View Daily Data Tracking History
View Bill Text
View Statement of Purpose / Fiscal Impact
H0660.....................................................by WAYS AND MEANS
BUSINESS AND INDUSTRIAL DEVELOPMENT CORPORATIONS - Amends existing law to
provide that business and industrial development corporations are not
limited to meeting the financing and management assistance needs of
business firms located only in this state; to limit uses to which a
business and industrial development corporation may apply public moneys; to
provide that business and industrial development corporations may enter
into management assistance contracts that shall be in writing and that such
contracts shall govern all aspects of the business relationship between the
business and industrial development corporation and the business firm
regarding the management assistance provided; to remove the limitation that
business and industrial development corporations hold control of
corporations with offices located only in Idaho; and to remove the
requirement that a hearing be held prior to the director's issuance of
certain orders or imposing a civil penalty.
02/19 House intro - 1st rdg - to printing
02/20 Rpt prt - to Bus
02/28 Rpt out - rec d/p - to 2nd rdg
03/01 2nd rdg - to 3rd rdg
03/04 3rd rdg - PASSED - 66-0-4
AYES -- Aikele, Barraclough, Barrett, Bell, Bieter, Black, Block,
Boe, Bolz, Bradford, Bruneel, Callister, Campbell, Clark, Collins,
Crow, Cuddy, Deal, Denney, Ellis, Ellsworth, Eskridge, Field(13),
Field(20), Gould, Hadley, Hammond, Harwood, Henbest, Hornbeck,
Jaquet, Jones, Kellogg(Duncan), Kendell, Kunz, Lake, Langford,
Loertscher, Mader, McKague, Meyer, Montgomery, Mortensen, Moyle,
Pearce, Pischner, Pomeroy, Raybould, Ridinger, Roberts, Robison,
Sali, Schaefer, Sellman, Shepherd, Smith(33), Smith(23), Smylie,
Stevenson, Stone, Tilman, Trail, Wheeler, Wood, Young, Mr. Speaker
NAYS -- None
Absent and excused -- Bedke, Gagner, Higgins, Martinez
Floor Sponsor - Raybould
Title apvd - to Senate
03/05 Senate intro - 1st rdg - to Com/HuRes
03/12 Rpt out - rec d/p - to 2nd rdg
03/13 2nd rdg - to 3rd rdg
03/15 3rd rdg - PASSED - 34-0-1
AYES -- Andreason, Boatright, Branch Brandt, Bunderson, Burtenshaw,
Cameron, Darrington, Davis, Deide, Dunklin, Frasure, Geddes, Goedde,
Hill, Ingram, Ipsen, Keough, King-Barrutia, Little, Lodge, Marley,
Noh, Richardson, Risch, Sandy, Schroeder, Sims, Sorensen, Stegner,
Stennett, Thorne, Wheeler, Williams
NAYS -- None
Absent and excused -- Hawkins
Floor Sponsor - Andreason
Title apvd - to House
To enrol - rpt enrol - Sp signed
03/18 Pres signed - to Governor
03/20 Governor signed
Session Law Chapter 145
Effective: 07/01/02
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-sixth Legislature Second Regular Session - 2002
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 660
BY WAYS AND MEANS COMMITTEE
1 AN ACT
2 RELATING TO BUSINESS AND INDUSTRIAL DEVELOPMENT CORPORATIONS; AMENDING SECTION
3 26-2701, IDAHO CODE, TO PROVIDE THAT BUSINESS AND INDUSTRIAL DEVELOPMENT
4 CORPORATIONS ARE NOT LIMITED TO MEETING THE FINANCING AND MANAGEMENT
5 ASSISTANCE NEEDS OF BUSINESS FIRMS LOCATED ONLY IN THIS STATE AND TO MAKE
6 TECHNICAL CORRECTIONS; AMENDING SECTIONS 26-2707, 26-2709 AND 26-2711,
7 IDAHO CODE, TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 26-2714, IDAHO
8 CODE, TO LIMIT USES TO WHICH A BUSINESS AND INDUSTRIAL DEVELOPMENT CORPO-
9 RATION MAY APPLY PUBLIC MONEYS AND TO MAKE A TECHNICAL CORRECTION; AMEND-
10 ING SECTION 26-2716, IDAHO CODE, TO PROVIDE THAT BUSINESS AND INDUSTRIAL
11 DEVELOPMENT CORPORATIONS MAY ENTER INTO MANAGEMENT ASSISTANCE CONTRACTS
12 THAT SHALL BE IN WRITING AND THAT SUCH CONTRACTS SHALL GOVERN ALL ASPECTS
13 OF THE BUSINESS RELATIONSHIP BETWEEN THE BUSINESS AND INDUSTRIAL DEVELOP-
14 MENT CORPORATION AND THE BUSINESS FIRM REGARDING THE MANAGEMENT ASSISTANCE
15 PROVIDED AND TO CORRECT A CODIFIER'S ERROR; AMENDING SECTION 26-2718,
16 IDAHO CODE, TO REMOVE THE LIMITATION THAT BUSINESS AND INDUSTRIAL DEVELOP-
17 MENT CORPORATIONS HOLD CONTROL OF CORPORATIONS WITH OFFICES LOCATED ONLY
18 IN IDAHO AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 26-2720,
19 IDAHO CODE, TO CLARIFY THAT A POTENTIAL CONFLICT OF INTEREST INVOLVING
20 CERTAIN TRANSACTIONS SHALL BE DISCLOSED IN THE FINANCING OR OTHER APPRO-
21 PRIATE DOCUMENTS AND TO MAKE A TECHNICAL CORRECTION; AMENDING SECTION
22 26-2723, IDAHO CODE, TO REMOVE THE REQUIREMENT THAT A HEARING BE HELD
23 PRIOR TO THE DIRECTOR'S ISSUANCE OF A CEASE AND DESIST ORDER, TO CLARIFY
24 THAT A PERSON TO WHOM AN ORDER IS DIRECTED MAY PETITION FOR JUDICIAL
