By: Smith, Dalton H.B. No. 1889
73R2580 LJD-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the creation and operation of the Texas Small Business
1-3 Equity Commission and the development of certain businesses;
1-4 providing a penalty.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subtitle F, Title 4, Government Code, is amended
1-7 by adding Chapter 486 to read as follows:
1-8 CHAPTER 486. TEXAS SMALL BUSINESS EQUITY COMMISSION
1-9 SUBCHAPTER A. GENERAL PROVISIONS
1-10 Sec. 486.001. LEGISLATIVE FINDINGS. The legislature finds
1-11 that:
1-12 (1) the development and expansion of business,
1-13 commerce, and industry are essential to the economic growth of the
1-14 state and to the full employment, welfare, and prosperity of its
1-15 citizens; and
1-16 (2) the measures authorized by this chapter and the
1-17 assistance provided by this chapter, especially with respect to
1-18 financing, are in the public interest and serve a public purpose of
1-19 the state economically by the securing and retaining of private
1-20 business enterprises and the resulting maintenance of a higher
1-21 level of employment, economic activity, and stability.
1-22 Sec. 486.002. DEFINITIONS. In this chapter:
1-23 (1) "Board" means the governing board of the
1-24 commission.
2-1 (2) "Bonds" means any bonds, refunding bonds, notes,
2-2 debentures, interim certificates, grants, or other evidences of
2-3 indebtedness of the commission, whether in temporary or in
2-4 definitive form and whether or not exempt from federal taxation.
2-5 (3) "Candidate project" means a business idea to be
2-6 developed in the form of a feasibility study for promotion by a
2-7 public or private body, for which business there is a demonstrated
2-8 need but an entrepreneurial group with the technical expertise and
2-9 commitment to carry out the project does not exist or does not have
2-10 the financial capability to complete the project.
2-11 (4) "Certified development company" means a
2-12 development company organized to operate on a local, regional, or
2-13 statewide basis to sell debentures pertaining to identifiable small
2-14 businesses with the SBA's guarantee and to render other assistance
2-15 to small businesses.
2-16 (5) "Commission" means the Texas Small Business Equity
2-17 Commission.
2-18 (6) "Development company" means a for-profit or
2-19 nonprofit enterprise incorporated under the laws of this state for
2-20 the purpose of furthering the economic development of its community
2-21 and environs and with authority to promote and assist the growth
2-22 and development of small businesses in the areas covered by its
2-23 operations. The term includes a certified development company, a
2-24 community development corporation regulated by a federal agency,
2-25 and an economic development corporation formed under the
2-26 Development Corporation Act of 1979 (Article 5190.6, Vernon's Texas
2-27 Civil Statutes).
3-1 (7) "Disadvantaged concern" means a small business
3-2 owned by a person or persons whose participation in the free
3-3 enterprise system is hampered because of social or economic
3-4 disadvantages.
3-5 (8) "Distressed area" means:
3-6 (A) a county with a population of less than
3-7 25,000 that has an unemployment rate in excess of five percent,
3-8 according to statistics of the Texas Employment Commission, and
3-9 that has been designated as a distressed area by its governing
3-10 body; and
3-11 (B) any subarea of a political subdivision that
3-12 has been traditionally recognized by custom or by previous
3-13 governmental designation to be a subarea and that possesses all of
3-14 the following characteristics, certified to by the political
3-15 subdivision in which the subarea is located:
3-16 (i) a per capita income that is 80 percent
3-17 or less of the median income of the political subdivision in which
3-18 it is located;
3-19 (ii) an unemployment rate that is three
3-20 percent higher than the average unemployment rate of the political
3-21 subdivision taken as a whole; and
3-22 (iii) a percentage of individuals and
3-23 families in poverty that is 10 percent or more of the entire
3-24 subarea.
3-25 (9) "Feasibility study" means a study that is directly
3-26 and immediately relevant to the potential creation or expansion of
3-27 a small business. The study must include preliminary engineering
4-1 and architectural plans, location studies, marketing studies,
4-2 organizational plans, studies of the demand and supply of labor,
4-3 water, and sewerage, soil surveys and foundation studies, studies
4-4 of competition, distribution, transportation, loan packaging,
4-5 financial forecasts, taxes, and fiscal and other incentives, and
4-6 other related studies of the business environment, all of which are
4-7 directed toward the practical and real establishment of a small
4-8 business.
