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| [ House Amendment 001 ] |
90_HB0621
New Act
30 ILCS 105/5.449 new
815 ILCS 705/40 from Ch. 121 1/2, par. 1740
Creates the Minority and Female Franchise Equity
Investment Act. Authorizes the Attorney General to
administer a program of financial assistance to enable
minority and female owned businesses to purchase franchises.
Amends the Franchise Disclosure Act of 1987 to increase
certain franchise fees. Amends the State Finance Act to
create the necessary special fund within the State treasury.
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1 AN ACT concerning minority and female franchise
2 investments, amending named Acts.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 1. Short title. This Act may be cited as the
6 Minority and Female Franchise Investment Act.
7 Section 5. Findings and purpose. The General Assembly
8 finds that:
9 (a) Franchises have proven to be a fast growing and
10 reliable form of successful business expansion and successful
11 new business creation.
12 (b) Franchises play a major role in the economy of the
13 State of Illinois and have been a continuing source of
14 increasing tax revenues and job opportunities.
15 (c) The growth of franchises should be encouraged in the
16 State's economy and franchising should be an integral part of
17 the State's economic development effort.
18 (d) Socially or economically disadvantaged persons often
19 lack adequate capital and are unable to obtain financing from
20 financial institutions to begin and develop a franchise.
21 (e) It is in the interest of the public welfare and
22 purpose to promote the creation and viability of franchises
23 by socially or economically disadvantaged persons.
24 (f) Existing State programs intended to assist socially
25 or economically disadvantaged persons with business
26 opportunities are inadequate to meet the every increasing
27 need for additional assistance and are not focused upon the
28 particular problems facing prospective franchisees.
29 (g) The Attorney General, as administrator of the
30 Franchise Disclosure Act of 1987, is particularly well suited
31 to administer this additional facet of franchise development
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1 and regulation.
2 Section 10. Definitions. As used in this Act:
3 "Enterprise" means any business entity in Illinois
4 including, but not limited to, any sole proprietorship,
5 partnership, corporation, joint venture, association, or
6 cooperative proposing to participate under this Act in the
7 purchase of a franchise.
8 "Funding" means loans provided under this Act.
9 "Franchise" means a contract or agreement and has the
10 meaning used in Section 3 of the Franchise Disclosure Act of
11 1987. Franchise includes only those franchise offerings that
12 are registered or exempt under the Franchise Disclosure Act
13 of 1987.
14 "Program" means the funding provided under this Act.
15 "Minority person" means a person who is a citizen or
16 lawful permanent resident of the United States and who is:
17 (1) Black (a person having origins in any of the
18 black racial groups in Africa);
19 (2) Hispanic (a person of Spanish or Portuguese
20 culture with origins in Mexico, South or Central America,
21 or the Caribbean Islands, regardless of race);
22 (3) Asian American (a person having origins in any
23 of the original peoples of the Far East, Southeast Asia,
24 the Indian Subcontinent, or the Pacific Islands);
25 (4) American Indian or Alaskan Native (a person
26 having origins in any of the original peoples of North
27 America); or
28 (5) Disabled (a person having a physical or mental
29 impairment that substantially limits one or more of the
30 major life activities of the person or a person having a
31 record of such impairment).
32 "Female" means a person who is a citizen or lawful
33 permanent resident of the United States and who is of the
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1 female gender.
2 "Participant" means any enterprise applying to the
3 Administrator for funding from the Program.
4 "Control" means the exclusive or ultimate and sole
5 control of the business, including, but not limited to,
6 capital investment and all other financial matters, property,
7 acquisitions, contract negotiations, legal matters, officer,
8 director, and employee selection and comprehensive hiring,
9 daily operating responsibilities, cost-control matters,
10 income and dividend matters, financial transactions, and
11 rights of other shareholders or joint partners. Control
12 shall be real, substantial, and continuing, not pro forma.