25 REVIEW OF THE ORDER AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION
26 26-2724, IDAHO CODE, TO REMOVE THE REQUIREMENT THAT A HEARING BE HELD
27 PRIOR TO THE DIRECTOR'S ISSUANCE OF AN ORDER REMOVING A SUBJECT PERSON OF
28 A LICENSEE FROM HIS OFFICE, TO CLARIFY THAT A PERSON TO WHOM AN ORDER IS
29 DIRECTED MAY APPLY TO THE DIRECTOR TO MODIFY OR RESCIND THE ORDER AND TO
30 MAKE A TECHNICAL CORRECTION; AMENDING SECTION 26-2725, IDAHO CODE, TO
31 CLARIFY THAT A PERSON TO WHOM AN ORDER IS DIRECTED IS SUBJECT TO AN ORDER
32 OF SUSPENSION OR REMOVAL FROM OFFICE, AND HAS CERTAIN RIGHTS UNDER THAT
33 SECTION AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 26-2727, IDAHO
34 CODE, TO PROVIDE THAT THE DIRECTOR MAY ISSUE AN ORDER DIRECTING A BUSINESS
35 AND INDUSTRIAL DEVELOPMENT CORPORATION TO REFRAIN FROM PROVIDING MANAGE-
36 MENT ASSISTANCE TO BUSINESS FIRMS AND TO CLARIFY THAT A PERSON TO WHOM AN
37 ORDER IS DIRECTED MAY APPLY TO THE DIRECTOR TO MODIFY OR RESCIND THE
38 ORDER; AMENDING SECTION 26-2729, IDAHO CODE, TO REMOVE THE REQUIREMENT
39 THAT A HEARING BE HELD PRIOR TO THE DIRECTOR IMPOSING A CIVIL PENALTY FOR
40 VIOLATION OF LAW AND TO MAKE A TECHNICAL CORRECTION; AND AMENDING SECTION
41 26-2731, IDAHO CODE, TO MAKE A TECHNICAL CORRECTION.
42 Be It Enacted by the Legislature of the State of Idaho:
43 SECTION 1. That Section 26-2701, Idaho Code, be, and the same is hereby
44 amended to read as follows:
2
1 26-2701. PURPOSE OF CHAPTER. The purposes of this chapter are to:
2 (1) Promote economic development by encouraging the formation of business
3 and industrial development corporations, a new type of private institution, to
4 help meet the financing assistance and management assistance needs of business
5 firms. in the state.
6 (2) Provide for a system of licensing, regulation, and enforcement that
7 will enable business and industrial development corporations to satisfy eligi-
8 bility requirements to participate, if they so choose, in the program of the
9 small business administration pursuant to section 7(a) of the small business
10 act, Public Law 85-536, 15 U.S.C. section 636(a), and other programs for which
11 they may be eligible.
12 (3) Provide for a system of licensing, regulation, and enforcement
13 designed to prevent fraud, conflict of interest, and mismanagement, and to
14 promote competent management, accurate record keeping recordkeeping, and
15 appropriate communication with shareholders; in order to provide the follow-
16 ing:
17 (a) Comfort to prospective shareholders so as in order to facilitate
18 equity investments in business and industrial development corporations;
19 (b) Comfort to prospective debt sources so as in order to facilitate the
20 borrowing of money by business and industrial development corporations;
21 and
22 (c) Protection of the general reputation of business and industrial
23 development corporations as a type of institution in order to increase the
24 confidence of prospective equity investors in and prospective debt sources
25 for those institutions.
26 It is hereby further declared that all of the foregoing are public purposes
27 and uses for which public moneys may be expended or granted and that such
28 activities are governmental functions and serve a public purpose in improving
29 or otherwise benefiting the people of this state; that the necessity of enact-
30 ing the provisions hereinafter set forth is in the public interest and is
31 hereby so declared as a matter of express legislative determination.
32 SECTION 2. That Section 26-2707, Idaho Code, be, and the same is hereby
33 amended to read as follows:
34 26-2707. ANNUAL REPORT TO LEGISLATURE REQUIRED. (1) The director shall
35 publish annually and provide to the house business committee and senate com-
36 merce and labor committee, or the appropriate germane legislative committees,
37 information on the impact of this chapter in promoting economic development in
38 this state. At the a minimum, the information shall include aggregate statis-
39 tics on each of the following:
40 (a) The number and dollar amount of provisions of financing assistance
41 made by licensees to business firms.
42 (b) The number and dollar amount of provisions of financing assistance
43 made by licensees to business firms classified in broad categories of
44 industry such as divisions of the standard industrial classification man-
45 ual.
46 (c) The number and dollar amount of provisions of financing assistance
47 made by licensees to minority owned business firms and to woman owned
48 business firms.
49 (d) Estimates of the number of jobs created or retained.