4-9 (10) "Federal leverage" means financial assistance
4-10 provided to a qualified small business financing company by the SBA
4-11 or by another federal agency, including the purchase or guarantee
4-12 of debt instruments or preferred securities or the grant or loan of
4-13 funds.
4-14 (11) "Investment company" means a corporation or a
4-15 limited partnership to which a license has been granted by the SBA
4-16 for providing capital to small businesses. The term includes
4-17 investment companies licensed as provided by Section 301(c) or (d)
4-18 of the Small Business Investment Act (15 U.S.C. Section 681(c) or
4-19 (d)) and investment companies registered under the Investment
4-20 Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.).
4-21 (12) "Leverage" means federal, private, public, and
4-22 state leverage.
4-23 (13) "Licensee" means a qualified small business
4-24 financing company licensed under this chapter.
4-25 (14) "New product" means a product, including a
4-26 device, technique, process, or service, that is or may be
4-27 exploitable commercially, the production or provision of which does
5-1 not exist in this state or does not constitute a traditional
5-2 activity, type of enterprise, or method of production or service in
5-3 this state.
5-4 (15) "Private capital" means the combined paid-in
5-5 capital, paid-in surplus, and retained earnings, or partnership
5-6 capital and retained earnings, of a for-profit qualified small
5-7 business financing company or the funds belonging to or provided or
5-8 arranged by a nonprofit qualified small business financing company,
5-9 whether derived from a private or a public source, but excluding
5-10 federal or state leverage. The term includes capital that is:
5-11 (A) cash and property actually received in
5-12 exchange for shares of stock or partnership shares issued by the
5-13 company;
5-14 (B) cash and property contributed to the company
5-15 without obligation;
5-16 (C) cash and property for which the company is
5-17 indebted on a long-term, subordinated basis; or
5-18 (D) guarantees of capital pledged by third
5-19 parties on behalf of a company as approved by the commission.
5-20 (16) "Private leverage" means private financial
5-21 assistance exceeding that required under this chapter to be matched
5-22 with state leverage and that is provided to a qualified small
5-23 business financing company.
5-24 (17) "Public leverage" means public financial
5-25 assistance exceeding that required under this chapter to be matched
5-26 with state leverage and that is provided to a qualified small
5-27 business financing company.
6-1 (18) "Qualified financial institution" means a banking
6-2 or thrift institution, insurance company, trust fund, pension fund,
6-3 or related corporation, or other person engaged primarily in
6-4 lending or investing funds, that is selected by the commission as a
6-5 person to which guarantees are provided to induce the person to
6-6 provide financial assistance to qualified small business financing
6-7 companies in amounts at least equal to the total of the guarantees
6-8 provided.
6-9 (19) "Qualified small business financing company"
6-10 means a corporation or a limited partnership organized as provided
6-11 by federal regulations and in conformity with this chapter, to
6-12 which a federal license, state charter, or other authorization has
6-13 been granted to operate as an investment company, development
6-14 company, or other small business financing company as determined by
6-15 the commission.
6-16 (20) "SBA" means the Small Business Administration.
6-17 (21) "Small business" means a small business as
6-18 defined by the SBA that for purposes of size eligibility or other
6-19 factors meets the applicable criteria set forth in 13 C.F.R.
6-20 Section 121.
6-21 (22) "Small business growth concern" means a small
6-22 business given funding priority under Section 486.045.
6-23 (23) "State leverage" means financial assistance
6-24 provided to a licensee, directly or in cooperation with qualified
6-25 financial institutions, through the purchase or guarantee of
6-26 debentures or other debt instruments, the loan of funds, or the
6-27 purchase of equity securities as provided under this chapter.
7-1 Sec. 486.003. TEXAS SMALL BUSINESS EQUITY COMMISSION; BOARD.
7-2 (a) The Texas Small Business Equity Commission is a state agency.
7-3 (b) The commission is governed by a board composed of:
7-4 (1) nine members appointed by the governor with the
7-5 advice and consent of the senate; and
7-6 (2) the attorney general, state treasurer, and
7-7 agriculture commissioner as ex officio nonvoting members.
7-8 (c) In making the appointments the governor must attempt to
7-9 ensure full and fair representation of the general public,
7-10 including women and ethnic minorities.
