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Current Status Bill Number:View additional legislative information at the LPITS web site.1020 Ratification Number:239 Act Number:234 Type of Legislation:General Bill GB Introducing Body:Senate Introduced Date:20000112 Primary Sponsor:Passailaigue All Sponsors:Passailaigue, Saleeby, Hayes, Matthews, Patterson, McConnell, Ford, Reese and Courtney Drafted Document Number:l:\council\bills\dka\3640mm00.doc Companion Bill Number:4468 Date Bill Passed both Bodies:20000223 Governor's Action:S Date of Governor's Action:20000307 Subject:Business development corporation member, short-term loans, mortgages; Banks, Financial institutions, Corporations History Body Date Action Description Com Leg Involved ______ ________ ______________________________________ _______ ____________ ------ 20000331 Act No. A234 ------ 20000307 Signed by Governor ------ 20000301 Ratified R239 House 20000223 Read third time, enrolled for ratification House 20000222 Read second time House 20000215 Request for debate by Representative Knotts Fleming Trotter Whatley Cotty Koon Bales House 20000209 Committee report: Favorable 26 HLCI House 20000208 Introduced, read first time, 26 HLCI referred to Committee Senate 20000203 Read third time, sent to House Senate 20000201 Read second time ------ 20000128 Scrivener's error corrected Senate 20000127 Committee report: Favorable 02 SBI Senate 20000113 Committed to Committee 02 SBI Senate 20000113 Recalled from Committee 11 SJ Senate 20000112 Introduced, read first time, 11 SJ referred to Committee Versions of This Bill Revised on January 27, 2000 - Word format Revised on January 28, 2000 - Word format Revised on February 9, 2000 - Word format
(A234, R239, S1020)
AN ACT TO AMEND SECTION 33-37-10, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO DEFINITIONS IN CONNECTION WITH BUSINESS DEVELOPMENT CORPORATIONS, SO AS TO INCLUDE AS A FINANCIAL INSTITUTION A FEDERAL OR STATE AGENCY WHICH LENDS OR INVESTS FUNDS, TO DEFINE "LOAN CALL" AND "LOAN CALL AGREEMENT" AND REDEFINE "LOAN LIMITS", AND TO PROVIDE FOR A WRITTEN LOAN AGREEMENT BETWEEN A CORPORATION AND ITS MEMBERS RATHER THAN A STATUTORY LINE OF CREDIT; TO AMEND SECTION 33-37-70, AS AMENDED, RELATING TO TAXATION OF A BUSINESS DEVELOPMENT CORPORATION, SO AS TO PROVIDE THE STATE TAX EXEMPTIONS ALSO FOR A SUBSIDIARY CORPORATION; TO AMEND SECTION 33-37-250, AS AMENDED, RELATING TO POWERS OF A BUSINESS DEVELOPMENT CORPORATION, SO AS TO PROVIDE THAT A BUSINESS DEVELOPMENT CORPORATION MAY NOT MORTGAGE OR ASSIGN ITS ASSETS EXCEPT ON A PRO RATA BASIS TO ALL PARTIES PROVIDING CREDIT, OTHER THAN FOR SHORT-TERM LOANS AND PURCHASE MONEY LOANS FOR THE ACQUISITION OF CERTAIN INDUSTRIAL AND BUSINESS ASSETS, TO PROVIDE FOR THE POWERS OF A BUSINESS DEVELOPMENT CORPORATION'S SUBSIDIARY, AND TO MAKE TECHNICAL CHANGES; TO AMEND SECTION 33-37-450, AS AMENDED, RELATING TO VOTING BY STOCKHOLDERS AND MEMBERS, SO AS TO PROVIDE FOR DETERMINATION OF THE NUMBER OF ADDITIONAL VOTES OF A MEMBER BY ITS LOAN LIMIT PURSUANT TO THE LOAN CALL AGREEMENT; TO AMEND SECTION 33-37-460, AS AMENDED, RELATING TO LOANS TO THE BUSINESS DEVELOPMENT CORPORATION, SO AS TO DELETE STATUTORY REQUIREMENTS FOR LINES OF CREDIT AND PROVIDE FOR LINES OF CREDIT PURSUANT TO MUTUAL AGREEMENT, DECREASE FROM TWENTY TO TEN PERCENT THE TOTAL AMOUNT A MEMBER MAY HAVE OUTSTANDING AT ANY ONE TIME ON LOANS TO THE CORPORATION, TO PROVIDE FOR REVOLVING LINES OF CREDIT AND LEAD LENDERS, AND TO DELETE THE AUTOMATIC INCREASE IN LINES OF CREDIT OF MERGING ENTITIES; AND BY ADDING SECTION 33-37-465 SO AS TO PROVIDE FOR THE MAKING AND SECURING OF SHORT-TERM LOANS TO THE CORPORATION BY A MEMBER.
