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 a conservator.

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 directs.

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.