7-11 (d) Appointed members serve six-year terms with the terms of
7-12 one-third of the members expiring February 1 of each odd-numbered
7-13 year.
7-14 (e) At its first meeting following February 1 of each
7-15 odd-numbered year, the board shall elect its presiding officer and
7-16 other officers it considers necessary.
7-17 (f) Appointed members of the board serve without
7-18 compensation for service on the board but are entitled to
7-19 reimbursement of actual and necessary expenses incurred in the
7-20 performance of official duties.
7-21 Sec. 486.004. EXECUTIVE DIRECTOR; STAFF. The board may hire
7-22 an executive director and staff necessary to carry out the duties
7-23 of the commission.
7-24 Sec. 486.005. GENERAL POWERS AND DUTIES. (a) The board may
7-25 adopt reasonable rules to govern the affairs and conduct of its
7-26 business, including rules on policies and forms for loan
7-27 applications and credit instruments.
8-1 (b) The commission has all powers necessary to carry out the
8-2 purposes of this chapter, including the power to:
8-3 (1) develop and implement programs of financing
8-4 assistance and investment for the projects and programs described
8-5 by this chapter;
8-6 (2) acquire, by purchase, lease, option, gift, grant,
8-7 bequest, or devise, property or an interest in property that the
8-8 commission considers necessary;
8-9 (3) sell, convey, mortgage, lease, transfer, donate,
8-10 option, exchange, or otherwise dispose of property or an interest
8-11 in property as the objectives and purposes of the commission may
8-12 require;
8-13 (4) enter into contracts with any person; and
8-14 (5) procure insurance against property loss in amounts
8-15 as necessary and desirable.
8-16 (Sections 486.006-486.020 reserved for expansion
8-17 SUBCHAPTER B. EQUITY LEVERAGING PROGRAM; PROGRAM FINANCING
8-18 Sec. 486.021. EQUITY LEVERAGING PROGRAM. (a) The
8-19 commission may provide loans or guarantees to a qualified financial
8-20 institution to induce the institution to provide financial
8-21 assistance to qualified small business financing companies or to
8-22 small businesses in an amount at least equal to the total of those
8-23 loans or guarantees.
8-24 (b) The commission may make, renew, participate in, induce,
8-25 or guarantee loans, either directly or in cooperation with
8-26 qualified financial institutions, to qualified small business
8-27 financing companies licensed under this chapter. A loan must be
9-1 repayable in not less than five and not more than 30 years, with
9-2 due allowance for prepayment arrangements as may be approved by the
9-3 commission. The loan may be subordinated to loans of other
9-4 providers of long-term leverage funds so that the amount loaned
9-5 qualifies as equity, paid-in capital, or matching funds for
9-6 purposes of obtaining additional public or private leverage.
9-7 (c) The commission may make, participate in, or guarantee
9-8 loans, either directly or in cooperation with banks or other
9-9 lending agencies through agreements to participate on an immediate
9-10 or deferred basis, to offset the costs of feasibility studies for
9-11 candidate projects, with emphasis on new product and service
9-12 development. The loans may be made to small businesses or to
9-13 appropriate public or private bodies desiring to prepare and
9-14 promote candidate projects of interest to the economic development
9-15 of the state or a subdivision or region of the state.
9-16 (d) The commission shall adapt its programs in a manner that
9-17 makes maximum use of new sources of leverage and federal and other
9-18 programs, in the interest of expanding the small business sector in
9-19 this state and encouraging the existence of capital markets
9-20 accessible to small businesses.
9-21 (e) The commission may induce qualified financial
9-22 institutions to invest in nonvoting equity securities of qualified
9-23 small business financing companies licensed under this chapter. If
9-24 a licensee is not allowed by law or governmental regulations to
9-25 issue nonvoting securities, the commission may approve the
9-26 licensee's petition for a waiver of the requirement that investment
9-27 be limited to nonvoting securities, and the commission may
10-1 negotiate terms with a licensee in certain cases of default or
10-2 noncompliance under which holders of nonvoting securities may
10-3 obtain the right to vote their shares.
