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90_HB0621ham001
LRB9002818WHmgam01
1 AMENDMENT TO HOUSE BILL 621
2 AMENDMENT NO. . Amend House Bill 621 by replacing
3 everything after the enacting clause with the following:
4 "Section 1. Short title. This Act may be cited as the
5 Minority and Female Franchise Investment Act.
6 Section 5. Findings and purpose. The General Assembly
7 finds that:
8 (a) Franchises have proven to be a fast growing and
9 reliable form of successful business expansion and successful
10 new business creation.
11 (b) Franchises play a major role in the economy of the
12 State of Illinois and have been a continuing source of
13 increasing tax revenues and job opportunities.
14 (c) The growth of franchises should be encouraged in the
15 State's economy and franchising should be an integral part of
16 the State's economic development effort.
17 (d) Socially or economically disadvantaged persons often
18 lack adequate capital and are unable to obtain financing from
19 financial institutions to begin and develop a franchise.
20 (e) It is in the interest of the public welfare and
21 purpose to promote the creation and viability of franchises
22 by socially or economically disadvantaged persons.
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1 (f) Existing State programs intended to assist socially
2 or economically disadvantaged persons with business
3 opportunities are inadequate to meet the ever-increasing need
4 for additional assistance and are not focused upon the
5 particular problems facing prospective franchisees.
6 Section 10. Definitions. As used in this Act:
7 "Enterprise" means any business entity in Illinois
8 including, but not limited to, any sole proprietorship,
9 partnership, corporation, joint venture, association, or
10 cooperative applying to participate under this Act in the
11 purchase of a franchise.
12 "Funding" means loans provided under this Act.
13 "Franchise" means a franchise that is registered or
14 exempt from registration under the Franchise Disclosure Act
15 of 1987.
16 "Program" means the program established under this Act to
17 provide funding for the purchase of franchises by qualifying
18 participants under this Act.
19 "Minority person" means a person who is a citizen or
20 lawful permanent resident of the United States and who is:
21 (1) Black (a person having origins in any of the
22 black racial groups in Africa);
23 (2) Hispanic (a person of Spanish or Portuguese
24 culture with origins in Mexico, South or Central America,
25 or the Caribbean Islands, regardless of race);
26 (3) Asian American (a person having origins in any
27 of the original peoples of the Far East, Southeast Asia,
28 the Indian Subcontinent, or the Pacific Islands);
29 (4) American Indian or Alaskan Native (a person
30 having origins in any of the original peoples of North
31 America); or
32 (5) Disabled (a person having a physical or mental
33 impairment that substantially limits one or more of the
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1 major life activities of the person or a person having a
2 record of such impairment).
3 "Female" means a person who is a citizen or lawful
4 permanent resident of the United States and who is of the
5 female gender.
6 "Qualifying participant" means any enterprise meeting the
7 requirements of this Act for funding from the Program.
8 "Control" means the exclusive or ultimate and sole
9 control of the business, including, but not limited to,
10 capital investment and all other financial matters, property,
11 acquisitions, contract negotiations, legal matters, officer,
12 director, and employee selection and comprehensive hiring,
13 daily operating responsibilities, cost-control matters,
14 income and dividend matters, financial transactions, and
15 rights of other shareholders or joint partners. Control
16 shall be real, substantial, and continuing, not pro forma.
17 Control shall include the power to direct or cause the
18 direction of the management and policies of the business and
19 to make the day-to-day as well as major decisions in matters
20 of policy, management, and operations. Control shall be
21 exemplified by possessing the requisite knowledge and
22 expertise to run the particular business, and control shall
23 not include simple majority or absentee ownership.
24 "Administrator" means the Director of Commerce and
25 Community Affairs.
26 "Loan" means acceptance of any note, bond, debenture, or
27 evidence of indebtedness, whether unsecured or secured by a
28 mortgage, pledge, loan guarantee, deed of trust, or other
29 lien on any property, or any certificate of, receipt for,
30 participation in, or an option to any of the foregoing or
31 other form approved by the Administrator. A loan shall bear
32 an interest rate, with terms of repayment, secured by such
33 collateral, with other terms and conditions, as the
34 Administrator shall deem necessary or appropriate.
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1 "Participating lender" means any trust company, bank,
2 savings bank, credit union, merchant bank, investment bank,
3 broker, investment trust, pension fund, building and loan
4 association, savings and loan association, insurance company,
5 venture capital company, or other institution.
6 Section 15. Powers and duties. The Administrator has
7 the power to:
8 (a) Provide loans for the establishment and development
9 of franchises by minority and female persons qualifying under
10 this Act.