Be it enacted by the General Assembly of the State of South Carolina:
Definitions
SECTION 1. Section 33-37-10 of the 1976 Code is amended to read:
"Section 33-37-10. As used in this chapter:
(1) 'Corporation' means a South Carolina business development corporation created pursuant to this chapter.
(2) 'Financial institution' means any banking corporation or trust company, building and loan association, insurance company or related corporation, partnership, foundation, federal or state agency, or other institution engaged primarily in lending or investing funds including, without limitation, the Small Business Administration, an agency of the United States Government.
(3) 'Member' means a financial institution authorized to do business in this State which undertakes to lend money to a corporation created pursuant to this chapter, upon its call and as provided by this chapter.
(4) 'Board of directors' means the board of directors of the corporation created pursuant to this chapter.
(5) 'Loan call' means the right of the corporation to call for loans by the members to the corporation as provided in Section 33-37-460 of this chapter.
(6) 'Loan call agreement' means the loan agreement between the corporation and its members describing the terms, conditions, and loan limits of the corporation's right to make loan calls to its members.
(7) 'Loan limit' means, for a member, the maximum amount subject to loan call at any one time by the corporation to the member as provided in the loan call agreement."
Corporation and its subsidiary exempt from taxes and fees
SECTION 2. Section 33-37-70 of the 1976 Code, as last amended by Act 353 of 1996, is further amended to read:
"Section 33-37-70. The corporation and its subsidiary corporation are not subject to taxes based upon or measured by income which are levied now or later by the State. The securities, evidences of indebtedness, and shares of the capital stock issued by the corporation and its subsidiary corporation, their transfer, income from them, and deposits of financial institutions invested in them are free at all times from taxation within the State. The corporation and its subsidiary corporation are not subject to a corporation license tax or fee imposed by Chapter 20 of Title 12."
Powers
SECTION 3. Section 33-37-250 of the 1976 Code, as last amended by Act 353 of 1996, is further amended to read:
"Section 33-37-250. In furtherance of the purposes for which the corporation is founded and in addition to the powers conferred on business corporations by this title, the corporation, subject to the restrictions and limitations contained in this chapter, may:
(1) elect, appoint, and employ officers, agents, and employees;
(2) make contracts and incur liabilities for any of the purposes of the corporation, except that the corporation may not incur secondary liability by way of guaranty or endorsement of the obligations of any person, firm, corporation, joint-stock company, association, or trust, or in any other manner;
(3) borrow money only from (i) the members, (ii) the Small Business Administration, an agency of the United States Government, and (iii) other lending sources approved by the board of directors of the corporation for the purposes of the corporation, issue its bonds, debentures, notes, or other evidences of indebtedness, whether secured or unsecured, and secure them by mortgage, pledge, deed of trust, or other lien on its property, franchises, rights and privileges of every kind and nature, or any part of them or interest in them, without securing stockholder or member approval. Except as provided in Section 33-37-465 and item (9) of this section, a loan to the corporation may not be secured in any manner unless all outstanding loans to the corporation are secured equally and ratably in proportion to the unpaid balance of the loans and in the same manner;
(4) make loans or participate with the Small Business Administration, an agency of the United States Government, in loans to any person, firm, corporation, joint-stock company, association, or trust and establish and regulate the terms and conditions of the loans and the charges for interest and service connected with them, except that the corporation may not approve an application for a loan without a showing by the person applying for the loan that he applied for the loan through ordinary banking channels and the loan was refused by at least one bank or other financial institution;
(5) purchase, receive, hold, lease, or otherwise acquire and sell, convey, transfer, lease, or otherwise dispose of real and personal property, together with rights and privileges incidental and appurtenant to it and the use of it including, but not limited to, real or personal property acquired by the corporation in the satisfaction of debts or enforcement of obligations;
(6) acquire all or part of the good will, business rights, real and personal property, and other assets, of any persons, firms, corporations, joint-stock companies, associations, or trusts, and to assume, undertake, or pay the obligations, debts, and liabilities of the person, firm, corporation, joint-stock company, association, or trust;
(7) acquire improved or unimproved real estate for the purpose of constructing industrial plants or other business establishments or for the purpose of disposing of it to others for the construction of industrial plants or other business establishments, and to transfer, lease, or otherwise dispose of industrial plants or business establishments;
(8) acquire, subscribe for, own, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of the stock, shares, bonds, debentures, notes, or other securities and evidences of interest in or indebtedness of any person, firm, corporation, joint-stock company, association, or trust, and to exercise all the rights, powers, and privileges of ownership, including the right to vote, while the owner or holder;
(9) mortgage, pledge, or otherwise encumber a property right or thing of value acquired pursuant to the powers contained in items (5) through (8) of this section, as security for the payment of a part of the purchase price of it;
(10) cooperate with and avail itself of the facilities of the Department of Commerce and similar governmental agencies, including the Small Business Administration, an agency of the United States Government, and cooperate with and assist and otherwise encourage organizations in the various communities of the State in the promotion, assistance, and development of the business prosperity and economic welfare of those communities or of this State or of any part of them;
(11) organize and incorporate pursuant to this title a subsidiary corporation as the board of directors finds necessary, appropriate, or convenient to carry out the powers and purposes expressly granted and provided for in this chapter, which subsidiary corporation has the powers described in this section in addition to all other powers conferred on business corporations by this title; and
(12) do all acts and things necessary or convenient to carry out the powers expressly granted in this chapter."
