing Agency to the
California Infrastructure and Economic Development Bank within
the Governor’s Office of Business and Economic Development.