Chapter 1726: DEVELOPMENT CORPORATIONS

1726.01 Development corporation definitions.

As used in sections 1726.01 to 1726.13 , inclusive, of the Revised Code, unless the context otherwise requires:

(A) "Financial institutions" means any banking corporation, trust company, building and loan association, savings and loan association, or corporation, partnership, foundation, or other institution engaged in lending or investing funds for industrial or business purposes.

(B) "Member" means any financial institution authorized to do industrial and business lending in this state which undertakes to lend money to a corporation, incorporated under Chapter 1726. of the Revised Code, upon its call, and in accordance with the provisions of such chapter.

(C) "Loan limit" means for any member, the maximum amount prescribed to be outstanding at one time on loans made by such member to a corporation, incorporated under Chapter 1726. of the Revised Code as determined under the provisions of such chapter.

(D) "The corporation" means a corporation, incorporated under sections 1726.01 to 1726.13 , inclusive, of the Revised Code.

Effective Date: 10-30-1965

1726.02 Formation of corporation - contents of articles of incorporation.

Ten or more natural persons, a majority of whom are citizens of this state, may form a development corporation under the provisions of Chapter 1726. of the Revised Code by subscribing and thereafter filing in the office of the secretary of state articles of incorporation which shall set forth:

(A) The name of the corporation, which shall include the words "Ohio Development Corporation";

(B) The place in this state where the principal office of the corporation is to be located;

(C) The purposes for which the corporation is formed, which shall include but need not be limited to, the following: to promote, aid, and through the united efforts of the institutions and corporations which shall from time to time become members or shareholders, develop and advance the industrial and business prosperity of the state or any section thereof; to encourage any industry; to stimulate and help expand all kinds of business ventures which tend to promote the growth of the state or any section thereof; to act whenever and wherever deemed by it advisable in conjunction with other organizations, including the small business administration of the United States and small business investment companies licensed under federal authority, to promote agricultural, industrial, and business developments within the state; and to furnish for approved and deserving applicants ready and required money for the carrying on and development of business or industrial undertakings;

(D) The authorized number of shares which shall be of the par value of one hundred dollars per share;

(E) The amount of stated capital with which the corporation will begin business, which shall not be less than five thousand dollars.

Effective Date: 01-10-1961

1726.03 Articles of incorporation to be examined by attorney general, certification and record.

When the articles of incorporation, or any amendment or amendments thereof, are filed in the office of the secretary of state under section 1726.02 of the Revised Code, the secretary of state shall submit them to the attorney general for examination. If such articles, or any amendment or amendments thereof, are found by him to be in accordance with Chapter 1726. of the Revised Code, and not inconsistent with the constitution and laws of the United States and of this state, he shall certify to and deliver them to the secretary of state, who shall cause them, together with the certificate of the attorney general, to be recorded in a book kept for that purpose.

Effective Date: 10-01-1959

1726.04 Powers of corporation.

In furtherance of its purposes, and in addition to the powers conferred by Chapter 1701. of the Revised Code, a corporation incorporated under Chapter 1726. of the Revised Code shall, subject to the restrictions contained in this chapter, have the following powers:

(A) To elect, appoint, and employ officers, agents, and employees; to make contracts and incur liabilities for any purposes of the corporation; provided, that the corporation shall not incur any secondary liability by way of guaranty or endorsement of the obligations of any person, firm, corporation, joint stock company, association, or trust, or in any other manner;

(B) To borrow money for any of the purposes of the corporation; to issue therefor its bonds, debentures, notes, or other evidences of indebtedness, whether secured or unsecured, and to secure the same by mortgage, pledge, deed of trust, or other lien on its property, franchises, rights, and privileges of every kind and nature or any part thereof or interest therein; provided, that no loan to the corporation shall be secured in any manner unless all outstanding loans to the corporation are secured equally and ratably in proportion to the unpaid balance of such loans and in the same manner;

(C) To make loans to any person, firm, partnership, corporation, joint stock company, association, or trust, and to establish and regulate the terms and conditions with respect to any such loans and the charges for interest and services connected therewith; provided, the corporation shall not approve any application for a loan unless and until the person applying for said loan shows that he has applied for the loan through ordinary banking or commercial channels and that the loan has been refused by at least one bank or other financial institution;

(D) To purchase, receive, hold, lease, or otherwise acquire and to sell, convey, transfer, lease, or otherwise dispose of real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto and the use thereof, including but not restricted to, any real or personal property acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations;

(E) To acquire the good will, business, rights, real and personal property, and other assets, or any part thereof, or interest therein, of any persons, firms, partnerships, corporations, joint stock companies, associations, or trusts, and to assume, undertake, or pay the obligations, debts, and liabilities of any such person, firm, partnership, corporation, joint stock company, association, or trust; to acquire improved or unimproved real estate for the purpose of constructing industrial plants or other business establishments thereon or for the purpose of disposing of such real estate to others for the construction of industrial plants or other business establishments; and to acquire, construct or reconstruct, alter, repair, maintain, operate, sell, convey, transfer, lease, or otherwise dispose of industrial plants or business establishments;