Voting by stockholders and members
SECTION 4. Section 33-37-450(B) of the 1976 Code, as last amended by Act 123 of 1995, is further amended to read:
"(B) Unless otherwise provided in the charter of the corporation, each stockholder has one vote, in person or by proxy, for each share of capital stock held by him, and each member has one vote, in person or by proxy. However, a member having a loan limit of more than one thousand dollars has one additional vote, in person or by proxy, for each additional one thousand dollars of the member's loan limit as determined pursuant to the loan call agreement with the corporation as provided in Section 33-37-460."
Loans to corporation by members
SECTION 5. Section 33-37-460 of the 1976 Code, as last amended by Act 353 of 1996, is further amended to read:
"Section 33-37-460. Each member of the corporation must make loans to the corporation when called upon pursuant to a written loan call agreement approved by the board of directors of the corporation and entered into between the corporation and all members. The loan call agreement must describe the mutual agreement of the corporation and the members as to the loan limits of each member, the method for determining the loan limits, the terms and conditions of each member's rights and obligations pertaining to loan calls by the corporation, and the corporation's rights to make loan calls of the members. The loan call agreement may be modified and amended unilaterally by the corporation only for the purpose of adding new members as parties to the loan call agreement if the new members execute and deliver addendums to the loan call agreement binding them to all terms, conditions, and loan limits of the agreement. The corporation and any member may agree mutually to increase the loan limit of the member if all other members have the opportunity to increase their loan limits in the same proportion or percentage relative to their original loan limits as provided in the loan call agreement. The loan call agreement is subject to the following further conditions and limitations:
(1) All loan limits must be established at the thousand dollar amount nearest to the amount computed in accordance with this section.
(2) A loan to the corporation may not be made if, immediately after the loan, the total amount of the obligations of the corporation exceeds ten times the amount then paid in on the outstanding capital stock of the corporation.
(3) The total amount outstanding on loans to the corporation made by a member at any one time, when added to the amount of the investment in capital stock of the corporation then held by the member, may not exceed:
(a) ten percent of the total amount then outstanding on loans to the corporation by all members, including in the total amount outstanding amounts validly called for loan but not yet loaned; or
(b) any federal or state statutory or regulatory limitations applicable to the members.
(4) Subject to item (3)(a), each loan call made by the corporation must be prorated among the members of the corporation in substantially the same proportion that the loan limit of each member bears to the aggregate of the loan limits of all members. Loan calls may require all members to fund the loan call contemporaneously with the loan call or, alternatively, may require that the loan call be funded on a revolving basis in periodic disbursements by groups of members as designated by the corporation on a rotating basis so that, in a single loan call, the disbursement by one designated group may retire at a future date the outstanding balance of another group of members.
(5) All loans to the corporation by members must be evidenced by bonds, debentures, notes, or other evidences of indebtedness of the corporation which are freely transferable at all times. For administrative purposes, loans made by members pursuant to loan calls by the corporation must be funded by one or more members, designated by the corporation, which shall sell participation interests to other members in the proportions provided in this section.
(6) A member is not obligated to make loans to the corporation pursuant to calls made after the withdrawal of the member."
Short-term loans to corporation by members
SECTION 6. Article 5, Chapter 37, Title 33 of the 1976 Code is amended by adding:
"Section 33-37-465. A member may make short-term loans to the corporation independently of the loan calls made pursuant to Section 33-37-460, except that the aggregate of the outstanding balance of the short-term loans and the outstanding amount of a loan call to that member may not exceed the statutory and regulatory limitations as provided in Section 33-37-460. When the purpose of the short-term loan is to provide funds to the corporation for disbursement of a loan, the corporation may grant to the member funding the short-term loan a security interest in or collateral assignment of the loan on the condition that the security interest or collateral assignment is terminated upon payment of the short-term loan."
Time effective
SECTION 7. This act takes effect upon approval by the Governor.
Ratified the 1st day of March, 2000.
Approved the 7th day of March, 2000.
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