2006 Massachusetts Code - Chapter 40F — Section 5. Corporations established or operated for purpose of financing small businesses or entities undertaking projects.

[Text of section effective until July 1, 2010. Repealed by 1987, 324, Sec. 6. See, also, 1990, 528, Sec. 6 and 2000, 159, Sec. 302.]

Section 5. The CDFC is hereby specifically authorized to establish or to invest in the capital stock of one or more corporations organized for the purposes of furthering the objectives of this chapter as set forth in section one of chapter eight hundred and sixty-six of the acts of nineteen hundred and seventy-five. Without limitation, any such corporation may:

(1) serve as a financial intermediary between entities undertaking projects and small businesses and public or private sources of capital including, without limitation, direct lenders, guarantors or grant makers. Any corporation so organized may accomplish its purposes by means of (i) investing in the equity capital of, (ii) making direct loans to, or (iii) issuing loan guarantees to entities undertaking projects or to small businesses; and

(2) provide financial and managerial consulting services to entities undertaking projects, small businesses and minority-owned or women-owned contractors.

The CDFC may have a controlling or a minority interest in any such corporation, as the board of directors of the CDFC shall determine in its discretion; provided, however, that at least one member of the board of directors of the CDFC shall sit on the board of directors of any such corporation.

None of the funds received derived from the common stock investment provided for in section four shall be used to support the establishment or operation of any corporations organized by the CDFC pursuant to this section or to finance the purchase of shares of capital stock authorized by this section. Notwithstanding the provisions of section four A, funds received from the common stock investment provided for in section four A and from any other investments authorized by this chapter may be used for the establishment and operation of any corporation so organized or to finance the purchase of shares of capital stock authorized by this section. Notwithstanding the foregoing, the amounts received by CDFC pursuant to section four A under the stock purchase agreement relating to Class B shares of stock shall be used for purposes relating to the assistance of minority-owned or women-owned contractors by any corporation established or in which the CDFC invests pursuant to this section.

Any corporation established under the provisions of this section or in which the CDFC has invested pursuant to this section shall, prior to making any investment in the capital stock of, or loans or loan guarantees to entities undertaking projects or to small businesses, make the following findings:

(1) That such action is consistent with the objectives of this chapter as set forth in section one of chapter eight hundred and sixty-six of the acts of nineteen hundred and seventy-five and may reasonably be expected to contribute to the redevelopment and economic well-being of target areas or will increase or maintain threatened primary employment or will assist minority or women-owned businesses.

(2) That in cases where a community development corporation is sponsoring a project, the CDC appears able to manage its proposed project responsibilities.

(3) That the funds provided by the CDFC will be used solely in connection with the costs of the project or the operation of the small business.

(4) That provision is made in the contract for adequate reporting of financial data from the small business or project to such corporation. Such provisions may include a requirement for an annual or other periodic audit of the books of the project or the small business.

(5) That its participation is necessary to the successful completion of the proposed project or to the success of the small business because funding for the project or small business is unavailable in the traditional capital markets, or that credit has been offered on terms that would preclude the success of the project or the small business.

(6) That provision has been made that should the CDFC desire to sell or otherwise dispose of stock received pursuant to such a contract, that the small business or entity undertaking a project, or their nominee, shall within one hundred and twenty days have the right of first refusal upon said sale and the right to meet any subsequent bona fide offer by a third party.

In no case shall the CDFC, or the CDFC in combination with such corporation, own more than forty-nine percent of the voting stock in any small business.

Upon the request of the CDFC, the commissioner of banks is hereby specifically authorized and directed to examine the books of any corporation established or invested in by the CDFC pursuant to the provisions of this section in the event that such examination is a condition of the particular investment, lending, loan guaranty or grant program administered by such corporation.