BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1155 (Dutton/Price)
Hearing Date: 04/26/2010 Amended: 04/12/2010
Consultant: Maureen Ortiz Policy Vote: BFI: 11-0
_________________________________________________________________
____
BILL SUMMARY: SB 1155 makes changes to the Capital Access
Company Law in order to streamline and increase access to
early-stage funding to small businesses.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Application process ------------unknown, likely less
than $100--------- Special*
potentially offset by fee revenue
Audits ------------unknown, paid
by licensees------------ Special*
*Corporations Fund
_________________________________________________________________
____
STAFF COMMENTS:
Applicants pay a fee of $2,000 to the Department of Corporations
(DOC), and are responsible for the costs of the audits. The
exact costs for this program are unknown and will be dependent
on the number of capital access companies that are formed and
apply for state licensure. For example, assuming 25 companies
apply for licensure under the program, the department might need
one personnel position, and fee revenue in this instance would
be $50,000. The DOC would also incur some minor costs for
developing the examination protocol. There will not be any
additional costs for promulgating regulations since they were
established when the program was first created in 1999.
The federal Investment Company Act of 1940 regulates capital
access companies with more than 100 shareholders. The National
Securities Market Improvement Act, enacted by Congress in 1996,
exempted certain business venture companies from the 1940 Act
provided that a state program is enacted to provide licensing
and oversight.
No other states currently provide a licensing scheme for capital
access companies. The Capital Access Company Law was established
in California by SB 2189 (Vasconcellos) Chapter 668, Statutes of
1998. The program provides for the licensure and regulation of
capital access companies by the Commissioner of Corporations.
However, this program is currently dormant as no companies have
to date been licensed. A company could apply for licensure if
it had, among other criteria, a tangible net worth of at least
$250,000 and funds of at least $5 million. The intent was to
allow certain businesses seeking to become a Capital Access
Company to submit an application to the Department of
Corporations (DOC) in order to sell securities under the
exemption granted to specified companies under the Investment
Company Act of 1940.
SB 1155 (Dutton/Price)
Page 2
SB 1155 redefines a "small business firm" for purposes of the
CAC Law as one that proposes to transact, or transacts, business
on a regular and continuous basis in California and which,
together with its affiliates, has a net worth of not more than
$18 million and average net income as specified of no greater
than $6 million during the preceding two years. The bill also
adds a definition of "smaller business firm", as a person that
has a net worth of not more than $6 million and average net
income after federal income taxes no greater than $2 million.
At least 20% of all financing assistance provided by a licensee
must be through the purchase of securities of smaller business
firms proposing to do business wholly or substantially in
California.
SB 1155 also authorizes the transfer or assignment of a CAC
license upon approval of the Commissioner, updates the conflict
of interest provisions, removes a prohibition against providing
financing assistance to a small business firm whose primary
business is providing financing assistance, and makes other
technical related changes.