(F) To acquire, subscribe for, own, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of the stock, shares, bonds, debentures, notes, or other securities and evidences of interest in, or indebtedness of, any person, firm, corporation, joint stock company, association, or trust, and while the owner or holder thereof to exercise all the rights, powers and privileges of ownership, including the right to vote thereon;

(G) To mortgage, pledge, or otherwise encumber any property acquired pursuant to the powers contained in divisions (D), (E), or (F) of this section;

(H) To cooperate with and avail itself of the facilities of the state commission or division concerned with economic development and of the department of commerce or any similar governmental agency insofar as such powers and purposes are conferred upon said governmental agencies and such state agencies are hereby authorized to cooperate and aid insofar as the powers conferred upon them authorize them so to do;

(I) To do all acts and things necessary or convenient to carry out the powers especially created in Chapter 1726. of the Revised Code.

Effective Date: 01-10-1961

1726.05 Acquiring shares.

(A) All persons, firms, partnerships, joint stock companies, association, or trust, and domestic corporations organized for the purpose of carrying on business within this state, including without limitation, any public utility companies, banking companies, trust companies, and foreign corporations licensed to do business in the state, except as provided in division (C) of this section, are hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities, or other evidences of indebtedness created by, or the shares of the capital stock of the corporation, and while owners of said shares to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon.

(B) All financial institutions are hereby authorized to become members of the corporation and to make loans to such corporations as provided herein.

(C) A financial institution which does not become a member of a corporation shall not be permitted to acquire any shares of such corporation.

(D) Each financial institution which becomes a member of the corporation may acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of, any bonds, securities, or other evidences of indebtedness created by, or the shares of such corporation, and while owners of said shares to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon; provided, the amount of shares which may be acquired by any member pursuant to the authority granted by this section shall not exceed ten per cent of the loan limit of such member. The amount of shares of the development corporation which any member is authorized to acquire pursuant to the authority granted by this section is in addition to the amount of shares in other corporations which such member may otherwise be authorized to acquire by law.

Effective Date: 10-01-1959

1726.06 Requesting membership.

Any financial institution may request membership in a corporation incorporated under Chapter 1726. of the Revised Code by making application to the board of directors of the corporation on a form and in such manner as said board of directors may require, and membership shall become effective upon acceptance of such application by said board. Upon written notice given to the corporation, one year in advance, a member may withdraw from membership in the corporation at the expiration date of said notice.

Each member of the corporation shall make loans to the corporation as and when called upon by it to do so on such terms and other conditions as shall be approved from time to time by the board of directors of the corporation subject to the following conditions:

(A) The loan limit for any member shall be established initially by agreement between such member and the corporation at the time such member's membership becomes effective and may thereafter be increased by agreement between such member and the corporation, or decreased by agreement after written notice of such decrease given to the corporation one year in advance.

(B) No loans to the corporation shall be made if immediately thereafter, the total amount of the obligations of the corporation would exceed ten times the amount then paid in on the outstanding shares of the corporation.

(C) The total amount outstanding on loans to the corporation made by any member at any one time, when added to the amount of the investment in the shares of the corporation then held by such member, shall not exceed the following limits, to be determined as of the time such member becomes a member on the basis of the audited balance sheet of such member at the close of its fiscal year immediately preceding its application for membership: two per cent of the capital and surplus of commercial banks and trust companies; and such limits as may be approved by the board of directors of the corporation for other financial institutions.

(D) Each call made by the corporation shall be prorated among the members of the corporation in substantially the same proportion that the adjusted loan limit of each member bears to the aggregate of the adjusted loan limit of all members. The adjusted loan limit of a member shall be the amount of such member's loan limit, reduced by the balance of outstanding loans by such member to the corporation and the investment in shares of the corporation held by such member at the time of such call.

(E) All loans to the corporation by members shall be evidenced by bonds, debentures, notes, or other evidences of indebtedness of the corporation, which shall be negotiable and which shall bear interest at a rate of not less than one quarter of one per cent in excess of the rate of interest determined by the board of directors of the corporation to be the prime rate prevailing at the date of issuance thereof on unsecured commercial loans.

Effective Date: 01-10-1961

1726.07 Number of votes.

Each shareholder shall have one vote, in person or by proxy, for each share of capital stock held by him, and each member shall have one vote, in person or by proxy, except that any member having a loan limit of more than one thousand dollars shall have one additional vote, in person or by proxy, for each additional one thousand dollars which such member is authorized to have outstanding on loans to a corporation incorporated under Chapter 1726. of the Revised Code at any one time as determined under division (C) of section 1726.06 of the Revised Code.

