Regulations

Small Business Administration

§ 120.824

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.
When the Board votes on SBA loan ap-

proval or servicing actions, at least one
Board Member with commercial loan
experience acceptable to SBA, other
than the CDC manager, must be
present and vote. There must be no actual or apparent conflict of interest
with respect to any actions of the
Board.
(a) The Board may establish a Loan
Committee of non-Board Members that
reports to the Board. Loan Committee
members must include at least one
member with commercial lending experience acceptable to SBA. All members
of the Loan Committee must live or
work in the Area of Operations of the
State where the 504 project they are
voting on is located unless the project
falls under one of the exceptions listed
in Sec. 120.839, Case-by-case extensions.
No CDC staff may serve on a Loan
Committee. A quorum must have at
least five committee members authorized to vote. The CDC’s Board must
ratify the actions of any Loan Committee. There must be no actual or apparent conflict of interest with respect
to any actions of the Loan Committee.
(b) If a CDC is incorporated in one
State and is approved as a Multi-State
CDC to operate in another State, the
CDC must have a Loan Committee for
each State.
[65 FR 42632, July 11, 2000, as amended at 68
FR 57981, Oct. 7, 2003]

§ 120.824 Professional
management
and staff.
A CDC must have full-time professional management, including an Executive Director (or the equivalent) managing daily operations. It must also
have a full-time professional staff
qualified by training and experience to
market the 504 Program, package and
process loan applications, close loans,
service, and, if authorized by SBA, liquidate the loan portfolio, and sustain a
sufficient level of service and activity
in the Area of Operations. CDCs may
obtain, under written contract, management, marketing, packaging, processing, closing, servicing or liquidation
services provided by qualified individuals and entities under the following
circumstances:
(a) The CDC must have at least one
salaried professional employee that is
employed directly (not a contractor or

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