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§ 5003. Demand Procedures.

10 CA ADC § 5003Barclays Official California Code of Regulations

Barclays California Code of Regulations
Title 10. Investment
Chapter 7. Business, Transportation and Housing Agency: Small Business Loans and Guarantees
Article 2. Loan Guarantees
10 CCR § 5003
§ 5003. Demand Procedures.
Currentness
(a) The Lender shall be authorized to make a Demand upon the Corporation executing the Guarantee for repayment of the unpaid Loan principal and interest pursuant to the terms of the Guarantee, upon compliance with the following:
(1) Providing proof to the Corporation that the Borrower is in Default and Lender has delivered to both the Borrower and the Corporation a minimum of two letters subsequent to the Delinquency, at least thirty (30) days apart, explaining the consequences for failure to remedy the Delinquency. This requirement shall not apply if Borrower is in bankruptcy.
(2) If the Guarantee is a Collection Guarantee, providing proof that the Borrower has complied with the liquidation requirements of section 5004.
(b) The Lender shall deliver to the Corporation executing the Guarantee a Demand Letter requesting immediate payment of the guaranteed portion of Loan interest and principal, and documenting compliance with subsection (a).
(c) Within five (5) days of receipt of the Demand letter, the Corporation shall contract with the California Department of Financial Institutions or an independent auditor to conduct an investigation to determine whether the Lender has complied with the terms of the Guarantee, and to issue a report to both the Corporation and the Agency. The investigation shall address each of the following issues:
(1) Whether the Loan agreement between the Borrower and Lender is consistent with the terms and conditions in the Guarantee?
(2) Has all Collateral for the Loan and Guarantee been perfected and maintained? Is all Collateral available for assignment to the Corporation in the event that payment is made upon the Demand: Is any Collateral not available as a result of Lender's negligence, breach of contract, foreclosure or other cause? If yes, describe.
(3) If the Guarantee is a Collection Guarantee, has the Lender complied with the liquidation procedures of section 5004?
(4) Calculation on the outstanding principal and interest owed.
(5) Whether the Lender complied with the procedures for making a Demand under section 5003(b).
(6) In a section entitled “Loan Information” the report shall include the following information obtained solely from a review of Lender files: a description of the Borrower's business, a description of the Collateral for the Loan, and a discussion as to whether the Lender files contain any reference to matters material to Borrower's compliance with any environmental laws or regulations. The description of Collateral shall identify all real property Collateral as one or more of the following: industrial, commercial, agricultural, single family residence, multi-unit residential, vacant lot, unknown.
(7) A Loan history.
(d) Within five (5) days of receiving the California Department of Financial Institutions or auditor's report, the Corporation shall do one of the following:
(1) Deliver to the Agency a request for payment on the Demand, along with: a copy of the report described in subsection (c), the Demand, and a calculation of the amount owed pursuant to the Guarantee; or
(2) Deliver to the Lender, with a copy simultaneously delivered to the Agency, a refusal to make payment pursuant to the Demand, and detailing the reasons for refusal.
(e) Within ten (10) calendar days from the date the Agency receives the request for payment, the Agency shall do one of the following and simultaneously inform the Lender of such action:
(1) Deliver or cause to be delivered to the Corporation a check in an amount not to exceed the amount contained in the Demand Letter, made payable to the Lender; or
(2) Deliver or cause to be delivered a denial of the request for payment to the Corporation based upon fraud or gross negligence on the part of the Lender known to the Agency.
(3) Deliver or cause to be delivered to the Corporation a statement that the investigation was incomplete, and requiring the Corporation to complete the investigation and resubmit the request for payment to the Agency within five (5) calendar days from the date the statement is received by the Corporation.
(f) The amount paid to the Lender pursuant to a Demand Letter shall be less than the amount contained in the Demand Letter only under the following circumstances:
(1) The Demand contains an incorrect calculation of the amount owing;
(2) The amount owing on the Loan has been reduced by subsequent payments from the Borrower to the Lender; or
(3) The Lender has engaged in fraudulent activities pertaining to the Loan.
(g) Within one working day of receiving the check from the Agency, the Corporation shall contact the Lender and arrange to deliver the check to the Lender. The Corporation shall deliver the check and simultaneously collect an assignment by the Lender of the Lender's interest in the Loan. The assignment shall include the Loan Note and all Collateral, except as provided in section 5004.
(h) The Guarantee shall include a provision for binding arbitration in the event that either the Corporation or Agency denies the requested Demand pursuant to subsections (d)(2) or (e)(2), or the amount paid to the Lender is less than the amount contained in the Demand Letter.
(i) Demand must be made upon the Corporation no later than noon on the thirty-first calendar day following the date on which the Guarantee terminates; provided, however, that if the thirty-first day is not a day upon which the Corporation is open for business, the last day for making a Demand shall occur on the next succeeding day upon which the Corporation is open for business.

Credits

Note: Authority cited: Section 14024, Corporations Code. Reference: Section 14064, Corporations Code.
History
1. Repealer and new section filed 6-24-91; operative 7-24-91 (Register 91, No. 42).
2. Amendment of subsections (c) and (d) and amendment of Note filed 7-24-98; operative 7-24-98 pursuant to Government Code section 11343.4(d) (Register 98, No. 30).
3. Amendment filed 12-27-2004 as a deemed emergency pursuant to Corporations Code section 14024; operative 12-27-2004 (Register 2004, No. 53). A Certificate of Compliance must be transmitted to OAL by 6-27-2005 or emergency language will be repealed by operation of law on the following day.
4. Editorial correction of History 3 (Register 2005, No. 27).
5. Certificate of Compliance as to 12-27-2004 order, including amendment of subsection (c)(5) and Note, transmitted to OAL 5-25-2005 and filed 7-7-2005 (Register 2005, No. 27).
This database is current through 5/10/24 Register 2024, No. 19.
Cal. Admin. Code tit. 10, § 5003, 10 CA ADC § 5003
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