Law:Division 15. Business And Industrial Development Corporations (California)

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Contents

Chapter 1. General Provisions

Article 1. Short Title, Construction, And Severability

Ca Codes (fin:31000-31006) Financial Code Section 31000-31006



31000. This division shall be known and may be cited as the "Business and Industrial Development Corporations Law".


31001. This division shall be liberally construed to accomplish its purposes.

31002. No provision of this division imposing any liability applies to any act committed in good faith in conformity with any regulation, order, or written interpretive opinion of the commissioner or any such opinion of the Attorney General, notwithstanding that such regulation, order, or written interpretive opinion may later be amended, rescinded, or repealed or be determined by judicial or other authority to be invalid for any reason.


31003. In this division, unless otherwise expressly provided: (a) A reference to a statute or to a regulation includes such statute or regulation as amended, whether before or after the effective date of this division, as well as any new statute or regulation substituted for such statute or regulation after the effective date of this division. (b) A reference to a governmental agency or to a public officer includes any governmental agency or public officer which succeeds after the effective date of this division to substantially the same functions as those performed by such governmental agency or public officer on the effective date of this division.


31004. Except as otherwise provided in Chapter 14 (commencing with Section 31950) of this division: (a) The provisions of the Nonprofit Corporation Law (Division 2 (commencing with Section 5000) of Title 1 of the Corporations Code) shall apply to any licensee which is a California nonprofit corporation; provided, however, that, whenever any provision of the Nonprofit Corporation Law conflicts with any provision of this division or of any regulation or order issued under this division, such provision of the Nonprofit Corporation Law shall not apply and such provision of this division or of such regulation or order issued under this division shall apply. (b) The provisions of the General Corporation Law (Division 1 (commencing with Section 100), Title 1 of the Corporations Code) shall apply to any licensee other than a licensee which is a California nonprofit corporation; provided, however, that, whenever any provision of the General Corporation Law conflicts with any provision of this division or of any regulation or order issued under this division, such provision of the General Corporation Law shall not apply and such provision of this division or of such regulation or order issued under this division shall apply.


31006. If any provision of this division or the application thereof to any person or circumstances is held invalid, illegal, or unenforceable, such invalidity, illegality, or unenforceability shall not affect other provisions or applications of this division which can be given effect without the invalid, illegal, or unenforceable provision or application, and to this end, the provisions of this division are declared to be severable.


Article 2. Legislative Findings And Purposes

Ca Codes (fin:31020-31021) Financial Code Section 31020-31021



31020. The Legislature finds all of the following: (a) That it is necessary to increase job opportunities in this state. (b) That promoting the establishment, growth, and expansion of business firms in this state is an efficient way to increase job opportunities in this state. (c) That it is appropriate to provide for the licensing and regulation of business and industrial development corporations which will provide financing assistance and management assistance primarily to business firms in this state. (d) That the federal government, through the Small Business Administration and other federal agencies, offers programs for providing, through such intermediaries as business and industrial development corporations, financing assistance and management assistance to business firms in this state. (e) That, in order that this state may obtain the full benefits of such programs, it is necessary that this state provide for the licensing and regulation of business and industrial development corporations. (f) That only California corporations should be licensed to transact business as business and industrial development corporations because, compared with other types of persons, California corporations can be more effectively regulated and supervised, have greater permanency of existence, and can give better assurance of uninterrupted service.


31021. (a) The purposes of this division are: (1) To provide for the licensing and regulation of business and industrial development corporations which will provide financing assistance and management assistance primarily to business firms in this state. (2) To provide for the licensing and regulation of business and industrial development corporations so that such corporations will constitute state development companies for purposes of Sections 501 and 502 of the Small Business Investment Act of 1958 and eligible lending institutions for purposes of Section 7(a) of the Small Business Act. (3) To provide for the safe and sound conduct of the business of licensees. (4) To maintain the confidence of the Small Business Administration and other governmental agencies in licensees. (b) The purposes of this division, as set forth in subdivision (a), constitute standards which the commissioner shall observe in administering the provisions of this division.


Article 3. Definitions

Ca Codes (fin:31030-31056) Financial Code Section 31030-31056



31030. Subject to additional definitions contained in this division which are applicable to specific provisions of this division and unless the context otherwise requires, the definitions in this article apply throughout this division.

31031. "Act" includes omission.


31032. "Affiliate", when used with respect to a specified person, means any person (other than a natural person) controlling, controlled by, or under common control with, such specified person, directly or indirectly through one or more intermediaries.


31033. "Business day" means any day other than (a) Saturday, (b) Sunday, and(c) any other day which is specified or provided for as a holiday in the Government Code.


31034. "Business firm" means any person which transacts business on a regular and continual basis, with respect to the transacting of such business.

31034.5. "Business firm in another state" means both of the following: (a) Any person which transacts business on a regular and continual basis at one or more places of business in another state of the United States or the District of Columbia, with respect to the transacting of that business at those places of business. (b) Any person which proposes to establish one or more places of business in another state of the United States or in the District of Columbia and to transact business on a regular and continual basis at those places of business, with respect to the establishment of those places of business and the transacting of that business at those places of business.


31035. "Business firm in this state" means: (a) Any person which transacts business on a regular and continual basis at one or more places of business in this state, with respect to the transacting of such business at such places of business; or (b) Any person which proposes to establish one or more places of business in this state and to transact business on a regular and continual basis at such places of business, with respect to the establishment of such places of business and the transacting of such business at such places of business.

31036. "California corporation" means: (a) Any corporation organized under the General Corporation Law (Division 1 (commencing with Section 100), Title 1 of the Corporations Code) or any predecessor statute; provided, however, that "California corporation" does not include any corporation which is a close corporation, as defined in Section 158 of the Corporations Code; or (b) Any corporation organized under Part 6 (commencing with Section 14200), Division 3, Title 1 of the Corporations Code, as added by Chapter 985 of the Statutes of 1975; or (c) Any California nonprofit corporation.


31037. "California nonprofit corporation" means any corporation organized under the Nonprofit Corporation Law (Division 2 (commencing with Section 5000) of Title 1 of the Corporations Code) or any predecessor statute.

