Current through February 24, 2025
(a) If loans and
other material affiliated transactions as described in this section are made or
proposed to be made, the administrator will, in the administrator's discretion,
disallow the offer or sale of securities unless the issuer has, and represents
in the prospectus or offering document that the issuer will maintain, at least
two independent directors on its board of directors.
(b) The administrator will, in the
administrator's discretion, disallow the offer or sale of securities if the
issuer or its affiliates will have a loan or loan guarantee outstanding to a
promoter after the offering, or intends to make a loan to or a loan guarantee
on behalf of a promoter, other than
(1) an
advance to an officer, director, or employee for travel, business expenses, and
similar ordinary operating expenditures;
(2) loans or loan guarantees made for the
purchase of an issuer's securities by its officers, directors, and employees,
and loans for relocation of officers, directors, and employees, if those loans
or loan guarantees that are ongoing are approved by a majority of the
independent directors without an interest in the transactions, and if those
independent directors had access, at the issuer's expense, to the issuer's or
independent legal counsel; or
(3) a
loan made by an issuer or an affiliate whose primary business is that of making
loans, if
(A) the loan is evidenced by a
promissory note naming the lender as payee;
(B) the loan bears interest at a rate
comparable to that generally charged by other commercial lenders for similar
loans made in the lender's locale;
(C) the loan is to be repaid under
appropriate amortization schedules, and contains default provisions comparable
to those generally used by other commercial lenders for similar loans made in
the lender's locale;
(D) the loan
is to be made only if credit reports and financial statements show the loan to
be collectible and the borrower is a satisfactory credit risk, in light of the
nature and terms of the loan and other circumstances;
(E) the loan meets the loan policies
generally used by other commercial lenders for similar loans made in the
lender's locale;
(F) the purposes
of the loan and the disbursement of proceeds are to be reviewed and monitored
in a manner comparable to that generally used by other commercial lenders for
similar loans made in the lender's locale; and
(G) the loan does not violate the
requirements of any banking or other financial institution regulatory
authority.
(c) Except for a loan described in (b) of
this section, each loan existing at the time of the application for
registration must be repaid in full before the offering. The administrator
will, in the administrator's discretion, waive this requirement if
(1) repayment of the loan will be made under
appropriate amortization schedules; or
(2) a portion of the offering is made on
behalf of a promoter and the promoter agrees to repay the loan from the
proceeds of the offering.
(d) The administrator will, in the
administrator's discretion, disallow the offer or sale of securities if the
issuer or an affiliate have engaged in a material transaction with promoters,
unless
(1) the prospectus discloses the terms
of the transaction and indicates whether those terms are as favorable to the
issuer or its affiliates as those generally available from unaffiliated third
parties; and
(2) for an issuer
whose board of directors includes
(A) two or
more independent directors without an interest in the transaction, a majority
of those directors ratifies the transaction; those independent directors must
have access, at the issuer's expense, to the issuer's or independent legal
counsel; or
(B) less than two
independent directors without an interest in the transaction, the prospectus
discloses that the issuer lacked sufficient disinterested independent directors
to ratify the transaction at the time the transaction was initiated.
(e) The issuer shall
disclose in the prospectus or offering document if the issuer or an affiliate
makes or intends to make a loan to, makes or intends to make a loan guarantee
on behalf of, or engages or intends to engage in a material transaction with
promoters, and shall also disclose the terms of that transaction. If a material
transaction with or loan to promoters has been made, or may be made, the
administrator will, in the administrator's discretion, require the following
representations to appear in the prospectus or offering document:
(1) that any future material transaction with
or loan to promoters will be made or entered into on terms that are no less
favorable to the issuer than those that can be obtained from unaffiliated third
parties;
(2) that any future
material transaction with or loan to promoters, and any forgiveness of a loan,
will be approved by a majority of the issuer's independent directors without an
interest in the transaction, and that those independent directors will have
access, at the issuer's expense, to the issuer's or independent legal
counsel.
(f) The issuer
and its officers and directors shall consider
(1) their due diligence and other obligations
to affirmatively demonstrate a reasonable basis for the representations in (d)
and (e) of this section; and
(2)
whether to formalize, in the issuer's charter or bylaws, the representation
made as described in (e)(2) of this section.
(g) In order to satisfy the ratification
provisions of (b)(2), (d)(2)(A), and (e)(2) of this section, the issuer must
have on its board of directors at least two independent directors without an
interest in the transaction. If the issuer has on its board of directors only
two independent directors without an interest in the transaction, both
independent directors must approve a loan and other material transaction to
satisfy the ratification provisions of (b)(2), (d)(2)(A), and (e)(2) of this
section.
(h) The administrator
will, in the administrator's discretion, waive any part of this section upon
the issuer's petition or as part of a coordinated review with other regulatory
jurisdictions.
Authority:AS
45.55.120
AS
45.55.950