50 (e) Estimates of the number and dollar amount of any financial assistance
51 provided to licensed BIDCO's, or investments in individual licensed
52 BIDCO's, for the purpose of fostering economic development by any state or
53 federal agency, or by public or quasi-public entities, including the pub-
3
1 lic employee retirement system.
2 SECTION 3. That Section 26-2709, Idaho Code, be, and the same is hereby
3 amended to read as follows:
4 26-2709. REQUIREMENTS FOR LICENSURE. (1) An Idaho corporation may apply
5 to the director for licensure as a BIDCO. A person other than an Idaho corpo-
6 ration shall not apply for a license.
7 (2) After a review of information regarding the directors, officers, and
8 controlling persons of the applicant, a review of the applicant's business
9 plan, including at least three (3) years of detailed financial projections and
10 other relevant information, and a review of additional information considered
11 relevant by the director, the director shall approve an application for a
12 license if, and only if, the director determines all of the following:
13 (a) The applicant has a net worth, or firm financing commitments which
14 demonstrate that the applicant will have a net worth when the applicant
15 begins transacting business as a BIDCO, in liquid form available to pro-
16 vide financing assistance, that is adequate for the applicant to transact
17 business as a BIDCO as determined under subsection (3) of this section.
18 (b) Each director, officer, and controlling person of the applicant is of
19 good character and sound financial standing:; each director and officer of
20 the applicant is competent to perform his or her functions with respect to
21 the applicant; and the directors and officers of the applicant are collec-
22 tively adequate to manage the business of the applicant as a BIDCO.
23 (c) It is reasonable to believe that the applicant, if licensed, will
24 comply with this chapter.
25 (d) The applicant has reasonable promise of being a viable, ongoing BIDCO
26 and of satisfying the basic objectives of its business plan.
27 (3) In determining if the applicant has a net worth or firm financing
28 commitments adequate to transact business as a BIDCO, the director shall con-
29 sider the types and variety of financing assistance that the applicant plans
30 to provide; the experience that the directors, officers, and controlling per-
31 sons of the applicant have in providing financing and managerial assistance to
32 business firms; the financial projections and other relevant information from
33 the applicant's business plan; and whether the applicant intends to operate as
34 a profit or nonprofit corporation. Except as otherwise provided in this chap-
35 ter, the director shall require a minimum net worth of not less than one mil-
36 lion dollars ($1,000,000) and not more than ten million dollars ($10,000,000).
37 The director may require a minimum net worth of less than one million dollars
38 ($1,000,000), but not less than five hundred thousand dollars ($500,000), if,
39 in the context of the applicant's business plan, the initial capitalization
40 amount is adequate for the applicant to transact business as a BIDCO because
41 of special circumstances including, but not limited to, funded overhead, low
42 overhead, or specialized opportunities.
43 (4) For the purposes of subsection (2) of this section, the director may
44 find any of the following:
45 (a) That a director, officer, or controlling person of an applicant is
46 not of good character if the director, officer, or controlling person, or
47 a director or officer of a controlling person, has been convicted of,
48 entered a plea of guilty to, has been found guilty of, or has pleaded nolo
49 contendere to a crime involving fraud or dishonesty.
50 (b) That it is not reasonable to believe that an applicant, if licensed,
51 will comply with this chapter, if the applicant has been convicted of,
52 entered a plea of guilty to, has been found guilty of, or has pleaded nolo
53 contendere to a crime involving fraud or dishonesty.
4
1 (5) For purposes of subsection (2) of this section, subsection (4) of
2 this section shall not be considered to be the only grounds upon which the
3 director may find that a director, officer, or controlling person of an appli-
4 cant is not of good character or that it is not reasonable to believe that an
5 applicant, if licensed, will comply with the provisions of this chapter.
6 SECTION 4. That Section 26-2711, Idaho Code, be, and the same is hereby
7 amended to read as follows:
8 26-2711. USE OF BIDCO NAME RESTRICTED -- EXCEPTION. (1) Except as other-
9 wise provided in subsection (2) of this section, a person transacting business
10 in this state, other than a licensee, shall not use a name or title which
11 indicates that the person is a business and industrial development corporation
12 including, but not limited to, use of the term "BIDCO,", and shall not other-
13 wise represent that the person is a business and industrial development corpo-
14 ration or a licensee.
15 (2) Before being issued a license under this chapter, an Idaho corpora-
16 tion that proposes to apply for a license or that applies for a license may
17 perform, under a name that indicates that the corporation is a business and
18 industrial development corporation, the acts necessary to apply for and obtain
19 a license and to otherwise prepare to commence transacting business as a
20 licensee. Such a corporation shall not represent that it is a licensee until
21 after the license has been obtained. A licensee shall not misrepresent the
22 meaning or effect of its license.
23 SECTION 5. That Section 26-2714, Idaho Code, be, and the same is hereby
24 amended to read as follows:
25 26-2714. CORPORATE NAME -- DIRECTORS -- DIVIDENDS -- RESTRICTION ON USE
26 OF PUBLIC MONEYS. (1) The corporate name of each licensee may include the
27 phrase "Business and Industrial Development Corporation" or may include the
28 word "BIDCO.". A licensee shall not transact business under a name other than
29 its corporate name.
30 (2) The board of directors of each licensee shall consist of not less
31 than seven (7) directors. The board of directors of each licensee shall hold a
32 meeting not less than once each calendar quarter.