31038. "Control", when used with respect to a specified person, means possession, direct or indirect, of the power to do either of the following: (a) To vote 35 percent or more of any class of the voting securities issued by the specified person. (b) To direct or cause the direction of the management and policies of such specified person, whether through the ownership of voting securities, by contract (other than a commercial contract for goods or nonmanagement services), or otherwise; provided, however, that no natural person shall be deemed to control a person solely on account of being a director, officer, or employee of such person. For purposes of this subdivision, any person who, directly or indirectly, owns of record or beneficially, holds with power to vote, or holds proxies with discretionary authority to vote, 20 percent or more of any class of the then outstanding voting securities issued by a corporation shall be rebuttably presumed to control such corporation. This presumption is a presumption affecting the burden of proof.


31039. "Controlling person", when used with respect to a specified person, means any person who controls such specified person, directly or indirectly through one or more intermediaries.


31040. "Corporate name" means the name of a corporation as set forth in the articles of incorporation of such corporation.


31041. "Financial institution" means any commercial bank, trust company, savings and loan association, credit union, industrial loan company, insurance company, or person engaged in the business of lending money.

31042. "Insolvent", when used with respect to any person, means a person who has ceased to pay his debts in the ordinary course of business, who cannot pay his debts as they become due, or whose liabilities exceed his assets.

31043. To "issue", when used with respect to any regulation or order, includes to adopt, amend, repeal, or rescind.


31044. "License" means a license issued under this division authorizing a California corporation to transact business as a business and industrial development corporation.


31045. "Licensee" means a California corporation which is licensed under this division.


31046. "Officer" means: (a) When used with respect to a corporation, any person appointed or designated as an officer of such corporation by or pursuant to applicable law or the articles of incorporation or bylaws of such corporation or any person who performs with respect to such corporation functions usually performed by an officer of a corporation; and (b) When used with respect to a specified person other than a natural person or a corporation, any person who performs with respect to such specified person functions usually performed by an officer of a corporation with respect to such corporation.


31047. "Order" means any approval, consent, authorization, exemption, denial, prohibition, or requirement applicable to a specific case issued by the commissioner. "Order" includes any condition of a license and any agreement made by any person with the commissioner under this division.


31047.5. "Parent," when used with respect to a specified person other than a natural person, means any person other than a natural person which controls the specified person, directly or indirectly through one or more intermediaries.

31048. "Person" means any natural person, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, corporation, limited liability company, government, agency of any government, or any other organization; provided, however, that "person", when used with respect to acquiring control of or controlling a specified person, includes any combination of two or more persons acting in concert.


31049. "Principal shareholder", when used with respect to a corporation, means any person who owns, directly or indirectly, of record or beneficially, securities representing 10 percent or more of the voting power of such corporation.

31050. To "provide financing assistance" to a person includes: (a) To lend money or otherwise extend credit to such person; (b) To purchase securities issued by such person, either directly or indirectly through an underwriter; and (c) To lease property to such person.


31051. To "provide management assistance" to a person includes: (a) To provide management or technical advice to such person; and (b) To provide management or technical services to such person.


31052. "Regulation" means any published regulation, rule, or standard of general application issued by the commissioner.


31053. "Security" has the meaning set forth in Section 25019 of the Corporations Code.


31054. "Subsidiary", when used with respect to a specified person other than a natural person, means any person other than a natural person controlled by such specified person, directly or indirectly through one or more intermediaries.

31055. "Commissioner" means the Commissioner of Financial Institutions or any person to whom the Commissioner of Financial Institutions delegates the authority to act for him or her in the particular matter.


31056. "Voting power" has the meaning set forth in Corporations Code Section 194.5.


Chapter 2. Administration

Ca Codes (fin:31100-31115) Financial Code Section 31100-31115



31100. The commissioner shall administer the provisions of this division.

31101. (a) The commissioner may from time to time issue such regulations and orders as are in his or her opinion necessary to carry out the provisions and purposes of this division. (b) Regulations and orders issued under this division may, among other things, define any term used in this division, including (but not limited to) the term "unsafe or unsound act", as well as any term not used in this division. (c) For purposes of regulations and orders issued under this division, the commissioner may classify persons, transactions, and other matters within his or her jurisdiction, and may prescribe different regulations or orders for different classes. (d) The commissioner may waive any provision of any regulation or order issued under this division in any case where in his or her opinion such provision is not necessary in the public interest.


31102. Whenever the commissioner issues an order or license under this division, he or she may impose such conditions as are in his or her opinion necessary to carry out the provisions and purposes of this division.

31103. Every final order, decision, license, or other official act of the commissioner under this division is subject to judicial review in accordance with law.


31104. In any proceeding under this division: (a) The burden of proving that an application should be approved is upon the applicant. (b) The burden of proving an exemption or an exception from a definition is upon the person claiming such exemption or such exception from a definition.


31105. No provision of this division shall be construed to require by implication that the commissioner hold a hearing on any matter.


31106. No provision of this division shall be construed to require by implication that the commissioner make written findings on any matter.

31107. Any application filed with the commissioner under this division or under any regulation or order issued under this division shall be in such form, shall contain such information, shall be signed in such manner, and shall (if the commissioner so requires by regulation or order) be verified in such manner, as the commissioner may by regulation or order require.


31108. In determining whether to approve any application filed under this division or under any regulation or order issued under this division, the commissioner may consider proposals made by the applicant, including (but not limited to) proposals to appoint officers, sell securities, or obtain financing; and, if in the opinion of the commissioner it is probable that such applicant will be able to implement any such proposal, the commissioner may make findings on the basis of such proposal; provided, however, that, whenever the commissioner approves an application on the basis, in whole or in part, of a proposal made by the applicant, the commissioner shall impose upon such approval appropriate conditions requiring that such applicant implement such proposal within such period of time as the commissioner may specify.


31109. The commissioner may honor applications from interested persons for interpretive opinions regarding any provision of this division or of any regulation or order issued under this division.


31110. (a) The commissioner may (1) make such public or private investigations within or outside this state as he or she deems necessary to determine whether to approve any application filed with him or her under this division or under any regulation or order issued under this division, to determine whether any person has violated or is about to violate any provision of this division or of any regulation or order issued under this division, to aid in the enforcement of any provision of this division or of any regulation or order issued under this division, or to aid in the issuing of regulations or orders under this division, and (2) publish information concerning any violation of any provision of this division or of any regulation or order issued under this division. (b) For purposes of any investigation, examination, or other proceeding under this division, the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry. (c) In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to such person an order requiring him to appear before the commissioner, there to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey such order of the court may be punished by the court as a contempt.