13 Control shall include the power to direct or cause the
14 direction of the management and policies of the business and
15 to make the day-to-day as well as major decisions in matters
16 of policy, management, and operations. Control shall be
17 exemplified by possessing the requisite knowledge and
18 expertise to run the particular business, and control shall
19 not include simple majority or absentee ownership.
20 "Administrator" means the Illinois Attorney General.
21 "Loan" means acceptance of any note, bond, debenture, or
22 evidence of indebtedness, whether unsecured or secured by a
23 mortgage, pledge, loan guarantee, deed of trust, or other
24 lien on any property, or any certificate of, receipt for,
25 participation in, or an option to any of the foregoing or
26 other form approved by the Administrator. A loan shall bear
27 an interest rate, with terms of repayment, secured by any
28 collateral, with other terms and conditions, that the
29 Administrator shall deem necessary or appropriate.
30 "Participating lender" means any trust company, bank,
31 savings bank, credit union, merchant bank, investment bank,
32 broker, investment trust, pension fund, building and loan
33 association, savings and loan association, insurance company,
34 venture capital company or other institution.
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1 Section 15. Powers and duties. The Administrator has
2 the power to:
3 (a) Provide loans for the establishment and development
4 of franchises by minority and female persons qualifying under
5 this Act.
6 (b) Enter into agreements, accept funds or grants, and
7 cooperate with agencies of the federal and State government,
8 local units of government, universities, research
9 foundations, regional economic development corporations, and
10 other organizations for the purposes of carrying out this
11 Act.
12 (c) Enter into contracts and letter of credit
13 agreements, provide funds for participation agreements or
14 make any other agreements or contracts, or invest or loan
15 funds to any participating lender, private investor, public
16 or private development corporation or other entity necessary
17 or desirable to further the purpose of this Act. Any
18 agreement or contract may include, without limitation, terms
19 and provisions including, but not limited to, loan
20 documentation, review and approval procedures, organization
21 and servicing rights, contribution requirements, default
22 conditions, and other related activities.
23 (d) Fix, determine, charge, and collect any premiums,
24 fees, charges, costs and expenses, including, without
25 limitation, any application fees, commitment fees, program
26 fees, financing charges, or publication fees in connection
27 with its activities under this Act.
28 (e) Establish application, notification, contract, and
29 other forms, procedures, rules or regulations deemed
30 necessary and appropriate.
31 (f) Consent, subject to the provisions of any contract
32 with another person, whenever it deems it necessary or
33 desirable in the fulfillment of the purposes of this Act, to
34 the modification or restructuring of any capital loan
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1 agreement to which the Administrator is a party.
2 (g) Take whatever actions are necessary or appropriate
3 to protect the State's interest in the event of bankruptcy,
4 default, foreclosure, or noncompliance with the terms and
5 conditions of financial assistance provided under this Act,
6 including the power to sell, dispose, lease, or rent, upon
7 terms and conditions determined by the Administrator to be
8 appropriate, real or personal property that the Administrator
9 may receive as a result thereof.
10 (h) Consult with State and local governmental officials
11 in order to ensure the most effective use of program
12 resources without duplication or overlap with existing
13 business opportunity expansion programs.
14 (i) Exercise other powers necessary or incidental to the
15 foregoing powers.
16 Section 20. Qualifying participant. A sole
17 proprietorship applying to the Administrator for funding from
18 the Program shall be 100% owned and controlled by a minority
19 or female. If other than a sole proprietorship, at least 70%
20 of the enterprise applying to the Administrator for funding
21 from the Program shall be owned and controlled by one or more
22 minorities or females, or both. If funding is awarded to an
23 enterprise, it shall continue to be 100% owned and controlled
24 by a minority or female during the course of the loan if it
25 is a sole proprietorship; if the enterprise receiving funding
26 is other than a sole proprietorship, it shall continue to be
27 70% owned and controlled by one or more minorities or
28 females.
29 Section 25. Application and requirements for funding.
30 (a) Under the Program, the Administrator may provide
31 loans to qualifying participants only after the enterprise
32 has submitted an application that contains a business plan,
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1 including:
2 (1) A description of the franchisor and its
3 management, product and market.
