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Indicates Matter Stricken
Indicates New Matter
January 27, 2000
Introduced by Senators Passailaigue, Saleeby, Hayes, Matthews, Patterson, McConnell, Ford, Reese and Courtney
S. Printed 1/27/00--S. [SEC 1/28/00 3:04 PM]
Read the first time January 12, 2000.
To whom was referred a Bill (S. 1020), to amend Section 33-37-10, Code of Laws of South Carolina, 1976, relating to definitions in connection with business development corporations, etc., respectfully
That they have duly and carefully considered the same, and recommend that the same do pass:
EDWARD E. SALEEBY, for Committee.
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:
SECTION 1. Section 33-37-10 of the 1976 Code is amended to read:
"Section 33-37-10. As used in this chapter
the following words and phrases, unless differently defined or described, shall have meanings and references as follows:
(1) 'Corporation' means a South Carolina business development corporation created
under 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
any a financial institution authorized to do business within in this State which shall undertake undertakes to lend money to a corporation created under pursuant to this chapter, upon its call , and in accordance with the provisions of as provided by this chapter ;.
(4) 'Board of directors' means the board of directors of the corporation created
under pursuant to this chapter ; and.
(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
any a member, the maximum amount permitted to be outstanding at one time on loans made by such member to the corporation as determined under the provisions of this chapter subject to loan call at any one time by the corporation to the member as provided in the loan call agreement."
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
is and its subsidiary corporation are not subject to any taxes based upon or measured by income which are now or may be hereafter levied now or later by the State ; and. The securities, evidences of indebtedness, and shares of the capital stock issued by the corporation established under the provisions of this chapter and its subsidiary corporation, their transfer, income therefrom from them, and deposits of financial institutions invested therein in them are free at all times from taxation within the State. The corporation is and its subsidiary corporation are not subject to any a corporation license tax or fee imposed by Chapter 20 of Title 12."
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
the provisions of this title, the corporation shall, subject to the restrictions and limitations contained in this chapter, have the following powers may:
To elect, appoint, and employ officers, agents, and employees;
To make contracts and incur liabilities for any of the purposes of the corporation ; provided, except that the corporation shall may not incur any 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;
To borrow money only from (i) the members, (ii) the Small Business Administration, an agency of the United States Government, and (iii) such other lending sources which are approved by the board of directors of the corporation for any of the purposes of the corporation, to issue therefor its bonds, debentures, notes, or other evidences of indebtedness, whether secured or unsecured, and to 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 thereof of them or interest therein in them, without securing stockholder or member approval ; provided, that no. Except as provided in Section 33-37-470 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 such the loans and in the same manner;
To make loans , or to 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 to establish and regulate the terms and conditions with respect to any such of the loans and the charges for interest and service connected therewith; provided, however, with them, except that the corporation shall may not approve any an application for a loan unless and until without a showing by the person applying for such the loan shall show that he has applied for the loan through ordinary banking channels and that the loan has been was refused by at least one bank or other financial institution;
To purchase, receive, hold, lease, or otherwise acquire , and to sell, convey, transfer, lease, or otherwise dispose of real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto to it and the use thereof, of it including, but not restricted limited to, any real or personal property acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations;
To acquire all or part of the good will, business rights, real and personal property, and other assets, or any part thereof or interest therein, of any persons, firms, corporations, joint-stock companies, associations, or trusts, and to assume, undertake, or pay the obligations, debts, and liabilities of any such the person, firm, corporation, joint-stock company, association, or trust;
To acquire improved or unimproved real estate for the purpose of constructing industrial plants or other business establishments thereon or for the purpose of disposing of such real estate 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;
To 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 thereof to exercise all the rights, powers and privileges of ownership, including the right to vote thereon;
To mortgage, pledge, or otherwise encumber any a property right or thing of value , acquired pursuant to the powers contained in items (5) to through (8) of this section, as security for the payment of any a part of the purchase price thereof of it;
to cooperate with and avail itself of the facilities of the Department of Commerce and any similar governmental agencies, including the Small Business Administration, an agency of the United States Government, and to 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 such those communities or of this State or of any part thereof of them; and
(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;
To do all acts and things necessary or convenient to carry out the powers expressly granted in this chapter."
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
shall have 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 which the member is authorized to have outstanding on loans to the corporation at any one time as of the member's loan limit as determined under pursuant to the loan call agreement with the corporation as provided in Section 33-37-460 (3)(b)."
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
shall must make loans to the corporation as and when called upon by it to do so on terms and conditions approved by the board of directors, subject to the following conditions 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
the provisions of this section.
No 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:
twenty 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 . However, the conditions of this subitem do not apply to short-term loans to the corporation when the loan later is repaid:
(i) from a general loan call to the corporation to be prorated among all members of the corporation as provided in item (4); or
(ii) through the sale of participations in loans made by the corporation; or
the following limits, to be determined initially as of the time the member becomes a member on the basis of the audited balance sheet of the member at the close of its fiscal year immediately preceding its application for membership, or for an insurance company, its last annual statement to the Director of the Department of Insurance or his designee and annually after that time based upon the audited balance sheet of the member at the close of its fiscal year immediately preceding the first day of the fiscal year of the corporation for which the limit is to be determined, or for an insurance company, the last annual statement to the Director of the Department of Insurance, or his designee, before the fiscal year of the corporation for which the limit is to be determined:
(i) five percent of the capital and surplus of commercial banks and trust companies;
(ii) one percent of the total outstanding loans made by a building and loan association. However, a business development corporation created pursuant to this chapter in its charter or by appropriate amendment to it may provide that the loan limit of a building and loan association member may be only one half of one percent of the total outstanding loans made by the building and loan association member;
(iii) one percent of the capital and unassigned surplus of stock insurance companies, except fire insurance companies;
(iv) one percent of the unassigned surplus of mutual insurance companies, except fire insurance companies;
(v) one tenth of one percent of the assets of fire insurance companies;
(vi) the limits approved by the board of directors of the corporation for other financial institutions. 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
adjusted loan limit of each member bears to the aggregate of the adjusted loan limits of all members. The adjusted loan limit of a member must be the amount of the member's loan limit, reduced by the balance of outstanding loans made by the member to the corporation. 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
subsequent to after the withdrawal of the member.
(7) If two or more members or a member and another entity which is not a member but which is eligible to become a member merge or consolidate, the organization merged or consolidated shall elect that its total amount on loan to the corporation must be equal to the combined loan limits of the members or the loan limit of the member merging or consolidating with the other entity, determined immediately before the merger or consolidation."
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."
SECTION 7. This act takes effect upon approval by the Governor.
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