31110.5. The commissioner may provide information relating to a licensee to the Small Business Administration or to any governmental agency which licenses or regulates the licensee or any parent or subsidiary of the licensee.

31111. Notwithstanding the fact that the commissioner permits any licensee, any affiliate of such licensee, or any governmental agency to inspect or make copies of any record relating to such licensee or to any director, officer, employee, or affiliate of such licensee or that the commissioner provides any such record, or a copy thereof, to any such person, any provision of Section 6254 or 6255 of the Government Code which would, but for such fact, apply to such record, shall continue to apply to such record.


31112. The commissioner may refer such evidence as is available concerning any violation of this division or of any regulation or order issued under this division which constitutes a crime to the district attorney of the county in which such violation occurred, who may, with or without such a reference, institute appropriate criminal proceedings.


31113. Before any applicant for a license is issued a license, such applicant and each parent and subsidiary of such applicant shall file, and each person who becomes a parent or subsidiary of a licensee shall, not less than 30 days after becoming a parent or subsidiary of such licensee, file, with the commissioner, in such form as the commissioner may by regulation or order require, an irrevocable consent appointing the commissioner and his or her successor from time to time in office to be such person's attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against such person, or his or her successor, executor, or administrator, which arises under this division or under any regulation or order issued under this division after such consent has been filed, with the same force and validity as if served personally on such person. Service may be made by leaving a copy of the process at any office of the commissioner, but such service is not effective unless (a) the party making such service, who may be the commissioner, forthwith sends notice of such service and a copy of the process by registered or certified mail to the party served at his or her last address on file with the commissioner, and (b) an affidavit of compliance with this section by the party making service is filed in the case on or before the return date, if any, or within such further time as the court, in the case of a judicial proceeding, or the administrative agency, in the case of an administrative proceeding, allows.


31114. Whenever any person, including any nonresident of this state, engages in conduct prohibited or made actionable by this division or by any regulation or order issued under this division, whether or not the person has filed a consent to service of process under Section 31113, and if personal jurisdiction over the person cannot otherwise be obtained in this state, that conduct shall be considered equivalent to the person's appointment of the commissioner and the commissioner's successor from time to time in office to be the person's attorney to receive service of any lawful process in any noncriminal judicial or administrative proceeding against him or her, or his or her successor, executor, or administrator, which grows out of that conduct and which is brought under this division or under any regulation or order issued under this division, with the same force and validity as if served on him or her personally. Service may be made by leaving a copy of the process in any office of the commissioner, but the service is not effective unless (a) the party making the service, who may be the commissioner, forthwith sends notice of the service and a copy of the process by registered or certified mail to the party served at his or her last known address or takes other steps which are reasonably calculated to give actual notice, and (b) an affidavit of compliance with this section by the party making service is filed in the case on or before the return date, if any, or within such further time as the court, in the case of a judicial proceeding, or the administrative agency, in the case of an administrative proceeding, allows.


31115. (a) Fees shall be paid to, and collected by, the commissioner, as follows: (1) The fee for filing with the commissioner an application for a license shall be two thousand dollars ($2,000). (2) The fee for filing with the commissioner an application for approval to acquire control of a licensee shall be one thousand dollars ($1,000). (3) The fee for filing with the commissioner an application for approval for a licensee to merge with another corporation; an application for approval for a licensee to purchase all or substantially all of the business of another person, or an application for approval for a licensee to sell all or substantially all of its business or of the business of any of its offices to another licensee, shall be one thousand dollars ($1,000). However, whenever two or more applications relating to the same merger, purchase, or sale are filed with the commissioner, the fee for filing each application shall be the quotient determined by dividing one thousand dollars ($1,000) by the number of the applications. (4) The fee for filing with the commissioner an application for approval to relocate the head office of a licensee shall be one hundred dollars ($100). (5) The fee for issuing a license shall be twenty-five dollars ($25). (6) Each person that is licensed under this division on June 1 of any year shall pay, on or before the following July 1, a fee of two thousand dollars ($2,000). (7) Whenever the commissioner examines any licensee or any affiliate of a licensee, that licensee shall pay, within 10 days after receipt of a statement from the commissioner, a fee of seventy-five dollars ($75) per hour for each examiner engaged in the examination plus, in case it is necessary for any examiner engaged in the examination to travel outside this state, the travel expenses of the examiner. (b) (1) Each fee for filing an application with the commissioner shall be paid at the time when the application is filed with the commissioner. (2) No fee for filing an application with the commissioner shall be refundable, regardless of whether the application is approved, denied, withdrawn, or abandoned.


Chapter 3. Licensing

Ca Codes (fin:31150-31158) Financial Code Section 31150-31158



31150. (a) Except as otherwise provided in subdivision (b), no person transacting business in this state, other than a licensee, shall use any name or title which indicates that it is a business and industrial development corporation or otherwise represent that it is a business and industrial development corporation or that it is a licensee. (b) Any California corporation which proposes to apply for a license or which has applied for a license, may, before being issued a license, use a name or title which indicates that it is a business and industrial development corporation if it meets all of the following requirements: (1) The corporation shall append to the name the designation "proposed," "in organization," or "in formation," or any similar designation which the commissioner may approve. The designation shall be set forth at least as conspicuously as the name or title. (2) The corporation may perform only such acts as may be necessary (A) to apply for and obtain such license and (B) otherwise to prepare to commence transacting business as a licensee. (3) The corporation shall not represent that it is a licensee.


31151. No person other than a California corporation may apply for or be issued a license.


31152. If the commissioner finds all of the following with respect to an application for a license, the commissioner shall approve the application: (a) That the applicant has net worth in an amount which is not less than one million five hundred thousand dollars ($1,500,000) and which is adequate for the applicant to transact business as a business and industrial development corporation. (b) That the applicant has lendable funds in an amount which is not less than one million five hundred thousand dollars ($1,500,000) and which is adequate for the applicant to transact business as a business and industrial development corporation. (c) That the applicant has, in addition to the requirements of subdivision (b), financial resources in an amount which is adequate for the applicant to pay its expenses in transacting business as a business and industrial development corporation for a period of not less than three years. (d) That the directors, officers, and controlling persons of the applicant are each of good character and sound financial standing, that the directors and officers of the applicant are each competent to perform their functions with respect to the applicant, and that the directors and officers of the applicant are collectively adequate to manage the business of the applicant as a business and industrial development corporation. For purposes of this subdivision, the commissioner shall accord weight to the prior or current successful operation of a commercial enterprise. (e) That it is reasonable to believe that the applicant, if licensed, will comply with all applicable provisions of this division and of any regulation or order issued under this division. (f) That the applicant has reasonable promise of successful operation as a business and industrial development corporation. (g) That the licensing of the applicant will promote the public convenience and advantage. If, after notice and a hearing, the commissioner finds otherwise, he or she shall deny the application.


