Licensing Of Corporations - The Gambling Control Act - Business & Professions - CA

Section § 19880

This law section outlines additional rules that corporations must follow to get a gambling license in California. Corporations must maintain an office at the gambling site and keep all corporate records up-to-date with compliance to state laws. They must hold a ledger showing all current shareholders, available for inspection at any time. Upon applying for a license, certain detailed information must be provided, including business structure, financial history, security details, compensation of executives, and contracts related to gaming operations. Financial statements must follow official accounting standards and be audited. Annual financial reports and tax returns must also be submitted regularly.

In addition to the requirements of Section 19852, in order to be eligible to receive a gambling license as the owner of a gambling enterprise, a corporation shall comply with all of the following requirements:

(a) Maintain an office of the corporation in the gambling establishment.

(b) Comply with all of the requirements of the laws of this state pertaining to corporations.

(c) Maintain, in the corporation’s principal office in California or in the gambling establishment, a ledger that meets both of the following conditions:

(1) At all times reflects the ownership of record of every class of security issued by the corporation.

(2) Is available for inspection by the department at all reasonable times without notice.

(d) Supply supplemental forms and information, in accordance with Section 19865, with the initial license application, and thereafter only on request, to the department, which shall include, but not be limited to, all of the following:

(1) The organization, financial structure, and nature of the business to be operated, including the names, personal and criminal history, and fingerprints of all officers and directors, and the names, addresses, and number of shares held by all stockholders of record.

(2) The rights and privileges acquired by the holders of different classes of authorized securities, including debentures.

(3) The terms on which securities are to be offered.

(4) The terms and conditions on all outstanding loans, mortgages, trust deeds, pledges, or any other indebtedness or security interest.

(5) The extent of the equity security holdings in the corporation of all officers, directors, and underwriters, and their remuneration as compensation for services, in the form of salary, wages, fees, or otherwise.

(6) The amount of remuneration to persons other than directors and officers in excess of one hundred thousand dollars ($100,000) per annum.

(7) Bonus and profit-sharing arrangements.

(8) Management, consultant, and service contracts related to the operation of controlled gaming.

(9) Options existing, or to be created, in respect of their securities or other interests.

(10) Financial statements for at least three fiscal years preceding the year of registration, or, if the corporation has not been in existence for a period of three years, financial statements from the date of its formation. All financial statements shall be prepared in accordance with generally accepted accounting principles and audited by a licensee of the California Board of Accountancy.

(11) Any further financial data that the department, with the approval of the commission, may deem necessary or appropriate for the protection of the state.

(12) An annual profit-and-loss statement and an annual balance sheet, and a copy of its annual federal income tax return, within 30 calendar days after that return is filed with the Internal Revenue Service.

gambling license corporate compliance office in gambling establishment

Section § 19881

If a corporation wants to run a gambling enterprise, it must state this in its articles of incorporation. These articles need to be approved by the relevant department. Moreover, the Secretary of State won’t accept articles of incorporation or any amendments that include gambling activities unless they are pre-approved by the department.

(a) A corporation is not eligible to receive a license to own a gambling enterprise unless the conduct of controlled gambling is among the purposes stated in its articles of incorporation and the articles of incorporation have been submitted to and approved by the department.

(b) The Secretary of State shall not accept for filing any articles of incorporation of any corporation that include as a stated purpose the conduct of controlled gambling, or any amendment thereto, or any amendment that adds this purpose to articles of incorporation already filed, unless the articles have, or amendment has, been approved by the department.

corporation gambling license gambling enterprise articles of incorporation

Section § 19882

This law section outlines what happens if the commission denies or revokes a license for someone who owns shares in a corporation seeking an owner license. The corporation and individual are notified, and the security must be sold at fair market value within 60 days, unless more time is granted. The person can't receive dividends, vote, or get paid by the corporation after denial. Securities must state these restrictions. Exemptions may apply if the denial was just due to unclear eligibility, unless other denial reasons exist.

(a) If at any time the commission denies a license to, or revokes the license of, an individual owner of any security issued by a corporation that applies for or holds an owner license, both of the following shall apply:

(1) The commission shall immediately notify the individual and the corporation of that fact.

(2) The owner of the security shall sell the security for an amount not greater than fair market value, within 60 calendar days of the denial or revocation. Upon a showing of due diligence, the commission may extend the time for selling the security.

(b) Beginning upon the date when the commission serves notice of the denial upon the corporation, it is unlawful for the denied security owner to do any of the following:

(1) Receive any dividend, income, or interest upon any security described in subdivision (a), except dividends equal to the good faith estimate of the owner’s personal share of any income tax due on the ownership interest until the date of the sale, as determined in writing by an independent certified public accountant, or as may be necessary to protect the election of the gambling enterprise to be treated as an “S corporation” under Subchapter S (commencing with Section 1361) of Chapter 1 of Subtitle A of the Internal Revenue Code.

(2) Exercise, directly or through any trustee or nominee, any voting right conferred by any security described in subdivision (a).

(3) Receive any remuneration in any form from the corporation for services rendered or for any other purpose.

(c) Every security issued by a corporate owner licensee shall bear a statement, on both sides of the certificate evidencing the security, of the restrictions imposed by this section.

(d)

(1) The commission may, at its discretion, not apply the provisions of subdivision (b) or paragraph (2) of subdivision (a) when the person who has been denied a license was denied that license solely due to the person’s failure to clearly establish eligibility and qualification for licensure as described in subdivision (a) of Section 19859.

(2) Paragraph (1) shall not apply if additional grounds for denial of the license existed, whether or not those grounds were formally provided as the reason for the denial.

license denial security owner corporation shares

Section § 19883

This law requires specific individuals associated with a corporate gambling licensee, such as officers, directors, and key employees, to get individual gambling licenses. The corporation must notify the state of any changes and ensure applications are submitted within 30 days. If someone doesn't apply, is denied, or has their license revoked, they must be removed or suspended. Shareholders also face denial if they don't apply on time. If others required to apply fail to do so, it's considered the corporation's failure.

(a) To the extent required by this chapter, officers and directors, shareholders, lenders, holders of evidence of indebtedness, underwriters, agents, or employees of a corporate owner licensee shall be licensed individually. The corporation shall require these persons to apply for a gambling license, and shall notify the department of every change of corporate officers, directors, or key employees within 10 business days after the change. An officer, director, or key employee who is required to apply for a license shall apply for the license within 30 calendar days after he or she becomes an officer, director, or key employee.

(b) The corporation shall immediately remove any officer or director required to apply for a license from any office or directorship if any of the following apply to that officer or director:

(1) He or she fails to apply for the license within 30 calendar days after becoming an officer or director.

(2) He or she is denied a license.

(3) His or her license is revoked.

(c) If the license of any officer or director is suspended, the corporation, immediately and for the duration of the suspension, shall suspend that officer or director.

(d) If any shareholder who is required to apply for a gambling license fails to apply for the license within the time required, the shareholder shall be deemed to have been denied a license for purposes of subdivision (b) of Section 19882.

(e) If any person, other than an officer, director, or shareholder, who is required to apply for a gambling license fails to do so, the failure may be deemed to be a failure of the corporate owner licensee to require the application.

corporate gambling license individual licensing corporate officers