Sponsored by:
Assemblyman GARY S. SCHAER
District 36 (Bergen and Passaic)
SYNOPSIS
Economic Emergency Investment Stabilization Act allows EDA to invest in businesses impacted by major economic emergencies.
CURRENT VERSION OF TEXT
As introduced.
An Act establishing a direct investment program for businesses impacted during a major economic emergency, and supplementing and amending P.L.1974, c.80 (C.34:1B-1 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) Sections 1 through 5 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be known and may be cited as the Economic Emergency Investment Stabilization Act.
2. (New section) As used in P.L. , c. (C. ) (pending before the Legislature as this bill):
Authority means the New Jersey Economic Development Authority established by section 4 of P.L.1974, c.80 (C.34:1B-4).
Major economic emergency means an emergency that has resulted in the Governor declaring a state of emergency, pursuant to P.L.1942, c.251 (C.App.A:9-33 et seq.), within this State, which was required due to a public health emergency, pursuant to section 3 of P.L.2005, c.222 (C.26:13-3), or due to a major natural disaster; a major economic emergency shall also include a major disruption to the State s economy that results in a year over year decline in State sales and use tax or State income tax revenues of at least 10 percent, and a concurrent increase in the State unemployment rate above seven percent.
Matching investment agreement means an investment agreement with the authority which provides that the authority will make an equity investment in the business during a funding round, provided that the business has private funding sources that will provide two dollars in equity investment for every dollar in equity investment made by the authority, and which ensures that the terms of the investment made by the authority offer equal or greater shareholder rights and benefits than the terms granted to any of the private funding sources during the funding round in which the investment agreement takes place.
Program means the Pandemic Investment Stabilization Program established pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill).
Qualified applicant means a business as defined by the authority which:
a. is in the process of raising money through an offering of equity in the business and which is applying to the authority for a matching investment agreement;
b. has been determined by the authority that the potential equity investment will be a material factor in the financial success or failure of the business during the economic emergency, and that the business is likely, at the conclusion of the economic emergency, to return to a level of financial viability that will allow the authority to exit its equity stake without taking a loss on its investment;
c. has a board of directors or advisors;
d. is physically located in the State through property ownership or a lease agreement;
e. has at least 50 percent of its employees spend at least 80 percent of their time in New Jersey;
f. has founders that work full time for the business and have a financial investment into the business; and
g. is registered to do business in the State and is currently in good standing.
Stabilization fund means the Economic Emergency Investment Stabilization Fund established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).
3. (New section) The authority shall establish an equity investment program to be known as the Economic Emergency Investment Stabilization Program for the purpose of making equity investments in businesses that would be financially healthy if not for the effects of a major economic emergency.
4. (New section) a. To implement the program, the authority shall establish and maintain a special revolving fund to be known as the Economic Emergency Investment Stabilization Fund, which shall be credited, following the start of a major economic emergency, with:
(1) amounts from the Economic Recovery Fund, established pursuant to section 3 of P.L.1992, c.16 (C.34:1B-7.12), which the authority determines is appropriate to implement the program, within the limits of funding available from the Economic Recovery Fund
(2) any moneys that shall be received by the authority from the sale of equity stakes in businesses that were made using moneys in the stabilization fund pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill); and
(3) other moneys of the authority, including but not limited to, any moneys available from other business assistance programs administered by the authority which the authority is authorized and determines to deposit therein.
b. The authority shall use the moneys in the stabilization fund to:
(1) enter, during a major economic emergency or within six months of the end of all executive orders or economic conditions related to such an emergency, into matching investment agreements with qualified applicants;
(2) make equity investments of no greater than $1 of authority investment for every $1 in new outside investments up to an amount determined by the authority, pursuant to section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill); and
(3) defray the administrative expenses of the authority in carrying out the purposes and provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).
c. In evaluating a matching investment agreement application submitted by a qualified applicant, the authority shall place primary emphasis on the applicant's record of profitability and financial stability prior to the economic emergency, and on projections by the applicant, including the data and assumptions forming the basis thereof, of recovered profitability and financial stability during the term of the equity investment. The equity investment may only be made by the authority if the qualified applicant has demonstrated to the satisfaction of the authority that the qualified applicant has the ability, reputation, and growth prospects necessary such that, following the end of the economic emergency, the business will be attractive enough to private investors for the authority to easily sell its equity stake without taking a financial loss.
d. For any equity stake in any qualified applicant the authority makes pursuant to a matching investment agreemen