Cal. Code Regs. tit. 10 § 260.102.11

Current through Register 2024 Notice Reg. No. 23, June 7, 2024

Section 260.102.11 - Advances and Loans in Connection with Small Offering Exemption

For the purposes of subdivision (h) of Section 25102 of the Code, advances or loans made to the issuer shall not be deemed to be the "receipt of consideration for the securities by the issuer," until the issuance of shares in cancellation of the advances or loans, provided each of the following conditions is met:

(a) The advances or loans are made solely for the purpose of paying the expense incurred in connection with the organization of the issuer and the initial sale of its shares. Advances or loans includes advances on open book accounts and loans evidenced by promissory notes or other evidences of indebtedness.

(b) The advances or loans are made by, and owed to, the organizers of the corporation. For the purposes of this section, "organizers" means the persons instrumental in forming the issuer and the officers and directors of the issuer, but in no event may the number of persons making such advances or loans exceed the number of issuees permissible under Section 25102(h) of the Code.

(c) The issuer has not commenced business other than activities in connection with the organization and preparation for regular business or issued shares at the time such advances or loans are made.

(d) Any issuance of shares in cancellation of such advances or loans is consummated within 90 days after the filing of the articles of incorporation of the issuer.

(e) This section does not create any presumption that advances or loans made to the corporation not conforming to this section constitute the 'receipt of consideration for the securities of the issuer.'

Cal. Code Regs. Tit. 10, § 260.102.11

1. New section filed 1-22-75; effective thirtieth day thereafter (Register 75, No. 4).
2. Amendment filed 5-15-78; effective thirtieth day thereafter (Register 78, No. 20).
3. Amendment filed 8-7-85; effective thirtieth day thereafter (Register 85, No. 32).

Note: Authority cited: Section 25610, Corporations Code. Reference: Sections 25102, 25105 and 25110, Corporations Code.