10-4 Sec. 486.022. FUNDS COMMITTED FOR LOAN GUARANTEES;
10-5 AVAILABILITY OF EXCESS PORTION. (a) If commission funds have been
10-6 set aside, pledged, or otherwise allocated to guarantee a loan and
10-7 a portion of the loan has been repaid so that the full pledged or
10-8 allocated amount is no longer necessary to secure the unpaid
10-9 portion of the loan, the commission shall reduce the funds pledged
10-10 or allocated for the guarantee to the amount necessary to secure
10-11 the unpaid portion of the loan and shall use the excess money for
10-12 the purposes and programs of the commission as provided by this
10-13 chapter.
10-14 (b) Funds may not be released from a guarantee or part of a
10-15 guarantee if the release would alter the obligation of the
10-16 commission for the unpaid portion of the guaranteed loan.
10-17 Sec. 486.023. SELECTION OF QUALIFIED FINANCIAL INSTITUTION.
10-18 (a) The commission shall select a qualified financial institution
10-19 using the following criteria:
10-20 (1) the convenience of the institution to the
10-21 commission and to its licensees;
10-22 (2) the level of the institution's provision of
10-23 private leverage to small businesses;
10-24 (3) the rate of interest offered by the institution on
10-25 commission deposits; and
10-26 (4) the stability of the institution and its
10-27 reputation for integrity and community service.
11-1 (b) The commission may use similar criteria for the
11-2 selection of one or more banking institutions in which to deposit
11-3 its funds and provide safekeeping for its securities.
11-4 Sec. 486.024. PROGRAM FINANCING. (a) The commission may:
11-5 (1) borrow money and apply for and receive from a
11-6 federal agency, the state, a political subdivision of the state, or
11-7 a public or private source a grant, loan, or advance for or in the
11-8 aid of an economic development cooperative project;
11-9 (2) give security as required for the grant, loan, or
11-10 advance; and
11-11 (3) enter into and carry out a contract related to the
11-12 grant, loan, or advance.
11-13 (b) Public notice must be given before an action under this
11-14 section, and the action must be approved by a two-thirds majority
11-15 of the board.
11-16 (c) The commission may undertake the financing of the cost
11-17 of a project for an eligible small business from the proceeds of
11-18 its bonds by:
11-19 (1) entering into a lease for the facilities of the
11-20 eligible small business being financed;
11-21 (2) selling those facilities to the eligible small
11-22 business under a sales contract; or
11-23 (3) entering into another transaction the commission
11-24 considers appropriate to accomplish the purposes of this chapter
11-25 and the security of the bonds.
11-26 Sec. 486.025. REVENUE BONDS. (a) The commission may issue
11-27 revenue bonds, in an amount not to exceed $50 million annually, to
12-1 carry out the purposes of this chapter and that are payable from
12-2 and secured by a pledge of assets of the commission derived from
12-3 its undertakings, including loans, grants, or contributions of
12-4 funds made by the federal government or by state or local
12-5 governments. The principal and interest on any bonds issued by the
12-6 commission may be secured by a mortgage or other instrument
12-7 covering all or part of land or of a development project, including
12-8 any additions, improvements, extensions to, or enlargements of the
12-9 development project.
12-10 (b) Bonds issued under this section, together with all
12-11 interest on and income from the bonds, are exempt from all state
12-12 taxes.
12-13 (c) If bonds can be refunded to obtain interest rates that
12-14 are lower than the interest paid on existing bonds, the commission
12-15 may refund bonds by the issuance of new bonds, whether the bonds to
12-16 be refunded have or have not matured, and may refund bonds partly
12-17 to refund outstanding bonds. Refunding bonds may be sold and the
12-18 proceeds applied to the purchase, redemption, or payment of the
12-19 bonds to be refunded or exchanged for the bonds to be refunded.
12-20 (d) The bonds must be authorized by resolution of the board.
12-21 The bonds mature at the time or times as the resolution provides,
12-22 except that a bond may not mature more than 30 years after the date
12-23 of issue. The bonds must bear the date, bear interest at a rate,
12-24 be in the denomination, be in the form, carry the registration
12-25 privileges, be executed in the manner, be payable in the medium of
12-26 payment at the place, and be subject to the terms of redemption,
12-27 including redemption before maturity, as the resolution provides.
13-1 (e) The bonds may be sold by the commission in the manner
13-2 and from time to time at public or private sale, at the price or
13-3 prices determined by the board, and the commission may pay all
13-4 expenses and commissions that it considers necessary or
13-5 advantageous in connection with the issuance and sale. The bonds
13-6 are negotiable instruments.