31152.5. (a) For purposes of Section 31152, the commissioner may find: (1) That a director, officer, or controlling person of an applicant is not of good character if the director, officer, or controlling person or any director or officer of the controlling person has been convicted of, or has pleaded nolo contendere to, a crime involving fraud or dishonesty. (2) That it is not reasonable to believe that an applicant, if licensed, will comply with all applicable provisions of this division and of any regulation or order issued under this division if the applicant has been convicted of, or has pleaded nolo contendere to, a crime involving fraud or dishonesty. (b) Subdivision (a) shall not be deemed to be the only grounds upon which the commissioner may find, for purposes of Section 31152, that a director, officer, or controlling person of an applicant is not of good character or that it is not reasonable to believe that an applicant, if licensed, will comply with all applicable provisions of this division and of any regulation or order issued under this division.

31153. Before any applicant for a license is issued a license, each person which is a parent or subsidiary of such applicant shall file, and each person who becomes a parent or subsidiary of a licensee shall, not less than 30 days after becoming a parent or subsidiary of such licensee, file, with the commissioner, in such form as the commissioner may by regulation or order require, an agreement that such person shall comply with all applicable provisions of this division and of any regulation or order issued under this division.


31154. Whenever any application for a license has been approved and all conditions precedent to the issuance of such license have been fulfilled, the commissioner shall issue a license to the applicant.


31155. No license shall be transferable or assignable.


31156. Each licensee shall post its license in a conspicuous place at its head office.


31157. No licensee shall represent that it is sponsored, recommended, or approved by, or that its abilities or qualifications have in any respect been passed upon by, the commissioner. Nothing in this section shall be deemed to prohibit a licensee from stating that it is licensed if the effect of such license is not misrepresented.


31158. (a) The fact that a California corporation is licensed under any law other than this division shall not preclude such corporation from applying for or being issued a license under this division unless the transaction of business by such corporation as a licensee under such other law would violate any provision of this division or of any regulation or order issued under this division or would be contrary to the purposes of this division. (b) The fact that a California corporation is licensed under this division shall not preclude such corporation from applying for or being issued a license under any other law unless the transaction of business by such corporation as a licensee under such other law would violate any provision of this division or of any regulation or order issued under this division or would be contrary to the purposes of this division.


Chapter 4. Corporate Matters

Article 1. Name

Ca Codes (fin:31200-31201) Financial Code Section 31200-31201



31200. The corporate name of each licensee shall include the phrase "California business and industrial development corporation".


31201. No licensee shall, except with the prior approval of the commissioner, transact business under any name other than its corporate name.


Article 2. Board Of Directors

Ca Codes (fin:31210-31211) Financial Code Section 31210-31211



31210. The board of directors of each licensee shall consist of not less than five directors.


31211. The board of directors of each licensee shall hold a meeting not less frequently than once each calendar quarter.


Article 3. Securities

Ca Codes (fin:31220) Financial Code Section 31220



31220. Notwithstanding any other law of this state, but subject to the provisions of Section 31550: (a) Any commercial bank, industrial bank, or trust company organized under the laws of this state may, with the prior approval of the commissioner, acquire and hold securities issued by a licensee; provided, however, that the aggregate amount of securities issued by licensees which are held by the commercial bank, industrial bank, or trust company shall not at any time exceed 2 1/2 percent of the shareholders' equity of the commercial bank, industrial bank, or trust company. This subdivision shall not apply to any loan or other extension of credit made by a commercial bank or industrial bank organized under the laws of this state to a licensee in accordance with the Banking Law (Division 1 (commencing with Section 99)). (b) Any savings association organized under the laws of this state may, with the prior approval of the commissioner, acquire and hold securities issued by a licensee; provided, however, that the aggregate amount of securities issued by licensees which are held by such savings association shall not at any time exceed 1/2 percent of the total outstanding loans of such savings association. (c) Any insurance company admitted to transact insurance business in this state may, with the approval of the Insurance Commissioner, acquire and hold securities issued by a licensee; provided, however, that the aggregate amount of securities issued by licensees which are held by such insurance company shall not at any time exceed 2 1/2 percent of the unassigned surplus of such insurance company. (d) Any public utility licensed or regulated by the Public Utilities Commission may, with the approval of the Public Utilities Commission, acquire and hold securities issued by a licensee; provided, however, that the aggregate amount of securities issued by licensees which are held by such public utility company shall not at any time exceed 1/2 percent of the total assets of such public utility company.


Article 4. Distributions To Shareholders

Ca Codes (fin:31230-31233) Financial Code Section 31230-31233



31230. In this article, "distribution to its shareholders" has the meaning set forth in Corporations Code Section 166.


31231. No licensee shall, except with the prior approval of the commissioner, make, or obligate itself to make, any distribution to its shareholders.

31232. If the commissioner finds, with respect to an application for approval for a licensee to make, or to obligate itself to make, a distribution to its shareholders: (a) That for the applicant to make, or to obligate itself to make, the distribution will not endanger the applicant's ability to provide financing assistance and management assistance to business firms in this state; and (b) That for the applicant to make, or to obligate itself to make, the distribution will not be unsafe or unsound; the commissioner shall approve the application. If, after notice and a hearing, the commissioner finds otherwise, he or she shall deny the application.


31233. Notwithstanding the provisions of Section 31232, unless an application for approval for a licensee to make, or to obligate itself to make, a distribution to its shareholders is approved, denied, withdrawn, or abandoned within a period of 45 days after such application is filed with the commissioner or, if the applicant consents to an extension of the period, within such extended period, such application shall be deemed to be approved by the commissioner as of the first day after such period of 45 days or such extended period, as the case may be. For purposes of this section, an application for approval for a licensee to make, or to obligate itself to make, a distribution to its shareholders shall be deemed to be filed with the commissioner when such application, containing all the information required by the commissioner and otherwise complying with Section 31107, is received by the commissioner.


