2005 California Corporations Code Sections 14030-14043 Article 5. Funds

14030.  There is hereby created 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 lending institution or financial company that will
act as trustee of the funds.  The expansion fund and the trust fund
shall be used to pay for defaulted loan guarantees issued pursuant to
Article 9 (commencing with Section 14070), administrative costs of
corporations, and those costs necessary to protect a real property
interest in a defaulted loan or guarantee.  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 director
has permitted a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 14037.
14030.1.  (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
unrecovered losses resulting from loan guarantees issued pursuant to
subdivision (a) of Section 14075 and subdivision (b) of this section
and disaster loan guarantees issued prior to the effective date of
this section that are in default.  Any lending institution that
issues a low-interest 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 14037.6, and any unencumbered
balances transferred to the California Small Business Expansion Fund
pursuant to Chapters 11 and 12 of the Statutes of 1989, First
Extraordinary Session, and Chapter 1525 of the Statutes of 1990, as
of July 1, 1992.
   (b) The Governor should 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.
14030.2.  (a) The director may establish accounts within the
expansion fund for loan guarantees and surety bond guarantees,
including loan loss reserves.  Each account is a legally separate
account, and shall not be used to satisfy loan or surety bond
guarantees or other obligations of another corporation.  The director
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 director's decision may be repealed or modified by
a board resolution.
   (b) Annually, not later than January 1 of each year commencing
January 1, 1996, the director shall prepare a report regarding the
loss experience for the expansion fund for loan guarantees and surety
bond guarantees for the preceding fiscal year.  At a minimum, the
report shall also include data regarding numbers of surety bond and
loan guarantees awarded through the expansion fund, including
ethnicity and gender data of participating contractors and other
entities, and experience of surety insurer participants in the bond
guarantee program.  The director shall submit that report to the
Secretary of Business, Transportation and Housing for transmission to
the Governor and the Legislature.
14032.  All money deposited in the expansion fund is hereby
continuously appropriated, without regard to fiscal years, for the
purposes of this article.
14033.  The state shall not be liable or obligated in any way beyond
the state money which is allocated in the expansion fund from moneys
from the General Fund moneys appropriated for such purposes.
14034.  The director at his or her discretion, with the approval of
the Director of Finance, may request the trustee to invest those
funds in the trust fund in securities issued by the Treasury of the
United States government.  Returns from these investments shall be
deposited in the expansion fund and shall be used to support the
programs of this part.
14036.  The expansion fund and trust fund are created solely for the
purpose of receiving state, federal, or local government money, and
other public or private money  to make loans, guarantees, and
restricted investments pursuant to this article.  Funds in the
expansion fund may be allocated by the director, with the approval of
the Department of Finance, to the trust fund accounts.
14037.  (a) The state shall not be liable or obligated in any way
beyond the state money that is allocated and deposited in the trust
fund account from state money and that is appropriated for these
purposes.
   (b) The director may reallocate funds held within a corporation's
trust fund account.
   (1) The director shall 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 office 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 director pursuant to this subdivision may be appealed to
the board.  The board has authority to repeal or modify any decision
to reallocate funds.
   (2) The director may authorize a corporation to exceed the
leverage ratio specified in Section 14030, subdivision (b) of Section
14070, and subdivision (a) of Section 14076 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 five times its portion of funds on deposit in
the expansion fund.
14037.5.  The Director of Finance, with the approval of the
Governor, may transfer moneys in the Special Fund for Economic
Uncertainties to the Small Business Expansion Fund for use as
authorized by the director, in an amount necessary to make loan
guarantees pursuant to Chapter 1 (commencing with Section 14000) of
Part 5 of Division 3 of Title 1 of the Corporations Code.
14037.6.  (a) (1) 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 director, in an amount necessary to make loan
guarantees pursuant to this chapter.  However, no more than five
million dollars ($5,000,000) may be transferred pursuant to this
section in connection with any single declared disaster.
   (2) The Director of Finance, or his or her designee, within 30
days of any transfer made pursuant to this section, shall provide
notice of the amount of the transfer to the Chair of the Joint
Legislative Budget Committee and the chair of the committee in each
house that considers appropriations.
   (b) The Governor should 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 or 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.
   (c) This section shall remain in effect until January 1, 2007, and
as of that date is repealed, unless a later enacted statute, which
is enacted before January 1, 2007, deletes or extends that date.
14037.7.  Within 60 days of the conclusion of the period for
guaranteeing loans under any small business disaster loan guarantee
program conducted for a disaster as authorized by Section 8684.2 of
the Government Code or Section 14075, the agency 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.
14038.  (a)  The funds in the  expansion fund shall be paid out to
trust fund accounts by the Treasurer on warrants drawn by the
Controller and requisitioned by the director, pursuant to the
purposes of this chapter.  The director may transfer funds allocated
from the expansion fund to accounts, established solely to receive
the funds, in lending institutions designated by the office to act as
trustee.  The lending institutions so designated shall be approved
by the state for the receipt of state deposits.  Interest earned on
the trust fund accounts in lending institutions may be utilized by
the corporations pursuant to the purposes of this chapter.
   (b) Except as specified in subdivision (c), the director 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.
   Any decision made by the director pursuant to this subdivision may
be appealed to the board within 15 days of notice of the proposed
action.  The board may repeal or modify any reallocation and transfer
decisions made by the director.
   (c) The criteria specified in subdivision (b) shall not apply to a
corporation that has been in existence for five years or less.  The
director shall develop regulations specifying the basis for
transferring account funds to those corporations that have been in
existence for five years or less.
14039.  Pursuant to this section and the regulations, 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 or suspension of the corporation, these funds shall be
withdrawn by the director 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.
14040.  Each trust fund account shall consist of a loan guarantee
account, and, upon recommendation by the director, a bond guarantee
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
obligations of another corporation.  Not more than one-third of a
trust fund account shall be allocated to a bond guarantee account.
No corporation shall 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.
14041.  (a) Except as provided in subdivisions (c) and (d) of
Section 14070, the  trust fund account, shall be used solely to make
loans, guarantee bonds, and guarantee loans, approved by the
corporation, that meet the California Small Business Development
Corporation Law loan criteria.  The state shall not be liable or
obligated in any way as a result of the allocation of state money to
a trust fund account beyond the state money that is allocated and
deposited in the fund pursuant to this chapter, and that is not
otherwise withdrawn by the state pursuant to this chapter.
   (b) A summary of all loans and bonds to which a state guarantee is
attached shall be submitted to the director upon execution of the
loan agreement and periodically thereafter.
   (c) A summary of all loans made by a corporation shall be
submitted to the director upon execution of the loan agreement and
periodically thereafter.
14043.  The financial institution that is to act as trustee of the
trust fund shall be designated after review by the director.  The
corporation shall not receive money on deposit to support guarantees
issued under the provisions of this chapter without the approval of
the director.