33 (3) Within thirty (30) days after the death, resignation, or removal of a
34 director or officer; the election of a director; or the appointment of an
35 officer, the licensee shall notify the director in writing of the event and
36 shall provide any additional information which the director may require.
37 (4) A licensee shall not pay, or obligate itself to pay, a cash dividend
38 or dividend in kind to its shareholders, unless that payment is consistent
39 with a dividend policy which has been adopted by the licensee and approved by
40 the director. In reviewing dividend policies under this section, the director
41 shall be flexible in recognizing the special characteristics of BIDCOs and the
42 diverse range of potentially appropriate dividend policies for BIDCOs, while
43 at the same time protecting against unsafe or unsound acts which could
44 threaten the viability of the licensee as an ongoing BIDCO. The director may
45 at any time withdraw any previous approval of a dividend policy if the direc-
46 tor determines that the withdrawal is necessary to prevent unsafe or unsound
47 acts.
48 (5) Without the prior approval of the director, a licensee shall not buy
49 back, or obligate itself to buy back a share of stock from a shareholder.
50 (6) Any public moneys received by a licensee shall be applied by the
51 licensee solely to providing financing assistance or management assistance to
5
1 business firms with a home office in Idaho.
2 SECTION 6. That Section 26-2716, Idaho Code, be, and the same is hereby
3 amended to read as follows:
4 26-2716. BUSINESS ACTIVITIES -- CORPORATE POWERS. (1) The business of a
5 licensee shall be the business of providing financing assistance and manage-
6 ment assistance to business firms. A licensee shall not engage in a business
7 other than the business of providing financing assistance and management
8 assistance to business firms.
9 (2) In addition to the powers and privileges provided to a licensee by
10 this chapter, a licensee has all powers and privileges conferred by its incor-
11 porating statute which are not inconsistent with or limited by this chapter.
12 The powers of a licensee include, but are not limited to, all of the follow-
13 ing:
14 (a) To borrow money and otherwise incur indebtedness for its purposes,
15 including issuance of corporate bonds, debentures, notes, or other evi-
16 dence of indebtedness. A licensee's indebtedness may be secured or unse-
17 cured, and may involve equity features including, but not limited to, pro-
18 visions for conversion to stock and warrants to purchase stock.
19 (b) To make contracts. Such contracts may include contracts to provide
20 management assistance to business firms, which contracts shall be in writ-
21 ing, and the terms of which shall govern all aspects of the relationship
22 between the licensee and the business firm regarding the management assis-
23 tance provided by the licensee.
24 (c) To incur and pay necessary and incidental operating expenses.
25 (d) To purchase, receive, hold, lease, or otherwise acquire, or to sell,
26 convey, mortgage, lease, pledge, or otherwise dispose of, real or personal
27 property, together with rights and privileges that are incidental and
28 appurtenant to these transactions of real or personal property, if the
29 real or personal property is for the licensee's use in operating its busi-
30 ness or if the real or personal property is acquired by the licensee from
31 time to time in satisfaction of debts or enforcement of obligations.
32 (e) To make donations for charitable, educational, research, or similar
33 purposes.
34 (f) To implement a reasonable and prudent policy for conserving and
35 investing its money before the money is used to provide financing assis-
36 tance to business firms or or to pay the expenses of the licensee.
37 SECTION 7. That Section 26-2718, Idaho Code, be, and the same is hereby
38 amended to read as follows:
39 26-2718. BIDCO ACQUIRING ANOTHER FIRM -- APPLICATION -- REQUIREMENTS. (1)
40 Either by itself or in concert with a director, officer, principal share-
41 holder, or affiliate; another licensee; or a director, officer, principal
42 shareholder, or affiliate of another licensee, a licensee shall not hold con-
43 trol of a business firm, except as follows:
44 (a) If and to the extent necessary to protect the licensee's interest as
45 creditor of, or investor in, the business firm, a licensee that had pro-
46 vided financing assistance to a business firm may acquire and hold control
47 of that business firm. Unless the director approves a longer period, a
48 licensee holding control of a business firm under this subdivision shall
49 divest itself of the interest which constitutes holding control as soon as
50 practicable or within three (3) years after acquiring that interest,
51 whichever is sooner.
6
1 (b) With the approval of the director, a licensee may acquire and hold
2 control of a corporation which has offices located only in this state and
3 which is licensed as a small business investment company under the small
4 business investment act of 1958, Public Law 85-699, 72 Stat. 689 or any
5 successor statute.
6 (c) With the approval of the director, a licensee may acquire and hold
7 control of a company located in this state which is a local development
8 company in accordance with the small business investment act of 1958,
9 whether or not such a development company is or may become certified by
10 the small business administration under section 503 of the small business
11 investment act of 1958, 15 U.S.C. section 697 or any successor statute.
12 (d) With the approval of the director, a licensee may acquire and hold
13 control of another business firm with offices only in this state which is
14 engaged in no business other than the business of providing financing
15 assistance and management assistance to business firms.
16 (e) With the approval of the director, a licensee may acquire and hold
17 control of a business firm not referred to in paragraphs (a) through (d)
18 of this subsection. The director shall not approve an application under
19 this subdivision unless the director determines that such an approval will
20 not cause the amount of the licensee's investments in business firms cov-
21 ered by this subdivision to exceed fifteen percent (15%) of the amount of
22 the assets of the licensee and that in the director's judgment such an
23 approval will promote the purposes of this chapter. An approval by the
24 director under this subdivision shall be for a period of not more than
25 three (3) years, except that in a particular case the director may subse-
26 quently extend the period beyond three (3) years if the director deter-
27 mines that a longer period is needed and is consistent with the purposes
28 of this chapter.
