December 11, 2019
By Caity Witucki
Contributing Editor, Coleman’s SBA Compliance Report
Coleman’s SBA Compliance Report – Certified Development Company Corporate Governance Requirements
On December 4, 2019, the Federal Register published the final rule on streamlining and modernizing certified development company program corporate governance requirements.
The Top 10 Changes You Should Be Aware Of:
- Any person or entity is now prohibited from owning or controlling more than 25% of CDC voting stock.
- The minimum number of directors required for the CDC’s Board has been reduced from nine to seven.
- The provision which limits the number of directors in the commercial lending field to less than 50% of the Board has been removed.
- A CDC may now contract with another CDC for marketing, processing, closing, servicing or liquidation functions. To do so, they must enter into a professional servicing contact that has been pre-approved by the Director of the Office of Financial Assistance and the CDCs must be located in the same SBA region.
- The SBA has increased the dollar threshold that triggers an annual audit for the CDC’s financial statements from $20 million to $30 million.
- For Multi-State CDCs, a Loan Committee now must include at last two individuals who live or work in a state where Project is being considered.
- A CDC can now apply to make a 504 loan outside their Area of Operations if the CDC has previously assisted the business or its affiliates.
- The SBA will now allow PCLP CDCs to maintain a balance in the LLRF equal to one percent of the current principal amount, instead of one percent of the original principal amount, of the PCLP Debenture after the loan is seasoned for 10 years.
- SBA Form 1253 has been revised to clarify what CDCs are required to submit with their Annual Report.
- The SBA will no longer require CDCs to provide a copy of documents that the SBA already has in its possession, including SBA’s approval of each contract or management waiver, a copy of the Board’s resolution approving the contract, or a copy of the Board’s explanation for why it believes that it is in the best interest of the CDC to enter into the contract.
All changes will go into effect on January 3, 2020. For further information contact Linda Reilly at (202)205-9949 or email@example.com.
13 CFR 120