Regulations

Small Business Administration

§ 120.823

information (such as contribution toward SBA mission).
(d) SBA will notify the CDC in writing of its decision, and, if the petition
is declined, the reasons for the decision.
[68 FR 57980, Oct. 7, 2003, as amended at 73 FR
75517, Dec. 11, 2008]

REQUIREMENTS FOR CDC CERTIFICATION
AND OPERATION
§ 120.820 CDC non-profit status and
good standing.
A CDC must be a non-profit corporation, except that for-profit CDCs certified by SBA prior to January 1, 1987
may retain their certifications. An
SBIC may not become a CDC. A CDC
must be in good standing based upon
the following criteria:
(a) In good standing in the State in
which the CDC is incorporated and any
other State in which the CDC conducts
business.
(b) In compliance with all laws, including taxation requirements, in the
State in which the CDC is incorporated
and any other State in which the CDC
conducts business.
(c) Must have satisfactory SBA performance, as determined by SBA in its
discretion. The CDC’s Risk Rating,
among other factors, will be considered
in determining satisfactory SBA performance. Other factors may include,
but are not limited to, on-site review/
examination assessments, historical
performance measures (like default
rate, purchase rate and loss rate), loan
volume to the extent that it impacts
performance measures, and other performance related measurements and
information (such as contribution toward SBA mission).
[68 FR 57980, Oct. 7, 2003, as amended at 73 FR
75518, Dec. 11, 2008]

§ 120.821 CDC Area of Operations.
A CDC must operate only within its
designated Area of Operations approved
by SBA except as provided in § 120.839.
[68 FR 57980, Oct. 7, 2003]

§ 120.822 CDC membership.
(a) CDC Membership. A CDC must
have at least 25 members (or stockholders for for-profit CDCs approved

prior to January 1, 1987). The CDC
membership must meet annually. No
person or entity can own or control
more than 10 percent of the CDC’s voting membership (or stock). No employee or staff of the CDC can qualify
as a member of the CDC for the purpose
of meeting the membership requirements. The CDC membership must include representatives from all the
groups listed in paragraph (b) of this
section.
(b) Membership groups. Members must
be responsible for actively supporting
economic development in the Area of
Operations and must be from one of the
following groups:
(1) Government organizations responsible for economic development in the
Area of Operations;
(2) Financial institutions that provide commercial long term fixed asset
financing in the Area of Operations;
(3) Community organizations dedicated to economic development in the
Area of Operations such as chambers of
commerce, foundations, trade associations, colleges, universities, or small
business development centers (as defined in section 21(a)(1) of the Act, 15
U.S.C. 648(a)(1)); and
(4) Businesses in the Area of Operations.
(c) A CDC that is incorporated in one
State and is operating as a Multi-State
CDC in another State must meet the
membership requirements for each
State.
[68 FR 57980, Oct. 7, 2003]

§ 120.823

CDC Board of Directors.

The CDC must have a Board of Directors chosen from the membership by
the members, and representing at least
three of the four membership groups.
No single group shall control. No person who is a member of a CDC’s staff
may be a voting member of the Board
except for the CDC manager. The Board
Members must be responsible officials
of the organizations they represent and
at least one member other than the
CDC manager must possess commercial
lending experience. The Board must
meet at least quarterly and shall be responsible for CDC staff decisions and
actions. A quorum shall require at
least 5 Directors authorized to vote.

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