29 (2) If the director fails to issue an order approving or denying an
30 application under subsection (1)(b) or (c) of this section, within forty-five
31 (45) days from receipt by the director of an application which complies with
32 section 26-2704, Idaho Code, the application shall be considered approved by
33 the director.
34 (3) For the purposes of subsection (1) of this section, "hold control"
35 means ownership, directly or indirectly, of record or beneficially, or of vot-
36 ing securities greater than:
37 (a) For a business firm with outstanding voting securities held by fewer
38 than fifty (50) shareholders, forty percent (40%) of the outstanding vot-
39 ing securities.
40 (b) For a business firm with outstanding voting securities held by fifty
41 (50) or more shareholders, twenty-five percent (25%) of the outstanding
42 voting securities.
43 (4) If a licensee anticipates acquiring and holding control of a business
44 firm under subsection (1)(a) of this section, the licensee shall file with the
45 director a plan for acquiring and holding control of the business firm that
46 shall include at least all of the following:
47 (a) The reasons it is necessary for the licensee to acquire and hold con-
48 trol of the business firm.
49 (b) The percentage of outstanding voting securities of the business firm
50 the licensee plans to own.
51 (c) The licensee's proposed course of action upon obtaining control of
52 the business firm.
53 (d) The length of time the licensee anticipates it will be necessary to
54 hold control of the business firm.
55 (5) The director may require the licensee to demonstrate the necessity
7
1 for the licensee to hold control of a business firm under subsection (1)(a) of
2 this section.
3 SECTION 8. That Section 26-2720, Idaho Code, be, and the same is hereby
4 amended to read as follows:
5 26-2720. CONFLICT OF INTEREST -- DEFINED. (1) For purposes of this sec-
6 tion:
7 (a) "Associate" means that term as defined as in section 26-2702, Idaho
8 Code.
9 (b) "Relative" means parent, child, sibling, spouse, father-in-law,
10 mother-in-law, son-in-law, brother-in-law, daughter-in-law, sister-in-law,
11 grandparent, grandchild, nephew, niece, uncle, or aunt.
12 (2) If a licensee provides financing assistance to a business firm or
13 engages in another business transaction, and if that financing assistance or
14 transaction involves a potential conflict of interest, the terms and condi-
15 tions under which the licensee provides the financing assistance or engages in
16 the transaction shall not be less favorable to the licensee than the terms and
17 conditions that would be required by the licensee in the ordinary course of
18 business if the transaction did not involve a potential conflict of interest.
19 Each person who participates in the decision of the licensee relating to a
20 transaction described in this section and has knowledge of a potential con-
21 flict of interest involving that transaction shall take care that disclose the
22 potential conflict of interest is disclosed in the financing documents of the
23 transaction or, for a business transaction not involving financing assistance,
24 in another appropriate document.
25 (3) For the purposes of subsection (2) of this section, transactions
26 engaged in by a licensee which involve a potential conflict of interest
27 include, but are not limited to, the following:
28 (a) Providing financing assistance to a principal shareholder of the
29 licensee, to a person controlled by a principal shareholder of the licen-
30 see, or to a director, officer, partner, relative, controlling person, or
31 affiliate of a principal shareholder of the licensee.
32 (b) Providing financing assistance to a business firm to which a princi-
33 pal shareholder of the licensee: a director, officer, partner, relative,
34 controlling person, or affiliate of a principal shareholder of a licensee,
35 or a person controlled by a principal shareholder of the licensee provides
36 or plans to provide contemporaneous financing assistance.
37 (c) Providing financing assistance to a business firm which has or is
38 expected to have a substantial business relationship with another business
39 firm which has a director, officer, or controlling person who is also a
40 director, officer, or controlling person of the licensee or who is the
41 spouse of a director, officer, or controlling person of the licensee.
42 (d) Providing financing assistance to a business firm if that business
43 firm, or a director, officer, or controlling person of that business firm,
44 contemporaneously has lent or will lend money to an associate of the
45 licensee.
46 (e) Providing financing assistance for the purchase of property of an
47 associate or principal shareholder of the licensee.
48 (f) Selling or otherwise transferring any of its assets to an associate
49 or principal shareholder of the licensee.
50 (4) Nothing in this section or in any other section of this chapter lim-
51 its the authority of the director to determine that an act involves a conflict
52 of interest and therefore is an unsafe or unsound act.
53 (5) Except with the approval of the director, a licensee shall not pro-
8
1 vide a lien on or security interest in any of its property for the purpose of
2 securing an obligation of, or an obligation incurred for the benefit of,
3 another person.
4 SECTION 9. That Section 26-2723, Idaho Code, be, and the same is hereby
5 amended to read as follows:
6 26-2723. VIOLATION OF CHAPTER -- DIRECTOR'S POWERS -- HEARINGS -- CEASE
7 AND DESIST. (1) If in the opinion of the director, a person violates, or there
8 is reasonable cause to believe that a person is about to violate the provi-
9 sions of this chapter, the director may bring an action in the district court
10 to enjoin the violation or to enforce compliance with the provisions of this
11 chapter. Upon a showing that a person has engaged in or is about to engage in,
12 an act or practice constituting a violation of the provisions of this chapter,
13 a restraining order, preliminary or permanent injunction, or writ of mandamus
14 shall be granted, and a receiver or a conservator may be appointed for the
15 defendant or the defendant's assets. The court shall not require the director
16 to post a bond in an action brought under this chapter.
