ASSEMBLY, No. 2692
STATE OF NEW JERSEY
INTRODUCED FEBRUARY 3, 1997
By Assemblyman GREENWALD
An Act providing for the creation of a security interest in certain liquor licenses and supplementing Title 33 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
"Debt-repayment interest" means a security interest in a license, which interest is created and limited solely to secure the payment of an obligation or obligations of the licensee to the holder of the obligation.
"Division" means the Division of Alcoholic Beverage Control.
"Holder" means a financial institution which has a right to a repayment obligation of credit supplied to a licensee and includes only those financial institutions with authority to make commercial loans and which are subject to regulation by the Department of Banking and Insurance or, for federally chartered financial institutions, subject to regulation by the Office of the Comptroller of the Currency or the Office of Thrift Supervision.
"License" means a Class C retail license issued pursuant to R.S.33:1-12.
"Licensee" means a person who has a license.
2. A holder may obtain a debt-repayment interest in a license upon application to and approval of the division as set forth in this act.
3. The rights of the holder of a debt-repayment interest shall be limited to the right to transfer the license to the holder upon default of the licensee in payment of an obligation, which obligation shall be evidenced by a writing signed by the licensee and containing the following information:
a. The names and addresses of the holder and the licensee;
b. A designation of the licensed premises;
c. The amount of the indebtedness; and
d. Language that indicates that the licensee grants to the holder the interest in the license in order to secure the repayment of any unpaid balance of the indebtedness.
4. In order to obtain a valid and perfected debt-repayment interest, the holder shall be eligible to be a licensee and shall apply to and be approved by the issuing authority as a person with an interest in the license in substantially the same manner and pursuant to the same application and notice provisions as all other interests in a license are approved. The annual renewal application for each license subject to a debt-repayment interest shall contain that information which the division requires.
5. Any license which is subject to a debt-repayment interest shall so indicate on the face of the license, in the format the division prescribes.
6. a. The division shall keep an index of all debt-repayment interests, indexed by the name of the licensee, and shall note on the index the date on which the debt-repayment interest was approved. The information in the index shall be made available to the public, upon application and payment of a fee, the amount of which shall be determined by the division in relation to the information requested.
b. A holder may, by the holder's signed statement, release the debt-repayment interest in a license. The statement of release is sufficient if it contains the name of the licensee, the address of licensed premises and the name and address of the holder, and requests the division to delete the debt-repayment interest from the index. Upon presentation to the division, the division shall amend its index accordingly.
7. a. If a licensee is in default of an obligation to a holder secured by a debt-repayment interest in the license, the holder shall have the right to:
(1) Have the license transferred to it in full satisfaction of the debt, provided that the holder has given at least ten day's prior notice of the proposed transfer to the division, the licensee and any other holder of a debt-repayment interest in the license; and
(2) Dispose of the license at a public or private sale provided that every aspect of the sale including the method, manner, time, place and terms shall be commercially reasonable and provided further that no rights in the license shall be transferred to the successful bidder, other than the holder, unless and until the transfer is approved as a person-to-person transfer of the license to the successful bidder in the same manner as other person-to-person transfers are considered and approved. All holders of any subordinate debt-repayment interest in the license shall be entitled to notice of the sale.
b. The transfer of a license pursuant to this section shall not remove or eliminate any restrictions on the license imposed by the issuing authority or by the division.
8. A debt-repayment interest shall become perfected and enforceable upon approval by the issuing authority pursuant to this act. If there is more than one debt-repayment interest in the same license, the priority of each interest shall be determined by the time and date of its approval.
9. Nothing in this act shall be deemed to create a property or other right in any license for any purpose except for the limited debt-repayment interest to secure the repayment of debt by the licensee, nor shall anything in this act be deemed to limit revocation of a license or other sanctions imposed against the license pursuant to any applicable law or regulation.
10. A debt-repayment interest shall not be deemed to be a beneficial interest in a license pursuant to section 1 of P.L.1962, c.152 (C.33:1-12.31). The holder of a debt-repayment interest shall not be responsible for violations of law or regulation committed by the licensee.
11. The division shall promulgate regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), necessary to effectuate the provisions of this act, including regulations establishing fees for applications, filings and searches authorized pursuant to this act and, without limitation, fees for compliance with sections 4 and 6 of this act and regulations adopting forms and procedures.
12. This act shall take effect on the 120th day following enactment.
This bill would permit a financial institution authorized to make commercial loans to obtain a debt-repayment interest in certain Class C retail liquor licenses to secure repayment of an obligation of a licensee to the lender. In order to obtain such an interest, the lender must be eligible to be a licensee and must apply and be approved by the issuing authority. The application procedure would be the same as for any person wishing to have an interest in a license approved. Once approved, the debt-repayment interest is perfected and enforceable. The rights of a holder of a debt-repayment interest are limited to the right to transfer the license upon default of the licensee with respect to payment of an obligation to the holder. Upon default of an obligation to a holder by a licensee, the holder may: (1) have the license transferred to the holder in full satisfaction of the debt, provided that the holder has given notice at least 10 days in advance of the transfer to the division, the licensee and to any other holders of a debt-repayment interest in the license; and (2) dispose of the license at a public or private sale with every aspect of the sale to be commercially reasonable. No transfer to a successful bidder shall be complete until that bidder is approved in the same manner as other person-to-person transfers are considered and approved. A debt-repayment interest is not deemed to create a property interest or a beneficial interest in a license. A holder of a debt-repayment interest is not responsible for violations of law or regulation committed by the licensee.
The bill requires the Division of Alcoholic Beverage Control to set up an index of all debt-repayment interests, indexed by the name of the licensee. This information is to be made available to the public upon application and payment of a fee to be set by the division by regulation. The division is authorized to promulgate regulations necessary to effectuate the provisions of this bill, including regulations establishing fees and adopting forms and procedures.
Provides for the creation of a security interest in Class C retail liquor licenses.