Effective Date: 01-10-1961

1726.08 Board of directors.

The board of directors of a corporation incorporated under Chapter 1726. of the Revised Code shall be of such number in multiples of three as shall be determined in the first instance by the incorporators and thereafter by the shareholders and shall be elected in the first instance by the incorporators, and thereafter at each annual meeting of the corporation, or, if no annual meeting is held in any year at the time fixed by the bylaws, at a special meeting held in lieu thereof, the members of the corporation shall elect two-thirds of the board of directors and the shareholders shall elect the remaining directors. The directors shall hold office until the next annual meeting of the corporation or special meeting held in lieu of the annual meeting after their election, and until their successors are elected and qualified unless sooner removed in accordance with the provisions of the bylaws.

Any vacancy in the office of a director elected by the members shall be filled by the directors elected by the members, and any vacancy in the office of a director elected by the shareholders shall be filled by the directors elected by the shareholders.

Effective Date: 03-22-1973

1726.09 Net earnings, surplus.

Each year a corporation incorporated under Chapter 1726. of the Revised Code shall set apart as earned surplus not less than ten per cent of its net earnings for the preceding fiscal year until such surplus is equal in value to one-half of the amount paid in on the shares of the corporation then outstanding. Whenever the amount of such surplus becomes impaired, it shall be built up again to the required amount in the manner provided for its original accumulation. Net earnings and surplus shall be determined by the board of directors, after providing for such reserves as said directors deemed desirable, and the directors' determination made in good faith shall be conclusive on all persons.

Effective Date: 01-10-1961

1726.10 Designation of depository.

A corporation incorporated under Chapter 1726. of the Revised Code shall not deposit any of its funds in any banking institution unless such institution has been designated as a depository by a vote of a majority of the directors present at an authorized meeting of the board of directors, exclusive of any director who is an officer or director of the depository so designated. The corporation shall not receive money on deposit.

Effective Date: 01-10-1961

1726.11 Annual financial reports - audits.

Each development corporation incorporated under this chapter shall prepare an annual financial report that conforms to rules prescribed by the auditor of state pursuant to section 117.20 of the Revised Code, that is prepared according to generally accepted accounting principles, and that is certified by the board of trustees of the corporation or its treasurer or other chief fiscal officer. The financial report shall be filed with the auditor of state within one hundred twenty days following the last day of the corporation's fiscal year, unless the auditor of state extends that deadline. The auditor of state may establish terms and conditions for granting any extension of that deadline.

Each development corporation shall submit to audits by the auditor of state, the scope and frequency of which shall be in accordance with section 117.11 of the Revised Code as if the corporation were a public office subject to that section. However, a development corporation may request in accordance with section 115.56 of the Revised Code, as if the corporation were a public office subject to that section, the performance of any of those audits by an independent certified public accountant.

The auditor of state is authorized to receive and file the annual financial reports required by this section and the reports of all audits performed in accordance with this section. The auditor of state shall analyze those annual financial reports and the reports of those audits to determine whether the activities of the development corporation involved are in accordance with this chapter.

Effective Date: 03-12-2001

1726.12 Cancellation of articles of incorporation.

If any development corporation fails to prepare an annual financial report as required by section 1726.11 of the Revised Code and to file that report with the auditor of state within ninety days of the time prescribed for that filing by that section, or if the auditor of state determines by applying the standards applicable to a public office under section 117.41 of the Revised Code that any development corporation cannot be audited and declares it to be unauditable and the corporation fails to then prepare an annual financial report as required by section 1726.11 of the Revised Code and to file that report with the auditor of state within ninety days of the time that the auditor of state declared the corporation to be unauditable, or if any annual financial report discloses that any development corporation has failed to begin business for a period of three years from the effective date of the filing of its articles of incorporation, the auditor of state shall certify that fact to the secretary of state. The secretary of state then shall cancel the articles of the development corporation involved by appropriate entry upon the margin of the record of the articles. All the powers, privileges, and franchises conferred upon that development corporation by those articles of incorporation then shall cease. The secretary of state shall immediately notify that development corporation of the action taken.

Effective Date: 03-12-2001

1726.13 Applicability of general corporation laws.

The provisions of Chapter 1701. of the Revised Code shall be applicable to corporations organized under this Chapter 1726. of the Revised Code to the extent they are not inconsistent herewith.

Effective Date: 10-01-1959

1726.14 [Repealed].

Effective Date: 01-10-1961

1726.15 Investing in housing partnerships.

Any financial institution, as defined in division (A) of section 1726.01 of the Revised Code, except a building and loan association, may purchase for its own account, hold, or dispose of shares of stock issued by a corporation created under the "Housing and Urban Development Act of 1968," 82 Stat. 476, 42 U.S.C. 3931 , and may make, hold, or dispose of investments in a partnership, limited partnership, or joint venture formed under section 907(a) or section 907(c) of such act.

Effective Date: 07-10-1972