DRAFT CSC, Title 28.  Finance
 
CHAPTER 5
State Investments Act

1201.  Short title.
1202.  Purpose.
1203.  Definitions.
1204.  State Investments Committee.
1205.  Purchase of interest in a business enterprise.
1206.  Selling of interest in a business enterprise.
1207.  Evidence of ownership.
1208.  Appointment of members of the board of directors.
1209.  Conflict of interest; Removal of members of the board of directors.
1210.  Access to books and records.
1211.  Profits and other distributions.
1212.  Financial reports.
1213.  Voting of shares.
1214.  Severability.

      1201.  Short title.
     This Act Chapter shall be known and may be cited as the "State Investments Act of 1996."

Source:  CSL 3-95-28, 1, modified.

Editor's note:  CSL 3-95-28 that created this Chapter was signed into law by the Governor on December 12, 1996.

      1202.  Purpose.
     The purpose of this act Chapter is to establish controls over the investment of State funds in business enterprises, to provide Legislative input into the selection of representatives of the State on the boards and governing bodies of such enterprises, to ensure that the State Government is adequately informed about the results of state investments, and to enable state officials to determine whether State investments in business enterprises are accomplishing their intended goals.

Source:  CSL 3-95-28, 2.

      1203.  Definitions.
     As used in this Act Chapter:

     (a) (1)  "Board of directors" means the board of directors, managing committee, or any other board, committee, formal group or entity which manages or controls a business enterprise.

     (c) (2)  "Business enterprise" means any business corporation, whether incorporated under the laws of the Federated States of Micronesia or any other jurisdiction; partnership, joint venture, or any other business entity, whether owned and/or controlled by private or public investors, or a combination thereof.

     (b) (3)  "Personal financial interest" means ownership of five percent or more of the total equity, with voting rights, of a business enterprise, by a person alone, by a person. s immediate family, parents, siblings, or parents or siblings of his spouse, or any combination thereof, or by a person and any combination of the person's immediate family, parents, siblings, or parents or siblings of his spouse.

     (e) (4)  "Shares" means shares of stock, a partnership interest, an interest in a joint venture, or any other equity interest in a business enterprise.

     (d) (5)  "State investment" means any investment of state monies from the General Fund of the State used to:

     (1) (a)  purchase an equity interest in; or

     (2) (b)  loan money to a business enterprise.

Source:  CSL 3-95-28, 3, terms put into alphabetical order and renumbered accordingly, Section modified.

      1204.  State Investments Committee.
     There shall be a State Investments Committee, composed of five members, three 3 appointed by the Governor with the advice and consent of the Senate, and two 2 by joint appointment of the President and the Speaker of the Chuuk State Legislature.  The Governor shall call and preside at the organizational meeting until a permanent chairman is elected.  He shall call the meeting within 30 days of the appointment and confirmation of the members.

Source:  CSL 3-95-28, 4.

      1205.  Purchase of interest in a business enterprise.
     The State may, upon recommendation by the State Investments Committee and appropriation duly enacted, make an investment in a business enterprise when such investment is likely to have the effect of encouraging economic development in the State of Chuuk, providing necessary services to the government or the public, or being in the best interests of the people of Chuuk State.  The contract of purchase shall be executed on behalf of the State by any three or more members of the State Investments Committee, after approval as to form by the Attorney General.

Source:  CSL 3-95-28, 5.

      1206.  Selling of interest in a business enterprise.
     The State may, upon recommendation by the State Investments Committee, or as provided by duly enacted law, sell its interest in a business enterprise as follows:  The State shall advertise on the local radio station, and publish in a local newspaper or any newspaper accessible to the legal residents of Chuuk State, 90 days before the sale, for the sale of its interests, shares of stock, or assets in the business enterprise, and shall protect the equal opportunity of its citizens and municipal governments to purchase such interests or stock from the State Government at a fair and reasonable market price.  The sale shall be to the highest responsible bidder.  No such sale, or contract of sale shall become effective or be valid until after approval by joint resolution of the Legislature.

Source:  CSL 3-95-28, 6.

      1207.  Evidence of ownership.
     When the State makes a State investment in a business enterprise, the Governor shall cause the shares of stock, certificates of partnership, or other evidence of ownership to be issued in the name of the State of Chuuk.  The evidence of ownership shall be filed for safekeeping at the Governor's Office with certified copies at the Legislature and the State Court under secure conditions.  The Governor shall direct the business enterprise to reflect ownership by the State of Chuuk on the books and records of the enterprise, with copies furnished to the State.

Source:  CSL 3-95-28, 7.