13-7 (f) Bonds authorized to be issued by the board shall be
13-8 submitted to and approved by the bond review board before issuance.
13-9 (g) The bonds are legal instruments in which public officers
13-10 or public bodies of the state, political subdivisions of the state,
13-11 insurance companies and associations, and other persons carrying on
13-12 insurance business, banks, bankers, banking associations, trust
13-13 companies, savings and loan associations, investment companies, and
13-14 other persons carrying on banking business, administrators,
13-15 guardians, executors, trustees, and other fiduciaries, and other
13-16 persons authorized to invest in bonds or in other obligations of
13-17 the state, may invest funds, including capital, in their control or
13-18 belonging to them. The bonds are also securities that may be
13-19 deposited with and received by public officers and bodies of the
13-20 state, an agency or political subdivision of the state, and public
13-21 corporations for any purpose for which the deposit of bonds or
13-22 other obligations is authorized by law.
13-23 (h) If a member of the board or an officer of the commission
13-24 ceases to be a member or officer before delivery of bonds signed by
13-25 the member or officer, the member's or officer's signature or
13-26 facsimile of the signature is valid and sufficient for all
13-27 purposes, as if the member or officer had remained in office until
14-1 delivery.
14-2 (i) The commission may contract with the holders of its
14-3 bonds as to the custody, collection, securing, investment, and
14-4 payment of money of the commission and of money held in trust or
14-5 otherwise for the payment of bonds and may carry out the contract.
14-6 A bank or trust company may give security for the deposits.
14-7 (j) The commission may create an insurance or guaranty fund
14-8 to insure the payment or repayment of all or part of the principal
14-9 of or redemptions, prepayment premiums, penalties, or interest on:
14-10 (1) its bonds; or
14-11 (2) any instrument executed, obtained, or delivered in
14-12 connection with the issuance and sale of its bonds.
14-13 Sec. 486.026. EXEMPTION FROM TAXATION. Funds, bonds, or
14-14 other evidences of indebtedness issued by the commission, their
14-15 transfer, and the income from them, including any profits made on
14-16 their sale, are free from taxation in this state.
14-17 (Sections 486.027-486.040 reserved for expansion
14-18 SUBCHAPTER C. LICENSING AND REQUIREMENTS
14-19 FOR SMALL BUSINESS FINANCING COMPANIES
14-20 Sec. 486.041. LICENSE REQUIRED. Funds may not be provided
14-21 by the commission or a qualified financial institution under this
14-22 chapter to a qualified small business financing company unless the
14-23 company has been issued a license under this chapter.
14-24 Sec. 486.042. APPLICATION FOR LICENSE. A qualified small
14-25 business financing company may apply to the commission for a
14-26 license establishing the eligibility of the company to participate
14-27 in the equity leveraging program provided by this chapter.
15-1 Sec. 486.043. APPROVAL OR DENIAL OF LICENSE APPLICATION.
15-2 (a) The commission shall develop for the board's adoption rules
15-3 and reporting requirements as the commission considers proper for
15-4 adequate investigations concerning the advisability of approving an
15-5 application for a license. The rules must include provisions:
15-6 (1) for ascertaining that the applicant is a holder of
15-7 a valid license, authorization, or charter to operate as a
15-8 qualified small business financing company;
15-9 (2) for ascertaining that the applicant is currently
15-10 in compliance with all applicable federal and state law;
15-11 (3) to assure the financial capacity of the applicant
15-12 to raise the capital, in the case of an applicant proposing to
15-13 receive state leverage funds, conditioned on its own promise of
15-14 first having raised or increased its own private paid-in capital in
15-15 the required proportion;
15-16 (4) for ascertaining the qualifications and competence
15-17 of the board members and management of the applicant; and
15-18 (5) for obtaining assurances that the proposed board
15-19 members and management of the applicant intend to comply with this
15-20 chapter.
15-21 (b) After receipt and due consideration of an application,
15-22 the commission shall approve or deny the application and shall
15-23 notify the applicant of the action.
15-24 (c) If an application is denied, the commission shall
15-25 specify in writing the reasons for the denial and forward them to
15-26 the applicant.
15-27 (d) A license may not be transferred or surrendered without
16-1 prior written approval of the commission.