Chapter 5. Offices

Article 1. General Provisions

Ca Codes (fin:31300-31305) Financial Code Section 31300-31305



31300. Each licensee shall maintain its head office in this state.


31301. No licensee shall maintain an office at any place outside this state.

31302. Each office of a licensee shall be located in a place which is reasonably accessible to the public and shall, unless the commissioner approves otherwise, be open for the transaction of business during normal business hours on each business day.


31303. Each licensee shall post in a conspicuous place at each of its offices a sign which bears the corporate name of such licensee.


31304. Each licensee shall maintain telephone service at each of its offices and shall maintain a telephone listing under its corporate name for each of its offices.


31305. Each licensee shall maintain at each of its offices personnel who are competent to conduct the business of such office.


Article 2. Establishing, Relocating, And Closing Offices

Ca Codes (fin:31320-31322) Financial Code Section 31320-31322



31320. (a) No licensee shall relocate its head office without the prior approval of the commissioner. (b) No licensee shall establish, relocate, or close any office (other than its head office) unless it files a report on the action with the commissioner not less than 30 days (or such shorter period as the commissioner may approve) before taking the action.


31322. If the commissioner finds, with respect to an application by a licensee for approval to relocate its head office: (a) That the office at its proposed location will be reasonably accessible to the public; (b) That it is reasonable to believe that the applicant will operate the office at its proposed location in compliance with all applicable provisions of this division and of any regulation or order issued under this division; (c) That it will not be unsafe or unsound for the applicant to relocate the office; and (d) That the relocation of the office will not be detrimental to the public convenience and advantage, or, if the relocation of the office would be detrimental to the public convenience and advantage, that the relocation of the office is necessary in the interests of the safety and soundness of the applicant; the commissioner shall approve the application. If, after notice and a hearing, the commissioner finds otherwise, the commissioner shall deny the application.


Chapter 6. Transaction Of Business

Ca Codes (fin:31400-31410) Financial Code Section 31400-31410



31400. (a) Each licensee shall transact its business in a safe and sound manner and shall maintain itself in a safe and sound condition. (b) No licensee shall commit any unsafe or unsound act.


31401. No licensee shall engage in any business other than one or more of the following: (a) The business of providing financing assistance and management assistance to business firms. (b) The business of a state development company in accordance with all applicable provisions of the Small Business Investment Act of 1958 and of the regulations of the Small Business Administration. (c) The business of a local development company in accordance with all applicable provisions of the Small Business Investment Act of 1958 and of the regulations of the Small Business Administration. (d) The business of a small business investment company in accordance with all applicable provisions of the Small Business Investment Act of 1958 and of the regulations of the Small Business Administration.


31402. Each licensee shall use its best efforts: (a) To provide financing assistance to business firms in this state in cooperation with the Small Business Administration pursuant to Section 7(a) of the Small Business Act; (b) To obtain loans from the Small Business Administration pursuant to Sections 501 and 502 of the Small Business Investment Act of 1958; and (c) Otherwise to cooperate with, and meet the requirements of, the Small Business Administration for the purpose of providing financing assistance and management assistance to business firms in this state.


31403. (a) Except as provided in subdivision (b), no licensee shall provide financing assistance or management assistance to any person other than a business firm in this state. (b) (1) If a licensee provides financing assistance to a business firm in this state, the licensee may also provide financing assistance and management assistance to the business firm with respect to business transacted in any other state of the United States or the District of Columbia. (2) If a licensee provides financing assistance to a business firm in this state which is a franchisor, the licensee may also provide financing assistance and management assistance to any business firm in another state which is a franchisee of the franchisor. (3) If a licensee provides financing assistance to a business firm in this state which is a franchisee of a franchisor, the licensee may also provide financing assistance and management assistance to any business firm in another state which is a franchisee of the franchisor.

31404. Except as otherwise provided in subdivision (b) of Section 31403, no licensee shall provide financing assistance or management assistance for use outside this state.


31405. Except as otherwise provided in subdivisions (b), (c), and (d) of Section 31406: (a) No licensee shall provide financing assistance or management assistance to any business firm the primary business of which is to provide financing assistance or management assistance. (b) No licensee shall provide financing assistance to any business firm for the purpose of providing financing assistance to other persons or discharging, in whole or in part, any obligation incurred for such purpose.


31406. No licensee shall, either by itself or in concert with any of its directors, officers, principal shareholders, or affiliates, any other licensee, or any of the directors, officers, principal shareholders, or affiliates of any other licensee, acquire or hold control of any business firm, except as follows: (a) Any licensee which has provided financing assistance to a business firm may, if and to the extent necessary to protect its interests as a creditor of, or investor in, such business firm, acquire and hold control of such business firm; provided, however, that such licensee shall divest itself of such control as soon as practicable and in any event within three years after acquiring such control or such longer period as the commissioner may approve. (b) Any licensee may, with the prior approval of the commissioner, acquire and hold control of a corporation which is licensed as a small business investment company under the Small Business Investment Act of 1958. (c) Any licensee may, with the prior approval of the commissioner, acquire and hold control of a corporation which is licensed as a personal property broker under Division 9 (commencing with Section 22000). (d) Any licensee may, with the prior approval of the commissioner, acquire and hold control of a corporation which transacts business as a local development company in accordance with all applicable provisions of the Small Business Investment Act of 1958 and of the regulations of the Small Business Administration.


31408. No licensee shall, except with the prior approval of the commissioner, guarantee the debt of any other person or otherwise lend its credit to any other person; provided, however, that, whenever a licensee sells to another person an obligation to pay money, which obligation is owned by such licensee, such licensee may guarantee the payment of such obligation.


31409. No licensee shall, except with the prior approval of the commissioner, provide a lien or security interest in any of its property for the purpose of securing an obligation of, or an obligation incurred for the benefit of, any other person.


31410. This section creates and authorizes an exempt class of persons pursuant to Section 1 of Article XV of the State Constitution. The restrictions upon rates of interest contained in Section 1 of Article XV of the State Constitution shall not apply to any loans made by, or forbearances of, any licensee. This section shall apply retroactively to any such loans or forbearances.