      1208.  Appointment of members of board of directors.
     Whenever, as a result of a state investment, the State becomes entitled to name, appoint or elect one or more members of the board of directors of a business enterprise, such members shall be appointed by the Governor, with the advice and consent of the Senate.  Such members of the board shall serve for the term of office as specified in the bylaws or other organizational documents of the business enterprise, unless removed pursuant to provisions of the bylaws or of this Act Chapter, and shall act in the best interests of all of the people of Chuuk, when voting as a member of the board, or otherwise acting in the capacity of a member of the board of directors.

Source:  CSL 3-95-28, 8, modified.

      1209.  Conflict of interest; removal of members of board of directors.
 
     (a) (1)  No person shall serve as a State member of a board of directors under this Act Chapter if that person has a financial interest in the business enterprise.  In the event that a personal financial interest on the part of a State member appointed under this act Chapter arises after his appointment to a board of directors, he shall immediately resign or be removed.

     (b) (2)  A public member of the board of directors of a business enterprise with a state investment may be removed, for cause, by joint resolution of the State Legislature.  "Cause" shall include, but not be limited to,  failure to represent the best interests of Chuuk State.  The existence of cause shall be determined solely by the Legislature.

Source:  CSL 3-95-28, 9, modified.

      1210.  Access to books and records.
     The Governor, President of the Senate, Speaker of the House, or their respective designees, shall each have access to the books and records of the business enterprise to the same extent as a comparable private investor has, under such conditions of confidentiality as may be appropriate in each case.

Source:  CSL 3-95-28, 10.

      1211.  Profits and other distributions.
     All payments made by a business enterprise on account of the State. s ownership or creditor interest, whether in the form of profits, principal, and interest, or other distributions, shall be made payable to the State of Chuuk as payee, and shall be deposited in the General Fund of the State, unless otherwise provided by law.

Source:  CSL 3-95-28, 11.

      1212.  Financial reports.

     (a) (1)  Any business enterprise which receives a State investment under this act Chapter shall make financial reports at least quarterly, according to generally accepted accounting principles, including an audited annual financial report signed by a certified state accountant.  Any such business enterprise shall allow the duly authorized representative of the State Investments Committee and/or the Legislature to examine the financial and other records of the business enterprise, at reasonable times during business hours.  Any contract for a State investment entered into after the effective date of this Act Chapter shall be deemed to include a provision requiring such reports and examinations.  Copies of such reports shall be provided to the members of the State Investments Committee, and an additional two copies shall be provided to the Legislature.  Failure to provide such reports or to allow such examinations shall be deemed a violation of the State's ownership or creditor interest, and a breach of the contract of purchase.  In such event, the State members of the board of directors shall take every action possible to cause the business enterprise to make and provide such reports.

     (b) (2)  Contracts for State investments existing on the effective date of this Act Chapter, including but not limited to, partnership agreements, agreements for the purchase of shares of corporations, shareholder agreements, and the charter, bylaws or other organizing documents of any such entity shall, to the extent allowable under Article III, Section 10 of the Constitution of the State of Chuuk, be deemed to include a provision requiring the reports and examinations required by this Section.  Furthermore, any existing right of the State on the effective date of this Act Chapter to obtain financial reports, or to examine the financial or other records of any business enterprise, shall be construed to mean that the State Investments Committee and/or the Legislature shall have the right to receive copies of the reports, and their duly appointed representatives shall have the right to examine the records.  In the event that the business enterprise refuses to deliver copies of the reports to the State Investments Committee, and/or to the Legislature, or to allow examination of the records, the Committee shall have the authority to file an action to compel delivery of the reports and examination of the records; and the Legislature shall have the power to subpoena the reports from the business enterprise or from the Executive Branch of the Chuuk State Government, or to file an action to compel delivery of the reports and examination of the records.

Source:  CSL 3-95-28, 12, modified.

      1213.  Voting of shares.
      Any shares of the state with voting rights shall be voted as follows:  upon receipt of the proxy statement or other information from a business enterprise with a public investment, concerning a shareholder or other owners. meeting, the Chairman shall call a meeting of the State Investments Committee, which shall consider the issues to be voted on.  The Committee shall determine how the State's shares are to be voted by a majority vote of all of the members of the Committee, and the shares shall be voted in that manner.

Source:  CSL 3-95-28, 13.

      1214.  Severability.
     If any provision of this Act Chapter, or the application thereof to any person or circumstance, is held invalid, this invalidity does not effect other provisions or applications of the Act Chapter which can be given effect without the invalid provision or application, and to this end, the provisions of this Act Chapter are severable.

Source:  CSL 3-95-28, 14, modified.
                                                                                                                                                                                                                                                                                                           
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