4 (2) A statement of the amount, urgency of need, and
5 projected use of the capital required.
6 (3) A statement of the potential economic impact of
7 the purchase.
8 (4) Information that relates to the participant's
9 qualifications to participate in this Program.
10 (5) A statement of the business experience of each
11 individual person owning any interest in the enterprise
12 for the 10 years immediately preceding the application,
13 any felony conviction or any misdemeanor conviction for
14 which fraud was an essential element for each individual
15 person owning any interest in the enterprise, any charges
16 or complaints lodged against each individual person
17 owning any interest in the enterprise for which fraud was
18 an essential element and that resulted in civil or
19 criminal litigation, and any failure of any individual
20 person owning any interest in the enterprise to satisfy
21 an enforceable judgment entered against him or her based
22 upon fraud. Since the information required by this
23 paragraph may be confidential or contain proprietary
24 information, this information shall not be available to
25 the general public and shall be used only for the lawful
26 purposes contained in this Act.
27 (6) A description of other financing to be used for
28 the proposed purchase of the franchise by the enterprise.
29 Other financing may be in the form of any loan, equity
30 position, convertible preferred stock, letter of credit,
31 guarantee, bond purchase or any other form approved by
32 the Administrator.
33 (7) Any other information the Administrator
34 requires.
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1 (b) Under the Program, any funding shall satisfy the
2 following requirements:
3 (1) An enterprise and the persons comprising it may
4 only receive funding under the Program for the purchase
5 of one franchise.
6 (2) The amount of the Administrator's funding may
7 not exceed $100,000 for any franchise and may not exceed
8 45% of the total initial investment in the franchise.
9 (3) The Administrator shall find that there is a
10 reasonable probability that the Administrator will
11 recover its initial investment and an adequate return on
12 investment, and the investment shall be recoverable
13 within 7 years of the funding.
14 (4) The recovery shall be the greater of the
15 current value of the percentage of the funding in the
16 enterprise or the amount of the initial investment in the
17 enterprise.
18 (5) Funding shall be provided to qualified
19 participants.
20 (c) The liability of the Administrator and the State of
21 Illinois in providing funding shall be limited to its
22 investments under the Program.
23 Section 30. Illinois Franchise Trust Fund.
24 (a) There is created the Illinois Franchise Trust Fund,
25 referred to as the "Franchise Fund" with the State Treasurer
26 as ex officio custodian. The purpose of the Franchise Fund
27 is to make loans in Illinois to qualifying minority and
28 female persons.
29 (b) There shall be deposited into the Franchise Fund
30 amounts, that include but are not limited to:
31 (1) Money appropriated by the State to the
32 Franchise Fund;
33 (2) Fees paid under the Franchise Disclosure Act of
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1 1987 and specified by Section 40 of that Act to be
2 deposited into the Illinois Franchise Trust Fund;
3 (3) All receipts, including dividends, principal
4 and interest payments, royalties or other return on any
5 loan or investment, from any applicable funding made by
6 the Administrator;
7 (4) All proceeds of assets of whatever nature
8 received by the Administrator as a result of default or
9 delinquency with respect to loan agreements made by the
10 Administrator;
11 (5) Any appropriations, grants, or gifts made for
12 the purposes of this Act;
13 (6) Any income received from interest on
14 investments of moneys in the Franchise Fund; and
15 (7) Any money made available for the purposes of
16 this Act through federal programs, except that the terms
17 and conditions of this Act that are inconsistent with or
18 prohibited by federal authorization under which the
19 moneys are available shall not apply with respect to the
20 expenditure of those moneys.
21 (c) The Franchise Fund shall be self-sustaining and
22 shall achieve investment returns on its portfolio in the form
23 of:
24 (1) Royalties from enterprises in amounts to be
25 determined by the Administrator; and
26 (2) If debt security is used, interest payments.
