SECTIONS 14025-14028 - California Statutes

CORPORATIONS CODE

SECTION 14025-14028

14025. The director shall do all of the following:
(a) Administer this part.
(b) In accordance with program resources, stimulate the formation
of corporations and the use of branch offices for the purposes of
making this program accessible to all areas of the state.
(c) Expeditiously approve or disapprove the articles of
incorporation and any subsequent amendments to the articles of
incorporation of a corporation.
(d) Require each corporation to submit an annual written plan of
operation.
(e) Review reports from the Department of Financial Institutions
and inform corporations as to what corrective action is required.
(f) 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.

14026. The director, following notification to the secretary, may
do all of the following:
(a) Contract for services entered into pursuant to this chapter.
(b) Hold public hearings.
(c) Act as liaison between corporations formed under this part,
other state and federal agencies, lenders, and the Legislature.
(d) Process and tabulate on a monthly basis all corporate reports.
(e) Attend board meetings.
(f) Attend and participate at corporation meetings. The director,
or his or her designee, shall be an ex officio, nonvoting
representative on the board of directors and loan committees of each
corporation. The director shall meet with the board of directors of
each corporation at least once each fiscal year, commencing July 1,
1999.
(g) Assist corporations in applying for federal grant
applications, and in obtaining program support from the business
community.

14027. The director shall have the accounts of each corporation
formed under this part audited as of the close of business on June
30, of each year. The director shall also have the portfolio of each
corporation audited a minimum of once a year. Material audit
exceptions that are not corrected by the corporation within a
reasonable period of time may result in the suspension of the
corporation pursuant to Section 14028.

14028. (a) Upon a finding by the director that irreparable harm may
occur if guarantee authority is not temporarily withdrawn from a
corporation, the director may temporarily withdraw guarantee
authority from a corporation. The notice of temporary withdrawal sent
to the corporation shall specify the reasons for the action. As used
in this section, "guarantee authority" means the authority to make
or guarantee any loan that encumbers funds in a trust fund account or
the expansion fund. The director shall make one of the
determinations specified in subdivision (c) within 30 days of the
effective date of the temporary withdrawal unless the corporation and
the director mutually agree to an extension. The corporation shall
have the opportunity to submit written material to the director
addressing the items stated in the temporary withdrawal notice. If
the director does not make any determinations within 30 days, the
temporary withdrawal shall be negated. The corporation's yearly
contract shall remain in effect during the period of temporary
withdrawal, 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 of a corporation:
(1) Regulations implementing the Small Business Development
Corporation Law.
(2) The plan of operation specified in subdivision (d) of Section
14025.
(3) Fiscal and portfolio requirements, as contained in the fiscal
and portfolio audits specified in Section 14027.
(4) Milestones and scope of work as contained in the annual
contract between the corporation and the agency.
(c) Pursuant to subdivision (a) or (b), the director may do the
following:
(1) Terminate the temporary withdrawal.
(2) Terminate the temporary withdrawal subject to the corporation'
s adoption of a specified remedial action plan.
(3) Temporarily withdraw, or continue to withdraw, guarantee
authority until a specified time. This determination by the director
requires a finding that the corporation has failed to comply with the
Small Business Development Corporation Law.
(4) Suspend the corporation.
(5) Suspend the corporation, with suspension stayed until the
corporation provides a remedial action plan to the director, and the
director decides whether to repeal or implement the stayed
suspension.
The determinations contained in paragraphs (4) and (5) require a
finding that irreparable harm will occur unless the corporation is
suspended.
(d) In considering a determination regarding the recommended
suspension and possible remedial action plans, the director shall
consider, along with other criteria as specified in subdivision (b),
the corporation's history and past performance.
(e) Upon suspension of a corporation, the director shall transfer
all funds, whether encumbered or not, in the trust fund account of
the suspended corporation into either the expansion fund or
temporarily transfer the funds to another corporation.
(f) If the director decides to take any action against the
corporation pursuant to paragraphs (2) to (5), inclusive, of
subdivision (c), the corporation shall be notified of the action 10
days before the effective date of the action. The corporation shall
have the right to appeal the director's decision to the board within
that 10-day period by sending notice to the director and to the chair
of the board. Once the director receives notice that the action is
being appealed, the director's action shall be stayed except for
temporary withdrawal of guarantee authority. Upon receipt of the
notice, the director shall schedule a properly noticed board meeting
within 30 days. The board may elect to take any of the actions listed
in subdivision (g). The temporary withdrawal of corporation
guarantee authority shall remain in effect until the board issues its
decision.
(g) Pursuant to subdivision (f), the board may do any of the
following:
(1) Terminate the action taken by the director.
(2) Modify the action taken by the director subject to the
adoption by the corporation of a specified remedial action plan.
(3) Affirm the action taken by the director.
(h) Following suspension, the corporation may continue its
existence as a nonprofit corporation pursuant to the Nonprofit Public
Benefit Corporation Law (Part 2 (commencing with Section 5110) of
Division 2) but shall no longer be registered with the Secretary of
State as a small business development corporation. A corporation
shall not enjoy any of the benefits of a small business development
corporation following suspension.
(i) The funds in the trust fund account of a corporation under
temporary withdrawal shall be transferred to the expansion fund. Upon
termination of the temporary withdrawal, unless the termination is
caused by suspension, the funds of the corporation that were
transferred to the expansion fund from the trust fund account shall
be returned to the corporation's trust fund account, notwithstanding
Section 14037. 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 regulations 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 agency.