17 (2) If the director finds that a person has violated or that there is
18 reasonable cause to believe that a person is about to violate the provisions
19 of section 26-2711, Idaho Code, the director may order the person to cease and
20 desist from the violation unless and until the person is issued a license.
21 (3) Within thirty (30) days after an order is issued under subsection (2)
22 of this section, the person to whom the order is directed may file with the
23 director an application for a hearing on the order. If the director fails to
24 commence a hearing within fifteen (15) business days after that application is
25 filed or within a longer period to which the person consents, the order shall
26 be considered rescinded. Upon the conclusion of the hearing, the director
27 shall affirm, modify, or rescind the order. A person to whom an order is
28 issued directed under subsection (2) of this section may petition for judicial
29 review of the order in conformance with the provisions of chapter 52, title
30 67, Idaho Code.
31 (4) If, after notice and the opportunity for a hearing, the director
32 determines that a licensee or a subject person of a licensee has violated or
33 is violating, or that there is reasonable cause to believe that a licensee or
34 subject person of a licensee is about to violate, this chapter or another
35 applicable law, or that a licensee or subject person of a licensee has engaged
36 or participated or is engaging or participating, or that there is a reasonable
37 cause to believe that a licensee or subject person of a licensee is about to
38 engage or participate, in an unsafe or unsound act with respect to the busi-
39 ness of that licensee, the director may order that licensee or subject person
40 to cease and desist from the action or violation. The order may require the
41 licensee or subject person to take affirmative action to correct any condition
42 resulting from the action or violation.
43 (5) If the director determines that any of the factors set forth in sub-
44 section (4) of this section are true with respect to a licensee or subject
45 person of a licensee and that the action or violation is likely to cause the
46 insolvency of or substantial dissipation of the assets or earnings of the
47 licensee; is likely to seriously weaken the condition of the licensee; or is
48 likely to otherwise seriously prejudice the interests of the licensee before
49 the completion of proceedings conducted under subsection (4) of this section,
50 the director may order the licensee or subject person to cease and desist from
51 that action or violation. The order may require the licensee or subject per-
52 son to take affirmative action to correct any condition resulting from the
53 action or violation.
9
1 (6) Within thirty (30) days after an order is issued under subsection (5)
2 of this section, the licensee or subject person of a licensee to whom the
3 order is directed may file with the director an application for a hearing on
4 the order. If the director fails to commence a hearing within fifteen (15)
5 business days after the application is filed or within a longer period to
6 which the licensee or subject person consents, the order shall be considered
7 rescinded. Upon the hearing, the director shall affirm, modify, or rescind the
8 order. A licensee or subject person to whom an order is issued directed under
9 subsection (5) of this section may petition for judicial review of the order
10 pursuant to chapter 52, title 67, Idaho Code.
11 (7) If the director finds that a licensee has failed to comply with the
12 provisions of section 26-2717(5), Idaho Code, the director shall revoke the
13 certification of eligible equity investment and shall so notify the licensee
14 promptly.
15 SECTION 10. That Section 26-2724, Idaho Code, be, and the same is hereby
16 amended to read as follows:
17 26-2724. VIOLATION OF CHAPTER -- REMOVAL OF SUBJECT PERSON. (1) The
18 director may issue an order removing a subject person of a licensee from his
19 office, if any, with the licensee and prohibiting the subject person from fur-
20 ther participating in any manner in the conduct of the business of the licen-
21 see, if, after notice and the opportunity for a hearing, the director deter-
22 mines all of the following are true:
23 (a) The subject person has violated the provisions of this chapter or
24 another applicable law; the subject person has engaged or participated in
25 an unsafe or unsound act with respect to the business of the licensee; or
26 the subject person has engaged or participated in an act which constitutes
27 a breach of the subject person's fiduciary duty.
28 (b) The act, violation, or breach of fiduciary duty has caused or is
29 likely to cause substantial financial loss or other damage to the licensee
30 or has seriously prejudiced or is likely to seriously prejudice the inter-
31 ests of the licensee, or the subject person has received financial gain by
32 reason of the act, violation, or breach of fiduciary duty.
33 (c) The act, violation, or breach of fiduciary duty either involves dis-
34 honesty on the part of the subject person or demonstrates the subject
35 person's gross negligence with respect to the business of the licensee or
36 a willful disregard for the safety and soundness of the licensee.
37 (2) The director may issue an order removing the subject person from his
38 office with the licensee, if any, and prohibiting the subject person from fur-
39 ther participating in any manner in the conduct of the business of the licen-
40 see, except with the prior consent of the director, if, after notice and the
41 opportunity for a hearing, the director determines that, by engaging or par-
42 ticipating in an act with respect to a financial or other business institution
43 which resulted in substantial financial loss or other damage, the subject per-
44 son of a licensee has demonstrated both of the following:
45 (a) Dishonesty or willful or continuing disregard for the safety and
46 soundness of the financial or other business institution.
47 (b) Unfitness to continue as a subject person of the licensee or to par-
48 ticipate in conducting the business of the licensee.