Chapter 7. Records, Reports, And Examinations

Ca Codes (fin:31500-31509) Financial Code Section 31500-31509



31500. Each licensee shall adopt as its fiscal year the period from July 1st to and including the following June 30th.


31501. Each licensee shall make and keep such books, accounts, and other records in such form and in such manner as the commissioner may by regulation or order require. All records so required shall be kept at such place and shall be preserved for such time as the commissioner may by regulation or order specify.


31502. No licensee shall, except with the prior approval of the commissioner, enter or carry on its books or records any asset at a valuation exceeding the actual cost of such asset to such licensee.


31503. The commissioner may by order require a licensee to write down any asset on its books and records to a valuation which represents its then value.

31504. Each licensee shall, not more than 90 days after the close of each of its fiscal years or within such longer period as the commissioner may by regulation or order specify, file with the commissioner an audit report containing: (a) Financial statements (including balance sheet, statement of income or loss, statement of changes in capital accounts, and statement of changes in financial position or, in the case of a licensee which is a California nonprofit corporation, comparable financial statements) for or as of the end of such fiscal year, prepared with audit by an independent certified public accountant or an independent public accountant in accordance with generally accepted accounting principles; (b) Report, certificate, or opinion of such independent certified public accountant or independent public account, stating that such financial statements were prepared in accordance with generally accepted accounting principles; and (c) Such other information as the commissioner may by regulation or order require.


31506. Each licensee, each director, officer, and employee of a licensee, and each parent and subsidiary of a licensee shall file with the commissioner such reports as and when the commissioner may by regulation or order require. In addition, each affiliate of a licensee (other than a parent or subsidiary of the licensee) shall file with the commissioner such reports regarding transactions between the affiliate and the licensee as and when the commissioner may require. Each report shall be in such form, shall contain such information, shall be signed in such manner, and shall (if the commissioner so requires by regulation or order) be verified in such manner, as the commissioner may by regulation or order require.


31507. (a) The commissioner shall examine each licensee not less frequently than once each calendar year. (b) (1) The commissioner may at any time examine any licensee or any parent or subsidiary of a licensee. (2) The commissioner may at any time examine any office of any licensee within or outside of this state. (3) The commissioner may at any time examine any affiliate of a licensee (other than a parent or subsidiary of the licensee) but only with respect to matters relating to transactions between the affiliate and the licensee. (c) The directors, officers, and employees of any licensee or of any affiliate of a licensee being examined by the commissioner and any other person having custody of any of the books, accounts, or records of the licensee or affiliate shall exhibit to the commissioner, on request, any or all of the books, accounts, and other records of the licensee or affiliate and shall otherwise facilitate the examination so far as it may be in their power to do so. However, in the case of an examination of an affiliate of a licensee other than a parent or subsidiary of the licensee, only books, accounts, and records of the affiliate that relate to transactions between the affiliate and the licensee shall be subject to this subdivision. (d) The commissioner may, if in his or her opinion it is necessary in the examination of any licensee or of any affiliate of a licensee, retain any certified public accountant, attorney, appraiser, or other person to assist him or her, and the licensee shall pay, within 10 days after receipt of a statement from the commissioner, the fees of that person.


31508. (a) No licensee shall, except with the prior approval of the commissioner, cause or permit any other person to make or keep any of its books, accounts, or other records. (b) In case any person other than a licensee makes or keeps any of the books, accounts, or other records of such licensee, the provisions of this division and of any regulation or order issued under this division shall apply to such person with respect to the performance of such services and with respect to such books, accounts, and other records to the same extent as if such person were such licensee. (c) In case any person other than an affiliate of a licensee makes or keeps any of the books, accounts, or other records of such affiliate or, in the case of an affiliate other than a parent or subsidiary of the licensee, the books, accounts, and other records of the affiliate that relate to transactions between the affiliate and the licensee, the provisions of this division and of any regulation or order issued under this division shall apply to such person with respect to such books, accounts, and other records to the same extent as if such person were such affiliate.


31509. The commissioner may publish any report filed with him or her under this division or under any regulation or order issued under this division.


Chapter 8. Acquisition Of Control

Ca Codes (fin:31550-31552) Financial Code Section 31550-31552



31550. No person shall, except with the prior approval of the commissioner, acquire control of a licensee.


31551. If the commissioner finds, with respect to an application for approval to acquire control of a licensee: (a) That the applicant and the directors and officers of the applicant are of good character and sound financial standing; (b) That it is reasonable to believe that, if the applicant acquires control of the licensee, the applicant will comply with all applicable provisions of this division and of any regulation or order issued under this division; and (c) That the applicant's plans, if any, to make any major change in the business, corporate structure, or management of the licensee are not detrimental to the safety and soundness of the licensee or to the public convenience and advantage; The commissioner shall approve the application. If, after notice and a hearing, the commissioner finds otherwise, he or she shall deny the application.

31551.5. (a) For purposes of Section 31551, the commissioner may find: (1) That an applicant or a director or officer of an applicant is not of good character if such person has been convicted of, or has pleaded nolo contendere to, a crime involving fraud or dishonesty. (2) That an applicant's plan to make a major change in the management of a licensee is detrimental to the safety and soundness of the licensee and to the public convenience and advantage if the plan provides for a person who has been convicted of, or has pleaded nolo contendere to, a crime involving fraud or dishonesty to become a director or officer of the licensee. (b) Subdivision (a) shall not be deemed to be the only grounds upon which the commissioner may find, for purposes of Section 31551, that an applicant or a director or officer of an applicant is not of good character or that an applicant's plan to make a major change in the management of a licensee is detrimental to the safety and soundness of a licensee or to the public convenience and advantage.


31552. The commissioner may, by such regulations or orders as he or she deems necessary and appropriate, either unconditionally or upon specified terms and conditions or for specified periods, exempt from the provisions of this chapter any person or transaction or class of persons or transactions, if he or she finds such action to be in the public interest and that the regulation of such persons or transactions is not necessary for the purposes of this division.


Chapter 9. Merger And Purchase Or Sale Of Business

Ca Codes (fin:31600-31605) Financial Code Section 31600-31605



31600. In this chapter: (a) "Acquiring licensee" means: (1) In the case of a merger, the licensee which is the surviving corporation; (2) In the case of a purchase or sale, the licensee which is the purchaser. (b) "Disappearing corporation" has the meaning set forth in Section 165 of the Corporations Code. (c) "Surviving corporation" has the meaning set forth in Section 190 of the Corporations Code.