11 (b) Enter into agreements, accept funds or grants, and
12 cooperate with agencies of the federal and State government,
13 units of local government, universities, research
14 foundations, regional economic development corporations, and
15 other organizations to carry out the purposes of this Act.
16 (c) Enter into contracts and letter of credit
17 agreements, provide funds for participation agreements or
18 make any other agreements or contracts, or invest or loan
19 funds to any participating lender, private investor, public
20 or private development corporation, or other entity necessary
21 or desirable to further the purposes of this Act. Any
22 agreement or contract may include, without limitation, terms
23 and provisions including, but not limited to, loan
24 documentation, review and approval procedures, organization
25 and servicing rights, contribution requirements, default
26 conditions, and other related activities.
27 (d) Fix, determine, charge, and collect any premiums,
28 fees, charges, costs and expenses, including, without
29 limitation, any application fees, commitment fees, program
30 fees, financing charges, or publication fees in connection
31 with its activities under this Act.
32 (e) Establish application, notification, contract, and
33 other forms, procedures, or rules deemed necessary and
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1 appropriate.
2 (f) Consent, subject to the provisions of any contract
3 with another person, whenever it deems it necessary or
4 desirable in the fulfillment of the purposes of this Act, to
5 the modification or restructuring of any capital loan
6 agreement to which the Administrator is a party.
7 (g) Take whatever actions are necessary or appropriate
8 to protect the State's interest in the event of bankruptcy,
9 default, foreclosure, or noncompliance with the terms and
10 conditions of funding provided under this Act, including the
11 power to sell, dispose, lease, or rent, upon terms and
12 conditions determined by the Administrator to be appropriate,
13 real or personal property that the Administrator may receive
14 as a result thereof.
15 (h) Consult with State and local governmental officials
16 to ensure the most effective use of Program resources without
17 duplication or overlap with existing business opportunity
18 expansion programs.
19 (i) Exercise other powers necessary or incidental to the
20 foregoing powers.
21 Section 20. Qualifying participant. An enterprise must
22 meet the following qualifications in addition to the other
23 requirements set forth in this Act:
24 (i) 100% of a sole proprietorship applying for funding
25 from the Program shall be owned and controlled by a minority
26 or female and, if funding is awarded to the sole
27 proprietorship, the sole proprietorship shall continue to be
28 100% owned and controlled by a minority or female at all
29 times until the funding provided under this Act is repaid in
30 full.
31 (ii) At least 70% of an enterprise (other than a sole
32 proprietorship) applying for funding from the Program shall
33 be owned and controlled by one or more minorities or females
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1 and, if funding is awarded to the enterprise, the enterprise
2 shall continue to be at least 70% owned and controlled by one
3 or more minorities or females at all times until the funding
4 provided under this Act is repaid in full.
5 Section 25. Application and requirements for funding.
6 (a) Under the Program, the Administrator may provide
7 loans to a qualifying participant only after it has submitted
8 an application that contains a business plan including:
9 (1) A description of the franchisor and its
10 management, product, and market.
11 (2) A statement of the amount, urgency of need, and
12 projected use of the capital required.
13 (3) A statement of the potential economic impact of
14 the purchase.
15 (4) Information that relates to the participant's
16 qualifications to participate in the Program.
17 (5) A statement of the business experience of each
18 individual person owning any interest in the enterprise
19 for the 10 years immediately preceding the application,
20 any felony conviction or any misdemeanor conviction for
21 which fraud was an essential element for each individual
22 person owning any interest in the enterprise, any charges
23 or complaints lodged against each individual person
24 owning any interest in the enterprise for which fraud was
25 an essential element and that resulted in civil or
26 criminal litigation, and any failure of any individual
27 person owning any interest in the enterprise to satisfy
28 an enforceable judgment entered against him or her based
29 upon fraud. Because the information required by this
30 subdivision (5) may be confidential or contain
31 proprietary information, this information shall not be
32 available to the general public and shall be used only
33 for the lawful purposes contained in this Act.
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1 (6) A description of other financing to be used for
2 the proposed purchase of the franchise by the enterprise.
3 Other financing may be in the form of any loan, equity
4 position, convertible preferred stock, letter of credit,
5 guarantee, bond purchase, or any other form approved by
6 the Administrator.
7 (7) Any other information the Administrator
8 requires.
9 (b) Under the Program, all funding shall satisfy the
10 following requirements:
11 (1) An enterprise may only receive funding under
12 the Program for the purchase of one franchise, and no
13 individual may have an ownership interest in more than
14 one enterprise receiving funding under the Program.
15 (2) The amount of the Administrator's funding may
16 not exceed $100,000 for any franchise and may not exceed
17 45% of the total initial investment in the franchise.