27 (d) Moneys in the Franchise Fund shall be paid upon the
28 order of the Administrator, who shall use the Franchise Fund
29 and income from the Franchise Fund as follows:
30 (1) In the purchase of advisory services and
31 technical assistance consistent with the Program;
32 (2) To provide loans as permitted under the
33 Program; and
34 (3) To pay expenses for administrative, legal, and
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1 actuarial services relating to the Program.
2 Section 35. Hold harmless. Nothing in this Act shall be
3 construed as creating any rights of a competitor of an
4 approved borrower or any applicant whose application is
5 denied by the Administrator to challenge any application that
6 is accepted by the Administrator and any funding or other
7 agreement executed in connection with that accepted
8 application.
9 Section 40. False statement.
10 (a) Any person who knowingly makes or causes any false
11 statement or report to be made in any application or in any
12 document furnished to the Administrator commits a Class 2
13 felony.
14 (b) The Administrator, with assistance as he may from
15 time to time request of the State's Attorneys in the several
16 counties, shall investigate suspected criminal violations of
17 this Act and shall commence and try all prosecutions under
18 this Act. Prosecutions under this Act may be commenced by
19 information or indictment. With respect to the commencement
20 and trial of prosecutions instituted by the Administrator,
21 the Administrator shall have all of the powers and duties
22 vested by law in the State's Attorneys with respect to
23 criminal prosecutions generally. A prosecution for any
24 offense under this Act must be commenced within 3 years after
25 its commission. Nothing in this Act limits the power of the
26 State to punish any person for any conduct that constitutes a
27 crime under any other statute.
28 Section 100. The State Finance Act is amended by adding
29 Section 5.449 as follows:
30 (30 ILCS 105/5.449 new)
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1 Sec. 5.449. The Illinois Franchise Trust Fund.
2 Section 105. The Franchise Disclosure Act of 1987 is
3 amended by changing Section 40 as follows:
4 (815 ILCS 705/40) (from Ch. 121 1/2, par. 1740)
5 Sec. 40. Fees.
6 (a) The Administrator shall charge and collect the fees
7 fixed by this Section. Except as otherwise provided in this
8 Section, all fees and charges collected under this Section
9 shall be transmitted to the State Treasurer for deposit into
10 the General Revenue Fund at least weekly, accompanied by a
11 detailed statement thereof. Such fees and charges shall be
12 refundable at the discretion of the Administrator.
13 (1) (b) The fee for the initial registration of a
14 franchise shall be $650 $500.
15 (2) (c) The fee for filing an amended disclosure
16 statement with a material change shall be $150 shall be
17 $100 if the amendment pertains to a material change,
18 otherwise $25.
19 (3) (d) The fee for an interpretive opinion or no
20 action letter shall be $100 $50.
21 (4) (e) The fee for the registration of a franchise
22 broker shall be $100 with an annual a renewal fee of
23 $100.
24 (5) (f) The fee for filing an annual report shall
25 be $350 $100.
26 (b) The following fees are to be deposited into the
27 Illinois Franchise Trust Fund, a special fund created in the
28 State Treasury. The moneys held in the fund shall be used by
29 the Attorney General for expenditures incurred in the
30 administration of this Act, for the program authorized under
31 the Minority and Female Franchise Investment Act, for
32 education purposes under this Act, and for other necessary
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1 programs related to franchising. All interest or other
2 income earned from the investment of moneys in the fund shall
3 be deposited into the fund.
4 (1) $150 of every fee paid for an initial
5 registration shall be deposited into the Illinois
6 Franchise Trust Fund.
7 (2) $50 of every fee paid for an amended disclosure
8 statement shall be deposited into the Illinois Franchise
9 Trust Fund.
10 (3) $50 of every fee paid for an interpretive
11 opinion or no action letter shall be deposited into the
12 Illinois Franchise Trust Fund.
13 (4) $250 of every fee paid for an annual report
14 shall be deposited into the Illinois Franchise Trust
15 Fund.
16 (Source: P.A. 85-551.)