31601. No licensee shall merge with any other corporation unless: (a) In case such licensee is the surviving corporation, such merger shall have first been approved by the commissioner; (b) In case such licensee is a disappearing corporation, the surviving corporation is a licensee and such merger shall have first been approved by the commissioner.


31602. No licensee shall purchase all or substantially all of the business of any other person unless such purchase shall have first been approved by the commissioner.


31603. No licensee shall sell all or substantially all of its business to any other person unless such other person is a licensee and such sale shall have first been approved by the commissioner.


31604. If the commissioner finds, with respect to an application for approval of a merger, purchase, or sale: (a) That the merger, purchase, or sale will be safe and sound with respect to the acquiring licensee; (b) That it is reasonable to believe that, upon consummation of the merger, purchase, or sale, the acquiring licensee will comply with all applicable provisions of this division and of any regulation or order issued under this division; and (c) That the merger, purchase, or sale will not be detrimental to the public convenience and advantage, or, if the merger, purchase, or sale would be detrimental to the public convenience and advantage, that it is necessary in the interests of the safety and soundness of any of the parties to it; The commissioner shall approve the application. If, after notice and a hearing, the commissioner finds otherwise, he or she shall deny the application.


31605. The commissioner may, by such regulations or orders as he or she deems necessary and appropriate, either unconditionally or upon specified terms and conditions or for specified periods, exempt from the provisions of this chapter any person or transaction or class of persons or transactions, if he or she finds such action to be in the public interest and that the regulation of such persons or transactions is not necessary for the purposes of this division.


Chapter 10. Voluntary Surrender Of License

Ca Codes (fin:31650-31651) Financial Code Section 31650-31651



31650. Any licensee may surrender its license by filing with the commissioner such license and a report which shall be in such form, shall contain such information, shall be signed in such manner, and shall (if the commissioner so requires by regulation or order) be verified in such manner, as the commissioner may by regulation or order require.


31651. (a) Except as otherwise provided in subdivision (b), a voluntary surrender of a license shall be effective on the 30th day after such license and the report called for in Section 31650 are filed with the commissioner or on such earlier date as the commissioner may by order specify. (b) If a proceeding to revoke or suspend a license is pending at the time when such license and the report called for in Section 31650 are filed with the commissioner or if a proceeding to revoke or suspend a license or to impose conditions upon the surrender of a license is instituted before the 30th day after such license and the report called for in Section 31650 are filed with the commissioner, the voluntary surrender of such license shall become effective at such time and upon such conditions as the commissioner may by order specify.


Chapter 12. Crimes And Criminal Penalties

Article 1. General Provisions

Ca Codes (fin:31800-31802) Financial Code Section 31800-31802



31800. It shall be unlawful for any person willfully to make any untrue statement of a material fact in any application or report filed with the commissioner under this division or under any regulation or order issued under this division, or willfully to omit to state in any such application or report any material fact which is required to be stated therein.


31801. It shall be unlawful for any person having custody of any of the books, accounts, or other records of a licensee willfully to refuse to allow the commissioner, upon request, to inspect or make copies of any of such books, accounts, or other records.


31802. It shall be unlawful for any person, with intent to deceive any director, officer, employee, auditor, or attorney of a licensee, the commissioner, or any governmental agency, to make any false entry in any of the books, accounts, or other records of such licensee, to omit to make any entry in such books, accounts, or other records which such person is required to make, or to alter, conceal, or destroy any of such books, accounts, or other records.


Article 2. Conflicts Of Interest

Ca Codes (fin:31820-31829) Financial Code Section 31820-31829



31820. In this article, unless the context otherwise requires: (a) "Adviser," when used with respect to a licensee, means any person who regularly provides legal, accounting, or management services or advice to such licensee. (b) "Associate," when used with respect to a licensee, means: (1) Any principal shareholder, director, officer, manager, agent, or adviser of such licensee; (2) Any director, officer, partner, general manager, agent, employer, or employee of any person referred to in paragraph (1) of this subdivision; (3) Any person who controls, is controlled by, or is under common control with, any person referred to in paragraph (1) of this subdivision, directly or indirectly through one or more intermediaries; (4) Any close relative of any person referred to in paragraph (1) of this subdivision; (5) Any person of which any person referred to in paragraphs (1) to (4), inclusive, of this subdivision is a director or officer; or (6) Any person in which any person referred to in paragraphs (1) to (4), inclusive, of this subdivision or any combination of such persons acting in concert owns or controls, directly or indirectly, a 10 percent or greater equity interest. (7) For purposes of this subdivision, any person who is in any of the relationships referred to in paragraphs (1) to (6), inclusive, of this subdivision within six months before or after a licensee provides financing assistance shall be deemed to be in such relationship as of the date when such licensee provides such financing assistance. (8) For purposes of this subdivision, in case a licensee, in order to protect its interests, designates any person to serve as a director of, officer of, or in any capacity in the management of, a business firm to which such licensee provides financing assistance, such person shall not, on that account, be deemed to have any relationship with such business firm; provided, however, that this paragraph shall not apply in any case where the person has, directly or indirectly, any other financial interest in the business firm or where the person, at any time before the licensee provides the financing assistance, served as a director of, officer of, or in any other capacity in the management of, the business firm for a period of 30 days or more. (c) "Close relative" means ancestor, lineal descendant, brother or sister and lineal descendants of either, spouse, father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, or sister-in-law. (d) "Closing services" means services performed in connection with the providing of financing assistance. "Closing services" includes (but is not limited to) appraising property and preparing credit reports. "Closing services" does not include any services performed after the providing of financing assistance. (e) "Short-term financing assistance" means any financing assistance with a term of not more than five years.


31821. (a) The commissioner may, by such regulations or orders as he or she deems necessary and appropriate, either unconditionally or upon specified terms and conditions and for specified periods, exempt from the provisions of this article any person or transaction or class of persons or transactions, if the commissioner finds such action to be in the public interest and that the regulation of such persons or transactions is not necessary for the purposes of this division. (b) In exempting from the provisions of this article any person or transaction or class of persons or transactions, the commissioner shall give due consideration to any conflict of interest provision of federal law or regulation applicable to such person or transaction governing participants in federal financing programs.