49 (3) If the director determines that the factors set forth in subsection
50 (1) or (2) of this section are true with respect to a subject person of a
51 licensee, and that it is necessary for the protection of the interest of the
52 licensee or for the protection of the public interest that the director imme-
53 diately suspend the subject person from his or her office, if any, with the
10
1 licensee and prohibit the subject person from further participating in any
2 manner in conducting the business of the licensee, the director may issue an
3 order suspending the subject person from his or her office, if any, with the
4 licensee and prohibiting the subject person from further participating in any
5 manner in conducting the business of the licensee, except with the consent of
6 the director.
7 (4) Within thirty (30) days after an order is issued under subsection (3)
8 of this section, the subject person of a licensee to whom the order is
9 directed may file with the director an application for a hearing on the order.
10 If the director fails to begin a hearing within fifteen (15) business days
11 after the application is filed or within a longer period to which the subject
12 person consents, the order shall be considered rescinded. Upon the conclusion
13 of the hearing, the director shall affirm, modify, or rescind the order. A
14 subject person of a licensee to whom an order is issued under subsection (3)
15 of this section may petition for judicial review of the order pursuant to
16 chapter 52, title 67, Idaho Code.
17 (5) A person to whom an order is issued directed under this section may
18 apply to the director to modify or rescind the order. The director shall not
19 modify or rescind the order unless the director determines that it is in the
20 public interest to do so and that it is reasonable to believe that the person,
21 if and when he or she becomes a subject person of a licensee, will comply with
22 this chapter.
23 (6) As used in this section, "office,", if used with respect to a licen-
24 see, means the position of director, officer, or employee of the licensee or
25 of a subsidiary of the licensee.
26 SECTION 11. That Section 26-2725, Idaho Code, be, and the same is hereby
27 amended to read as follows:
28 26-2725. INDICTMENT OR CONVICTION OF A CRIME -- REMOVAL OF SUBJECT PER-
29 SON. (1) If the director determines that a subject person of a licensee has
30 been indicted by a grand jury or has been bound over for trial by a court for
31 a crime involving dishonesty or breach of trust, and that the fact that the
32 person continues to be a subject person of the licensee may threaten the
33 interests of the licensee or may threaten to impair public confidence in the
34 licensee, the director may issue an order suspending the subject person from
35 his office, if any, with the licensee and prohibiting the subject person from
36 further participating in any manner in the conduct of the business of the
37 licensee, except with the consent of the director.
38 (2) If the director determines that a subject person or former subject
39 person of a licensee to whom an order was issued directed under subsection (1)
40 of this section, or another subject person of a licensee, has been convicted
41 of, entered a plea of guilty to, has been found guilty of a crime which is
42 punishable by imprisonment for a term of not less than one (1) year and which
43 involves dishonesty or breach of trust, and that the fact that the person con-
44 tinues to be or will resume to be a subject person of the licensee may
45 threaten the interests of the licensee or may threaten to impair public confi-
46 dence in the licensee, the director may issue an order suspending or removing
47 the subject person or former subject person from his office, if any, with the
48 licensee and prohibiting the subject person from further participating in any
49 manner in the conduct of the business of the licensee, except with the prior
50 consent of the director.
51 (3) Within thirty (30) days after an order is issued under subsection (1)
52 or (2) of this section, the subject person of a licensee to whom the order is
53 directed may file with the director an application for a hearing on the order.
11
1 If the director fails to commence a hearing within fifteen (15) business days
2 after the application is filed or within a longer period to which the subject
3 person consents, the order shall be considered rescinded. Upon the conclusion
4 of the hearing, the director shall affirm, modify, or rescind the order. A
5 subject person or former subject person of a licensee to whom an order is
6 issued directed under subsection (1) or (2) of this section may petition for
7 judicial review of the order pursuant to chapter 52, Ttitle 67, Idaho Code.
8 (4) The fact that a subject person of a licensee charged with a crime
9 involving dishonesty or breach of trust is not convicted of the crime shall
10 not preclude the director from issuing an order to concerning the subject per-
11 son under any other provision of this chapter.
12 (5) A person to whom an order is issued directed under this section may
13 apply to the director to modify or rescind the order. The director shall not
14 modify or rescind the order unless the director determines that it is in the
15 public interest to do so and that it is reasonable to believe that the person,
16 if and when he or she becomes a subject person of a licensee, will comply with
17 this chapter.
18 (6) As used in this section, "office,", if used with respect to a licen-
19 see, means the position of director, officer, or employee of the licensee or
20 of a subsidiary of the licensee.
21 SECTION 12. That Section 26-2727, Idaho Code, be, and the same is hereby
22 amended to read as follows:
23 26-2727. ORDER TO REFRAIN FROM OFFERING FINANCIAL ASSISTANCE -- CONDI-
24 TIONS -- HEARING. (1) The director may issue an order directing a licensee to
25 refrain from providing any additional financing assistance and management
26 assistance to business firms if, in the opinion of the director, the order is
27 necessary to protect the interest of the licensee or the public interest, and
28 if, after notice and a hearing, the director determines that any of the fol-
29 lowing are true:
30 (a) The licensee or a controlling person, subsidiary, or affiliate of the
31 licensee has violated the provisions of this chapter or another applicable
32 law.
33 (b) The licensee is conducting its business in an unsafe and unsound man-
34 ner.
35 (c) The licensee is in a condition that makes it unsafe or unsound for
36 the licensee to transact business.
37 (d) The licensee has ceased to transact business as a business and indus-
38 trial development corporation.
