2002 Legislation
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HOUSE BILL NO. 660 – Business/Industrial Dvlp Corp

HOUSE BILL NO. 660

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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

Bill Text


                                                                        
                                                                        
  ||||              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 / Fiscal Impact



                       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