16-2 Sec. 486.044. LICENSEE'S APPLICATION FOR FINANCIAL
16-3 ASSISTANCE. (a) After a qualified small business financing
16-4 company has been granted a license, it may apply to the commission
16-5 for financial assistance under this chapter. The commission shall
16-6 accept and process applications on a first-come, first-served
16-7 basis, but it may restrict, allocate, or parcel out assistance or
16-8 set other reasonable conditions as it considers appropriate to the
16-9 furtherance of the purposes of this chapter.
16-10 (b) The commission shall establish and publish the
16-11 procedures to be followed in applying for financial assistance
16-12 under this chapter. The commission shall establish appropriate
16-13 procedures to assure proper use of its money and the outside
16-14 leverage obtained through its use, including assurance that:
16-15 (1) the concerns being financed by the licensees are
16-16 small businesses actually headquartered and operated in this state
16-17 and that they meet other criteria established by state law,
16-18 including applicable rules;
16-19 (2) the licensees use their funds in ways that permit
16-20 their portfolio companies to maximize their outside financing and
16-21 leverage;
16-22 (3) the licensees keep all uninvested funds on deposit
16-23 with, or securities in the safekeeping of, financial institutions
16-24 located in this state;
16-25 (4) proper recordkeeping and reporting are performed;
16-26 (5) all licensees comply with the laws, including
16-27 rules, of this state and other regulatory bodies to which they are
17-1 subject; and
17-2 (6) any benefit received by a licensee in violation of
17-3 Section 486.064 is paid to the commission and is secured and
17-4 cross-collateralized by the same security held by the commission
17-5 for repayment of commission funds.
17-6 Sec. 486.045. PRIORITY FOR FUNDS DISTRIBUTED BY LICENSEE.
17-7 (a) The greatest possible portion of the funds authorized by this
17-8 chapter shall be placed through licensees in small business growth
17-9 concerns that contribute most directly to greater employment,
17-10 productivity, and production of wealth in this state, with priority
17-11 given to those concerns that are also disadvantaged businesses or
17-12 are to be located in a distressed area.
17-13 (b) A small business is considered a small business growth
17-14 concern if its primary activity falls clearly within the following
17-15 industrial classifications provided by the Standard Industrial
17-16 Classification Manual prepared by the Office of Management and
17-17 Budget:
17-18 (1) Division A--Agriculture, Forestry, and Fisheries
17-19 (limited to new products or services);
17-20 (2) Division B--Mining, Including Oil and Gas;
17-21 (3) Division C--Heavy Industrial Construction and
17-22 Related Services (Group 162);
17-23 (4) Division D--Manufacturing, with the exclusion of
17-24 Main Group 21, Tobacco Manufacturing;
17-25 (5) Division E--Transportation, Communication, and
17-26 Electric, Gas, and Sanitary Services, with the exception of Public
17-27 Utilities;
18-1 (6) Division F--Regional Wholesale Distribution,
18-2 defined as "Merchant Wholesalers" under Major Group 50, and
18-3 franchisors, no groups specified;
18-4 (7) Division G--Industrial Parks and Regional
18-5 Wholesale Trade Marts, no groups specified;
18-6 (8) Division H--Major Industrial Repairs and Related
18-7 Services and Family Oriented Tourist Attractions, with the
18-8 exclusion of businesses primarily providing lodging and meals, no
18-9 groups specified;
18-10 (9) Divisions D, F, H and Others--Firms that derive
18-11 over 50 percent of their revenue by exporting products or services
18-12 to foreign countries; or
18-13 (10) Division I--Medical (Major Group 80).
18-14 (c) A small business that does not qualify as a small
18-15 business growth concern under Subsection (b) may be considered a
18-16 small business growth concern only if it is shown that the business
18-17 adds directly to greater employment, productivity, and production
18-18 of wealth within this state and receives the recommendation of the
18-19 commission.
