[§171C-17]  Hawaii public land development revolving fund; established; use of corporation funds.  (a)  There is established the Hawaii public land development revolving fund, to which shall be credited any state appropriations to the fund, any sums collected as a result of bonds issued pursuant to this chapter, any revenues generated from the facilities, or other moneys made available to the fund, to be expended as directed by the corporation.

     (b)  Notwithstanding any provision of this chapter to the contrary, revenues, income, and receipts derived from the project facilities shall be set apart in a separate subaccount and applied solely for the following purposes:

     (1)  The principal and interest on the bonds;

     (2)  The cost of administering, operating, and maintaining the project not to exceed fifteen per cent of the sums collected, net of principal and interest payments, on account of assessments and interest for any specific project facility;

     (3)  The establishment of program reserves not to exceed eighty-five per cent of the sums collected, net of principal and interest payments, on account of assessments and interest for any specific project facility; provided that accumulated reserves shall be credited to and become a part of the special land and development fund, established under section 171-19, except in the case of a specific project facility that is situated in part or wholly within a small boat harbor, in which case those accumulated reserves attributable to the portions of the facility situated in the small boat harbor shall be credited to and become a part of the boating special fund, established under section 248-8; and

     (4)  Other purposes as may be authorized in the proceedings providing for the issuance of the bonds.

If any surplus remains in any subaccount after the payment of the bonds chargeable against that subaccount, the surplus shall be credited to and become a part of the Hawaii public land development revolving fund, except as provided in paragraph (3).  Notwithstanding any other law to the contrary, moneys in the fund may be used to make up any deficiencies in the subaccount.

     (c)  The corporation shall hold the fund in an account or accounts separate from other funds.  Except as otherwise provided in subsection (b), the corporation shall invest and reinvest the fund and the income thereof to:

     (1)  Purchase qualified securities issued by enterprises for the purpose of raising seed capital; provided that the investment shall comply with the requirements of this chapter;

     (2)  Make grants, loans, and provide other monetary forms of assistance necessary to carry out the purposes of this chapter; and

     (3)  Purchase securities as may be lawful investments for fiduciaries in the State.

     All appropriations, grants, contractual reimbursements, and other funds not designated for this purpose may be used to pay for the proper general expenses and to carry out the purposes of the corporation.

     (d)  The corporation shall purchase qualified securities issued by an enterprise only after:

     (1)  Receiving:

         (A)  An application from the enterprise containing a business plan, which is consistent with the business and public land development plan, including a description of the enterprise and its management, product, and market;

         (B)  A statement of the amount, timing, and projected use of the capital required;

         (C)  A statement of the potential economic impact of the enterprise, including the number, location, and types of jobs expected to be created; and

         (D)  Any other information as the corporation shall require;

     (2)  Determining, based upon the application submitted, that:

         (A)  The proceeds of the investment will be used only to cover the seed capital needs of the enterprise, except as authorized in this section;

         (B)  The enterprise has a reasonable chance of success;

         (C)  The enterprise has the reasonable potential to create employment within the State and offers employment opportunities to residents;

         (D)  The coordinating entrepreneur and other founders of the enterprise have already made or are prepared to make a substantial financial and time commitment to the enterprise;

         (E)  The securities to be purchased are qualified securities;

         (F)  There is a reasonable possibility that the corporation will recoup at least its initial investment; and

         (G)  Binding commitments have been made to the corporation by the enterprise for adequate reporting of financial data to the corporation, which shall include a requirement for an annual or other periodic audit of the books of the enterprise, and for control by the corporation that it considers prudent over the management of the enterprise, in order to protect the investment of the corporation, including membership on the board of directors of the enterprise, ownership of voting stock, input in management decisions, and the right of access to the financial and other records of the enterprise; and

     (3)  Entering into a binding agreement with the enterprise concerning the manner of payback by the enterprise of the funds advanced, granted, loaned, or received from the corporation.  The manner of payback may include the payment of dividends, returns from the public sale of corporate securities or products, royalties, and other methods of payback acceptable to the corporation.  In determining the manner of payback the corporation shall establish a rate of return or rate of interest to be paid on any investment, loan, or grant of corporation funds under this section.

     (e)  If the corporation makes a direct investment, it shall also find that a reasonable effort has been made to find a professional investor to make an investment in the enterprise as a coventure, and that the effort was unsuccessful.  The findings, when made by the corporation, shall be conclusive.

     (f)  The corporation shall make investments in qualified securities issued by an enterprise in accordance with the following limits:

     (1)  Not more than $500,000 shall be invested in the securities of any one enterprise, except that more than a total of $500,000 may be invested in the securities of any one enterprise if the corporation finds, after its initial investment, that additional investments in that enterprise are required to protect the initial investment of the corporation, and the other findings set forth in subsection (d) and this subsection are made as to the additional investment;

     (2)  The corporation shall not own securities representing more than forty-nine per cent of the voting stock of any one enterprise at the time of purchase by the corporation after giving effect to the conversion of all outstanding convertible securities of the enterprise, except that if a severe financial difficulty of the enterprise occurs, threatening the investment of the corporation in the enterprise, a greater percentage of those securities may be owned by the corporation; and

     (3)  Not more than fifty per cent of the assets of the corporation shall be invested in direct investments at any time.

     (g)  No investment, loan, grant, or use of corporate funds for the purposes of this chapter shall be subject to chapter 42F.  [L 2011, c 55, pt of §1]