18 (3) The Administrator shall find that there is a
19 reasonable probability that the Administrator will
20 recover its initial investment and an adequate return on
21 investment, and the investment shall be recoverable
22 within 7 years of the funding.
23 (4) The recovery shall be the greater of the
24 current value of the percentage of the funding in the
25 enterprise or the amount of the initial investment in the
26 enterprise.
27 (5) Funding shall be provided to qualified
28 participants.
29 (c) The liability of the Administrator and the State of
30 Illinois in providing funding shall be limited to its
31 investments under the Program.
32 Section 30. Illinois Franchise Trust Fund.
33 (a) There is created the Illinois Franchise Trust Fund
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1 outside the State Treasury, with the State Treasurer as
2 custodian. The purpose of the Fund is to make loans to
3 qualifying participants in accordance with this Act.
4 (b) There shall be transferred into the Fund amounts
5 including but not limited to:
6 (1) Moneys appropriated by the State to the Fund;
7 (2) Fees paid under the Franchise Disclosure Act of
8 1987 and specified by Section 40 of that Act to be
9 deposited into the Fund;
10 (3) All receipts, including dividends, principal,
11 and interest payments, royalties, or other return on any
12 loan or investment, from any applicable funding made by
13 the Administrator;
14 (4) All proceeds of assets of whatever nature
15 received by the Administrator as a result of default or
16 delinquency with respect to loan agreements made by the
17 Administrator;
18 (5) Any appropriations, grants, or gifts made for
19 the purposes of this Act;
20 (6) Any income received from interest on
21 investments of moneys in the Fund; and
22 (7) Any moneys made available for the purposes of
23 this Act through federal programs, except that the terms
24 and conditions of this Act that are inconsistent with or
25 prohibited by federal authorization under which the
26 moneys are available shall not apply with respect to the
27 expenditure of those moneys.
28 (c) The Fund shall achieve investment returns on its
29 portfolio in the form of:
30 (1) Royalties from enterprises in amounts to be
31 determined by the Administrator; and
32 (2) If debt security is used, interest payments.
33 (d) Moneys shall be appropriated for the Fund and shall
34 be deposited into the Fund each month. The Administrator
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1 shall use the Fund as follows:
2 (1) In the purchase of advisory services and
3 technical assistance consistent with the Program;
4 (2) To provide loans as permitted under the
5 Program; and
6 (3) To pay expenses for administrative, legal, and
7 actuarial services relating to the Program.
8 Section 35. Hold harmless. Nothing in this Act shall be
9 construed as creating any rights of a competitor of an
10 approved borrower or any applicant whose application is
11 denied by the Administrator to challenge any application that
12 is accepted by the Administrator and any funding or other
13 agreement executed in connection with that accepted
14 application.
15 Section 40. False statement. Any person who knowingly
16 makes or causes any false statement or report to be made in
17 any application or in any document furnished to the
18 Administrator commits a Class 2 felony.
19 Section 905. The Franchise Disclosure Act of 1987 is
20 amended by changing Section 40 as follows:
21 (815 ILCS 705/40) (from Ch. 121 1/2, par. 1740)
22 Sec. 40. Fees.
23 (a) The Administrator shall charge and collect the fees
24 fixed by this Section. All fees and charges collected under
25 this Section shall be transmitted to the State Treasurer at
26 least weekly, accompanied by a detailed statement thereof.
27 Such fees and charges shall be refundable at the discretion
28 of the Administrator. The fees and charges shall be
29 deposited into the General Revenue Fund, except as otherwise
30 provided in subsection (b).
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1 (1) (b) The fee for the initial registration of a
2 franchise shall be $650 $500.
3 (2) (c) The fee for filing an amended disclosure
4 statement shall be $150 $100 if the amendment pertains to
5 a material change, otherwise $25.
6 (3) (d) The fee for an interpretive opinion or no
7 action letter shall be $100 $50.
8 (4) (e) The fee for the registration of a franchise
9 broker shall be $100 with an annual a renewal fee of
10 $100.
11 (5) (f) The fee for filing an annual report shall
12 be $350 $100.
13 (b) The following amounts shall be deposited into the
14 Illinois Franchise Trust Fund, a special fund created in the
15 State Treasury:
16 (1) $150 of every fee paid for an initial
17 registration.
18 (2) $50 of every fee paid for filing an amended
19 disclosure statement if the amendment pertains to a
20 material change.
21 (3) $50 of every fee paid for an interpretive
22 opinion or no action letter.
23 (4) $250 of every fee paid for filing an annual
24 report.
25 (Source: P.A. 85-551.)".