18-20 Sec. 486.046. LICENSEE'S ACCOUNTING REQUIREMENTS. (a) On
18-21 each disbursement of funds to a licensee, the licensee shall create
18-22 a separate Texas fund account and immediately transfer to that
18-23 account:
18-24 (1) all leverage funds received under this chapter;
18-25 (2) matching private capital, in an amount not less
18-26 than the agreed-on proportion of private capital of the licensee,
18-27 representing cash, unencumbered cash equivalent securities, or
19-1 guarantees of capital pledged by third parties on behalf of the
19-2 licensee or one-fourth of the amount of the cumulative total of
19-3 state leverage funds, whichever is greater;
19-4 (3) in the case of an investment company, all, or the
19-5 reasonable proportion to which the commission and the licensee
19-6 agree, of federal or other outside leverage available or received
19-7 in the future, until the proportion that the outside leverage in
19-8 the Texas fund bears to the total under Subdivisions (1) and (2)
19-9 equals or exceeds the proportion that the federal or other outside
19-10 leverage not in the Texas fund bears to the private capital of the
19-11 licensee not in the Texas fund; and
19-12 (4) in the case of a development company, all, or the
19-13 reasonable proportion to which the commission and the licensee
19-14 agree, of interest earned on the deposit or loan of the funds
19-15 specified under Subdivisions (1) and (2) and all, or the
19-16 reasonable proportion to which the commission and the licensee
19-17 agree, of federal or outside leverage available or received in the
19-18 future as a result of this chapter.
19-19 (b) Money in a Texas fund may be used only as provided by
19-20 this chapter.
19-21 (c) Not later than the 15th day after the date of each
19-22 disbursement by a licensee from its Texas fund, the licensee shall
19-23 remit to the commission a report in a form provided by the
19-24 commission certifying:
19-25 (1) the name, address, and phone number of the small
19-26 business receiving the disbursement and the name of its chief
19-27 executive officer;
20-1 (2) the amount and terms of the financing;
20-2 (3) the primary and secondary industrial
20-3 classification codes of the recipient's business;
20-4 (4) the assets, capital, and number of employees of
20-5 the recipient before financing, and assets, capital, and estimated
20-6 number of employees after financing;
20-7 (5) whether the recipient is a business headquartered
20-8 or operating in this state;
20-9 (6) whether the recipient is a small business, a
20-10 disadvantaged concern, or a small business in a distressed area or
20-11 state enterprise zone; and
20-12 (7) that the financing complies with the requirements
20-13 of this chapter and the rules of the board.
20-14 (d) A licensee shall maintain current financial records and
20-15 books of account in accordance with accepted accounting standards
20-16 and shall furnish to the commission a copy of financial reports at
20-17 the same time and with the same regularity as the reports are
20-18 prepared for management, stockholders, partners, or other
20-19 regulating agencies, but not less than once annually, together with
20-20 accompanying independent public accountant's certificates.
20-21 Sec. 486.047. INSPECTION OF RECORDS BY COMMISSION; AUDIT.
20-22 (a) The commission may at any time inspect records of a licensee
20-23 during normal business hours if the commission considers an
20-24 inspection appropriate.
20-25 (b) Except as provided by Subsection (c), reasonable
20-26 inspection fees may be charged to a licensee for not more than one
20-27 inspection annually.
21-1 (c) If a discrepancy or another reason is found by the
21-2 commission, the commission may cause the books of the licensee to
21-3 be audited at the licensee's expense.
21-4 Sec. 486.048. PERIODIC REVIEW OF LICENSEE'S OPERATIONS. (a)
21-5 The commission periodically may review the operations of a
21-6 licensee. The review must include an investigation of the
21-7 management and intended use of funds provided under this chapter.
21-8 (b) Based on the results of a periodic review, the
21-9 commissioner may:
21-10 (1) outline corrective steps that must be taken by the
21-11 licensed qualified small business financing company to retain that
21-12 license; or
21-13 (2) revoke the license of the qualified small business
21-14 financing company.
21-15 (c) If corrective steps that have been ordered are not taken
21-16 or the license is revoked, all funds that the licensee has received
21-17 under this chapter are immediately due and payable. If a senior
21-18 lender such as the SBA has provided additional leverage to the
21-19 licensee, the commission may not take action to collect the funds
21-20 without prior consultation with and full regard for the rights of
21-21 priority of the senior lender.
21-22 Sec. 486.049. APPLICATIONS TO OTHER LICENSING BODIES; COPIES
21-23 TO COMMISSION AND APPROVAL REQUIRED. (a) Unless specifically
21-24 exempted in writing by the commission, a licensee making
21-25 application to other licensing bodies for changes or approvals of
21-26 any nature shall make a copy of the application available to the
21-27 commission.