31822. It shall be unlawful for any licensee, directly or indirectly, to provide financing assistance to any of its associates.


31823. (a) It shall be unlawful for any licensee, directly or indirectly, to provide financing assistance to any associate of another licensee if any associate of the first licensee receives, has received, or is about to receive, directly or indirectly, financing assistance or a commitment for financing assistance from such other licensee. (b) It shall be unlawful for any licensee, directly or indirectly, to provide financing assistance to any associate of another licensee if any associate of the first licensee receives, has received, or is about to receive, directly or indirectly financing assistance or a commitment for financing assistance from a third licensee pursuant to any contract, understanding, or arrangement among such licensees.


31824. It shall be unlawful for any licensee or for any associate of a licensee, directly or indirectly, to borrow money from: (a) Any person to which such licensee has provided, or has committed to provide, financing assistance; (b) Any director of, officer of, or person who owns a 10 percent or greater equity interest in, any person referred to in subdivision (a); or (c) Any close relative of any person referred to in subdivision (b).

31825. It shall be unlawful for any licensee, directly or indirectly, to provide financing assistance to discharge, or to free other funds for use in discharging, in whole or in part, an obligation to any associate of such licensee; provided, however, that this section shall not apply to any transaction effected by an associate of a licensee in the normal course of such associate's business involving a line of credit or short-term financing assistance.

31826. It shall be unlawful for any licensee, directly or indirectly, to provide financing assistance for the purchase of property from any associate of such licensee.


31827. It shall be unlawful for any licensee, directly or indirectly, to provide financing assistance to any person to whom any associate of such licensee provides financing assistance, either contemporaneously with, or within one year before or after, the providing of financing assistance by the licensee, if the terms on which the licensee provides financing assistance are less favorable to the licensee than the terms on which the associate provides financing assistance to the associate. In any case where the financing assistance provided by the associate of the licensee is of a different kind from the financing assistance provided by the licensee, the burden shall be on the licensee to prove that the terms on which it provided financing assistance were at least as favorable to it as the terms on which the associate provided financing assistance to the associate. This section shall not apply to any transaction effected by an associate of a licensee in the normal course of such associate's business involving a line of credit or short-term financing assistance.


31828. It shall be unlawful for any associate of a licensee, directly or indirectly, to receive from any person to whom such licensee provides financing assistance, any compensation in connection with the providing of such financing assistance or anything of value for procuring, influencing, or attempting to procure or influence, the licensee's action with respect to the providing of the financing assistance. This section shall not apply to the receipt by an associate of a licensee of fees for bona fide closing services performed by such associate; provided, however, that the associate is, with the consent and knowledge of the person to whom the financing assistance is provided, designated by the licensee to perform such services, that the services are appropriate and necessary in the circumstances, that the fees for the services are approved as reasonable by the licensee, and that the fees for the services are collected by the licensee on behalf of the associate.


31829. It shall be unlawful for any licensee, directly or indirectly, to sell or otherwise transfer any of its assets to any of its associates.


Article 3. Criminal Penalties

Ca Codes (fin:31880-31881) Financial Code Section 31880-31881



31880. Any person who violates any provision of this chapter shall upon conviction be fined not more than ten thousand dollars ($10,000) or be imprisoned in the state prison, or in a county jail for not more than one year, or be punished by both such fine and imprisonment.


31880. Any person who violates any provision of this chapter shall upon conviction be fined not more than ten thousand dollars ($10,000) or be imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or in a county jail for not more than one year, or be punished by both that fine and imprisonment.

31881. Nothing in this division limits the power of the state to punish any person for any act which constitutes a crime under any statute.


Chapter 13. Civil Penalties

Ca Codes (fin:31900-31901) Financial Code Section 31900-31901



31900. If, after notice and a hearing, the commissioner finds that any person has violated any provision of this division or of any regulation or order issued under this division, the commissioner may order such person to pay to the commissioner a civil penalty in such amount as the commissioner may specify; provided, however, that the amount of such civil penalty shall not exceed one thousand dollars ($1,000) for each violation, or in the case of a continuing violation, one thousand dollars ($1,000) for each day for which such violation continues.

31901. The provisions of Section 31900 are additional to, and not alternative to, other provisions of this division which authorize the commissioner to issue orders or to take other action on account of a violation of any provision of this division or of any regulation or order issued under this division; provided, however, that no person who has been finally convicted under Chapter 12 (commencing with Section 31800) of this division on account of a violation of any provision of Chapter 12 shall be liable to pay a civil penalty under Section 31900 on account of such violation, nor shall any person who has paid a civil penalty under Section 31900 on account of a violation of any provision of Chapter 12 be liable to criminal prosecution under Chapter 12 on account of such violation.


Chapter 14. Transition Provisions

Ca Codes (fin:31950-31952) Financial Code Section 31950-31952



31950. In this chapter: (a) "Member" has the meaning set forth in the old law. (b) "Old corporation" means a corporation organized under the old law. (c) "Old law" means Part 6 (commencing with Section 14200), Division 3, Title 1 of the Corporations Code, as added by Chapter 985 of the Statutes of 1975.

31951. Except as otherwise provided in Sections 31004 and 31952, the provisions of the General Corporation Law (Division 1 (commencing with Section 100), Title 1 of the Corporations Code) shall, on and after the effective date of this division, apply to each old corporation; provided, however, that, for purposes of the provisions of Chapter 23 (commencing with Section 2300) of the General Corporation Law, with respect to each old corporation: (a) The term "effective date" shall mean the effective date of this division. (b) The term "prior law" shall mean the old law. (c) Each old corporation shall be deemed to be a corporation referred to in Section 162 of the Corporations Code.


31952. In case any old corporation has, on the effective date of this division, any members: (a) The old law shall continue to apply with respect to matters relating to the rights and obligations of such members with respect to such old corporation and to matters relating to the rights and obligations of such old corporation with respect to such members, so long as any of such members continues to be a member of such old corporation; provided, however, that, notwithstanding any provision of the old law to the contrary, any member of an old corporation may withdraw from membership in such old corporation by giving to such old corporation written notice of its intent to withdraw from membership in such old corporation not less than 10 days before the date on which it intends to withdraw from membership in such old corporation, which date shall be specified in such notice, and the withdrawal of such member from membership in such old corporation shall be effective on such date. (b) No person shall, on or after the effective date of this division, become a member of such old corporation.


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