Article 3. Conservatorship Of An Uninsured Licensee of California Financial Code >> Division 1. >> Chapter 7. >> Article 3.
Whenever the commissioner deems it necessary in order to
conserve the assets of any licensee that does not have federal
deposit or share insurance for the benefit of the customers and other
creditors, he or she may appoint a conservator of the licensee and
require the conservator to post a bond as the commissioner deems
proper. The conservator, under the direction of the commissioner,
shall take possession of the books, records, and assets of every
description of the licensee and take any action as the conservator
may deem necessary to conserve the assets of the licensee pending
further disposition of its business.
A conservator appointed in accordance with Section 640 has all
of the powers and rights with relation to the business and the
property of the licensee for which he or she is appointed conservator
as are possessed by the commissioner under this article with
relation to a licensee of which the commissioner has taken
possession, and the conservator is subject to the same obligations as
are imposed upon the commissioner under this article. During the
time that the conservator remains in possession of the licensee the
rights of the licensee, and of all persons with respect thereto,
subject to the other provisions of this article, are the same as if
the commissioner had taken possession of the property and business of
the licensee for the purposes of liquidation. All expenses of the
conservatorship shall be paid out of the assets of the licensee and
shall be a lien thereon which shall be prior to any other lien. The
conservator shall receive a salary in an amount no greater than that
which would be paid by the commissioner to a special deputy in charge
of the liquidation of a licensee.
The commissioner may order an examination at the earliest
possible date of a licensee for which the commissioner has appointed
While any licensee is in the hands of a conservator, the
commissioner may require the conservator to set aside and make
available for withdrawal by customers and for payment to other
creditors on a ratable basis such amounts as in the opinion of the
commissioner may safely be used for that purpose.
The commissioner, in his or her discretion, may permit the
conservator to receive shares or deposits, but any shares or deposits
received while the licensee is in the hands of a conservator shall
be held as trust funds and shall not be subject to any limitation as
to payment or withdrawal. The shares or deposits shall be segregated
and shall not be used to liquidate any indebtedness of the licensee
existing at the time the conservator was appointed or for the payment
of any later indebtedness incurred for the purpose of liquidating
any indebtedness of the licensee existing at the time the conservator
was appointed. The shares or deposits shall be kept on hand in cash,
invested in direct obligations of the United States, or deposited
with the Federal Reserve Bank.
If the commissioner is satisfied that it may be done safely
and that it would be in the public interest, he or she may terminate
a conservatorship and permit the licensee for whom a conservator was
appointed to resume the transaction of its business under the
direction of its board, subject to any terms, conditions,
restrictions, and limitations as the commissioner may prescribe.
The conservator of a licensee that has been permitted to
resume accepting member shares or deposits shall first cause a notice
to be published in a newspaper of local circulation. The notice
shall state the date on which the affairs of the licensee will be
returned to its board and that the provisions of Section 644 will not
be effective after 30 days from that date. The form of the notice
and the newspaper in which the same is to be published shall be first
approved by the commissioner. On the date of the publication of the
notice, the conservator shall mail a copy of the notice to every
person who made any deposit in the licensee after the date of the
appointment of the conservator. The conservator shall address the
copy of the notice to the persons who have made the deposits at the
addresses appearing upon the books of the licensee. The conservator
shall also mail a similar notice to every person making a deposit in
the licensee after the date of the publication of the notice and
before the affairs of the licensee are returned to its board.
The commissioner may assess and collect from all licensees for
whom a conservator is appointed their ratable share of the costs
incurred in the administration of this article.
Any licensee that the commissioner has taken possession of
pursuant to Section 592, and for which a conservator has been
appointed pursuant to this article, may be reorganized under a plan
that requires the consent of any of the following:
(a) Customers and other creditors of the licensee representing at
least 75 percent in amount of its total member shares or deposits and
other liabilities as shown by the books of the licensee, excluding
member shares or deposits and other liabilities which are to be
satisfied in full under the provisions of the plan.
(b) Stockholders owning at least two-thirds of the outstanding
stock as shown by the books of the licensee.
(c) Members of the licensee.
(d) Customers and other creditors of the licensee representing at
least 75 percent in amount of its total shares or deposits and other
liabilities as shown by the books of the licensee, excluding shares
or deposits and other liabilities that are to be satisfied in full
under the provisions of the plan, and, if applicable to the licensee,
of stockholders owning at least two-thirds of its outstanding stock
as shown by the books of the licensee.
All customers, creditors, stockholders, if applicable, and
other interested persons shall be given notice of any proposed plan
of reorganization in the manner and at the times as the commissioner
No plan of reorganization shall become effective until the
commissioner finds that the plan is fair and equitable to all
customers, creditors, and stockholders, if applicable, and is in the
public interest and until the commissioner approves the same in
writing, subject to any conditions, restrictions, and limitations as
the commissioner may prescribe.
No creditor having security for the payment of his, her, or
its claim shall be affected in his, her, or its right to enforce the
security by the provisions of any plan for the reorganization of the
licensee. Any plan of reorganization involving the reduction of
claims of creditors shall apply only to that portion of a secured
creditor's loan that is not covered by the pledged security.
When any plan of reorganization becomes effective, all books,
records, and assets of the licensee shall be disposed of in
accordance with the provisions of the plan and the affairs of the
licensee shall be conducted by its board in the manner provided by
the plan and under the conditions, restrictions, and limitations that
may have been prescribed by the commissioner. When any plan of
reorganization adopted and approved as herein provided becomes
effective, all customers and other creditors and, if applicable,
stockholders of the licensee, whether or not they have consented to
the plan of reorganization, shall be fully and in all respects
subject to and bound by the plan's provisions and the claims of all
customers and other creditors shall be treated as if they had
consented to the plan of reorganization.