SECTIONS 14025-14028

14025.  The director shall do all of the following: (a) Administer this part. (b) In accordance with program resources, stimulate the formationof corporations and the use of branch offices for the purposes ofmaking this program accessible to all areas of the state. (c) Expeditiously approve or disapprove the articles ofincorporation and any subsequent amendments to the articles ofincorporation of a corporation. (d) Require each corporation to submit an annual written plan ofoperation. (e) Review reports from the Department of Financial Institutionsand inform corporations as to what corrective action is required. (f) Examine, or cause to be examined, at any reasonable time, allbooks, records, and documents of every kind, and the physicalproperties of a corporation. The inspection shall include the rightto make copies, extracts, and search records.14026.  The director, following notification to the secretary, maydo all of the following: (a) Contract for services entered into pursuant to this chapter. (b) Hold public hearings. (c) Act as liaison between corporations formed under this part,other state and federal agencies, lenders, and the Legislature. (d) Process and tabulate on a monthly basis all corporate reports. (e) Attend board meetings. (f) Attend and participate at corporation meetings. The director,or his or her designee, shall be an ex officio, nonvotingrepresentative on the board of directors and loan committees of eachcorporation. The director shall meet with the board of directors ofeach corporation at least once each fiscal year, commencing July 1,1999. (g) Assist corporations in applying for federal grantapplications, and in obtaining program support from the businesscommunity.14027.  The director shall have the accounts of each corporationformed under this part audited as of the close of business on June30, of each year. The director shall also have the portfolio of eachcorporation audited a minimum of once a year. Material auditexceptions that are not corrected by the corporation within areasonable period of time may result in the suspension of thecorporation pursuant to Section 14028.14028.  (a) Upon a finding by the director that irreparable harm mayoccur if guarantee authority is not temporarily withdrawn from acorporation, the director may temporarily withdraw guaranteeauthority from a corporation. The notice of temporary withdrawal sentto the corporation shall specify the reasons for the action. As usedin this section, "guarantee authority" means the authority to makeor guarantee any loan that encumbers funds in a trust fund account orthe expansion fund. The director shall make one of thedeterminations specified in subdivision (c) within 30 days of theeffective date of the temporary withdrawal unless the corporation andthe director mutually agree to an extension. The corporation shallhave the opportunity to submit written material to the directoraddressing the items stated in the temporary withdrawal notice. Ifthe director does not make any determinations within 30 days, thetemporary withdrawal shall be negated. The corporation's yearlycontract shall remain in effect during the period of temporarywithdrawal, and the corporation shall continue to receivereimbursement of necessary operating expenses. (b) Failure of a corporation to substantially comply with thefollowing may result in the suspension of a corporation: (1) Regulations implementing the Small Business DevelopmentCorporation Law. (2) The plan of operation specified in subdivision (d) of Section14025. (3) Fiscal and portfolio requirements, as contained in the fiscaland portfolio audits specified in Section 14027. (4) Milestones and scope of work as contained in the annualcontract between the corporation and the agency. (c) Pursuant to subdivision (a) or (b), the director may do thefollowing: (1) Terminate the temporary withdrawal. (2) Terminate the temporary withdrawal subject to the corporation's adoption of a specified remedial action plan. (3) Temporarily withdraw, or continue to withdraw, guaranteeauthority until a specified time. This determination by the directorrequires a finding that the corporation has failed to comply with theSmall Business Development Corporation Law. (4) Suspend the corporation. (5) Suspend the corporation, with suspension stayed until thecorporation provides a remedial action plan to the director, and thedirector decides whether to repeal or implement the stayedsuspension. The determinations contained in paragraphs (4) and (5) require afinding that irreparable harm will occur unless the corporation issuspended. (d) In considering a determination regarding the recommendedsuspension and possible remedial action plans, the director shallconsider, along with other criteria as specified in subdivision (b),the corporation's history and past performance. (e) Upon suspension of a corporation, the director shall transferall funds, whether encumbered or not, in the trust fund account ofthe suspended corporation into either the expansion fund ortemporarily transfer the funds to another corporation. (f) If the director decides to take any action against thecorporation pursuant to paragraphs (2) to (5), inclusive, ofsubdivision (c), the corporation shall be notified of the action 10days before the effective date of the action. The corporation shallhave the right to appeal the director's decision to the board withinthat 10-day period by sending notice to the director and to the chairof the board. Once the director receives notice that the action isbeing appealed, the director's action shall be stayed except fortemporary withdrawal of guarantee authority. Upon receipt of thenotice, the director shall schedule a properly noticed board meetingwithin 30 days. The board may elect to take any of the actions listedin subdivision (g). The temporary withdrawal of corporationguarantee authority shall remain in effect until the board issues itsdecision. (g) Pursuant to subdivision (f), the board may do any of thefollowing: (1) Terminate the action taken by the director. (2) Modify the action taken by the director subject to theadoption by the corporation of a specified remedial action plan. (3) Affirm the action taken by the director. (h) Following suspension, the corporation may continue itsexistence as a nonprofit corporation pursuant to the Nonprofit PublicBenefit Corporation Law (Part 2 (commencing with Section 5110) ofDivision 2) but shall no longer be registered with the Secretary ofState as a small business development corporation. A corporationshall not enjoy any of the benefits of a small business developmentcorporation following suspension. (i) The funds in the trust fund account of a corporation undertemporary withdrawal shall be transferred to the expansion fund. Upontermination of the temporary withdrawal, unless the termination iscaused by suspension, the funds of the corporation that weretransferred to the expansion fund from the trust fund account shallbe returned to the corporation's trust fund account, notwithstandingSection 14037. While the funds of a corporation's trust fund accountreside in the expansion fund, use of the principal on the funds shallbe governed by the implementing regulations specifying use of fundsin the expansion fund. Interest on the funds moved from a corporation's trust fund account upon temporary withdrawal shall be limited topayment of the corporation's administrative expenses, as contained inthe contract between the corporation and the agency.