39 (e) The licensee is insolvent.
40 (f) The licensee has suspended payment of its obligations, has made an
41 assignment for the benefit of its creditors, or has admitted in writing
42 its inability to pay its debts as they become due.
43 (g) The licensee has applied for an adjudication of bankruptcy, reorgani-
44 zation, arrangement, or other relief under a bankruptcy, reorganization,
45 insolvency, or moratorium law, or that a person has applied for such
46 relief under such a law against a licensee and the licensee has by any
47 affirmative act approved of or consented to the action or such relief has
48 been granted.
49 (h) A fact or condition exists which would have been grounds for denying
50 the application if the fact or condition had existed at the time the
51 licensee applied for its license.
52 (2) If the director determines that any of the factors set forth in sub-
53 section (1) of this section are true with respect to a licensee and that it is
12
1 necessary for the protection of the interests of the licensee or the public
2 interest that the director immediately issue an order directing the licensee
3 to refrain from providing any additional financing assistance and management
4 assistance to business firms, the director may issue such an order without a
5 hearing. Within thirty (30) days after an order is issued under this subsec-
6 tion, the licensee to whom the order is directed may file with the director a
7 request for a hearing on the order. If the director fails to commence a hear-
8 ing within fifteen (15) business days after the request is filed or within a
9 longer period to which the licensee consents, that order shall be considered
10 rescinded. Upon the conclusion of the hearing, the director shall affirm, mod-
11 ify, or rescind the order.
12 (3) With the consent of the director, a licensee which has been the sub-
13 ject of an order under subsection (1) or (2) of this section may resume pro-
14 viding financing assistance and management assistance to business firms under
15 such conditions as the director may prescribe.
16 (4) A person to whom an order is issued directed under subsection (1) or
17 (2) of this section may apply to the director to modify or rescind the order.
18 The director shall not grant the application unless the director determines
19 that it is in the public interest to do so and that it is reasonable to
20 believe that the person, if and when the order is modified or rescinded, will
21 comply with this chapter.
22 SECTION 13. That Section 26-2729, Idaho Code, be, and the same is hereby
23 amended to read as follows:
24 26-2729. VIOLATION OF CHAPTER -- CIVIL PENALTIES. (1) If, after notice
25 and the opportunity for a hearing, the director finds that a person has vio-
26 lated the provisions of this chapter, he may order that person to pay to the
27 director a civil penalty in the amount the director specifies. However, the
28 amount of the civil penalty shall not exceed one thousand dollars ($1,000) for
29 each violation, or in the case of a continuing violation, one thousand dollars
30 ($1,000) for each day for during which the violation continues. Money col-
31 lected for a civil penalty under this section shall be deposited into the
32 finance administrative account pursuant to section 67-2702, Idaho Code.
33 (2) The provisions of this section do not apply to any act committed or
34 omitted in good faith in conformity with an order, rule, declaratory ruling,
35 or written interpretative opinion of the director, notwithstanding that the
36 order, rule, declaratory ruling, or written interpretative opinion is later
37 amended, rescinded, or repealed, or determined by judicial or other authority
38 to be invalid for any reason.
39 (3) The provisions of subsection (1) of this section are additional to,
40 and not alternative to, other provisions of this chapter which authorize the
41 director to issue orders or to take other action on account of a violation of
42 the provisions of this chapter.
43 SECTION 14. That Section 26-2731, Idaho Code, be, and the same is hereby
44 amended to read as follows:
45 26-2731. CONSTRUCTION -- PROMULGATION OF RULES -- APPLICABILITY OF CHAP-
46 TER. This chapter shall be liberally construed to accomplish its purposes.
47 A proceeding to promulgate rules or a proceeding regarding civil penalties
48 under section 26-2729, Idaho Code, shall be subject to the administrative pro-
49 cedures act contained in chapter 52, title 67, Idaho Code.
50 Except as otherwise provided in this section, the provisions of a
51 licensee's incorporating statute apply to the licensee. If a provision of the
13
1 licensee's incorporating statute conflicts with any provision of this chapter,
2 this chapter controls.
STATEMENT OF PURPOSE
RS 12106C1
This legislation amends the Idaho Business and Industrial
Development Corporation Act to provide the following changes: 1)
to remove the limitation that business and industrial development
corporations (BIDCO's) provide financing assistance and
management assistance to businesses located only in Idaho; 2) to
limit the uses to which a BIDCO may apply public moneys; 3) to
provide that BIDCOs may enter into management assistance
contracts that must be in writing, and that such contracts govern
all aspects of the business relationship between the BIDCO and
business firm regarding the management assistance provided; 4) to
remove the limitation that BIDCOs hold control of corporations
with offices located only in Idaho; 5) to require that only the
opportunity for a hearing be provided prior to the issuance of
certain orders against BIDCOs by the Director of the Department
of Finance, including the issuance of a cease and desist order,
and an order removing the "subject person" of a BIDCO from his
office, and prior to the Director imposing a civil penalty for
violation of the Act, and to provide that a person to whom an
order is directed may petition for judicial review of the order;
6) to provide that the Director may issue an order directing a
BIDCO to refrain from providing management assistance to business
firms; and 7) to make technical corrections.
FISCAL IMPACT
None.
Contact
Name: Rep. Dell Raybould
Phone: (208) 332-1000
STATEMENT OF PURPOSE/FISCAL NOTE H 660