22-1 (b) If the changes or approvals sought involve a 10 percent
22-2 or more change in ownership on a cumulative basis, change in
22-3 control, change in management, decrease in capital, repayment of
22-4 leverage funds, merger, consolidation, reorganization, liquidation,
22-5 or other event the commission considers would materially affect the
22-6 commission's interest, the application shall be made only with the
22-7 prior approval of the commission. Written proof of receipt by the
22-8 commission is required, and, in the absence of a written dissent or
22-9 objection by the commission within 30 days after the date of
22-10 receipt, approval of the commission is presumed.
22-11 (Sections 486.050-486.060 reserved for expansion
22-12 SUBCHAPTER D. PROHIBITED
22-13 ACTIVITIES; OFFENSES
22-14 Sec. 486.061. GENERAL OFFENSE. (a) A person commits an
22-15 offense if the person violates this chapter or a rule adopted under
22-16 this chapter.
22-17 (b) An offense under this section is a Class A misdemeanor.
22-18 Sec. 486.062. SELF-DEALING. (a) A person may not self-deal
22-19 to the prejudice of a small business, a licensee, partners, board
22-20 members, or shareholders of a licensee, the commission, or an
22-21 associate of the commission.
22-22 (b) In this section, "associate of the commission" means an
22-23 officer, director, employee, or other individual regularly serving
22-24 the commission in the capacity of a paid investment adviser or
22-25 attorney at law, or a close relative of that individual. For the
22-26 purposes of this definition, an individual in any of the
22-27 relationships described by this subsection within six months before
23-1 or after the date on which the commission provided assistance to a
23-2 licensee is considered to have been in that relationship on the
23-3 date of the commission's assistance. The term does not include an
23-4 unpaid adviser of the commission unless the adviser is also
23-5 involved in any of the relationships described by this subsection.
23-6 (c) For the purposes of Subsection (b), "close relative"
23-7 means an ancestor, lineal descendant, brother or sister and lineal
23-8 descendants of either, spouse, father-in-law, mother-in-law,
23-9 son-in-law, daughter-in-law, brother-in-law, or sister-in-law.
23-10 Sec. 486.063. CONFLICT OF INTEREST BY LICENSEE AND
23-11 ASSOCIATES. (a) A licensee and associates of a licensee shall
23-12 follow rules concerning conflicts of interest and prohibited
23-13 activities of the appropriate federal regulatory body under whose
23-14 jurisdiction the licensee is principally governed.
23-15 (b) In this section, "associate of a licensee" means an
23-16 associate as defined by the SBA in 13 C.F.R. Section 107 or as
23-17 defined under the regulations of another federal regulatory body
23-18 under whose jurisdiction the licensee is principally governed.
23-19 Sec. 486.064. USING FUNDS TO BENEFIT FROM DIFFERENCE IN
23-20 INTEREST RATES. A licensee may not use commission funds solely as
23-21 a means to obtain a benefit from a difference in interest rates.
23-22 Sec. 486.065. SLOW DISBURSEMENT OF FUNDS BY LICENSEE. The
23-23 board shall adopt rules governing the schedule for a licensee's
23-24 disbursement of funds. A licensee may not be unreasonably slow in
23-25 disbursing funds from its Texas fund to small business concerns.
23-26 Sec. 486.066. CONFLICT OF INTEREST BY COMMISSION MEMBER OR
23-27 STAFF. A member or employee of the commission may not directly or
24-1 indirectly be a party to or be in any manner interested in any
24-2 agreement with the commission by which liability or indebtedness is
24-3 created against the commission. An agreement made in violation of
24-4 this section is void.
24-5 SECTION 2. (a) Of the governor's original appointees to the
24-6 Texas Small Business Equity Commission, the governor shall
24-7 designate three members for terms expiring February 1, 1995, three
24-8 for terms expiring February 1, 1997, and three for terms expiring
24-9 February 1, 1999.
24-10 (b) The governor shall provide for the organizational
24-11 meeting of the commission.
24-12 SECTION 3. This Act takes effect September 1, 1993.
24-13 SECTION 4. The importance of this legislation and the
24-14 crowded condition of the calendars in both houses create an
24-15 emergency and an imperative public necessity that the
24-16 constitutional rule requiring bills to be read on three several
24-17 days in each house be suspended, and this rule is hereby suspended.