Surety Bond News

California’s amendment SB 1225, which became effective January 1, 2009, allows LLC’s (Limited Liability Corporations) to establish private cemeteries. These companies need to obtain a form of security, such as a trust or bank escrow account, bank certificates of deposit, cash, letters of credit, United States Treasury obligations, or surety bonds. A minimum of a $1 million bond in needed for companies with 5 or less employees. An additional $100,000 is added per licensee if there are more than 5 employees, but the maximum amount for the bond is $5 million.

Califonia’s SB 1007 law originally did not have any relation to fidelity bonds. When the law was amended and became effective on January 1, 2009, it required exchange facilitators to be licensed and obtain either a minimum $1 million bond or fidelity bond, securities, post cash, or an irrevocable letter of credit in the same amount. Financial Institutions and title insurers, underwritten title companies and controlled escrow companies are exempt from the licensing requirement of the bill, but they still need to comply with the bonding and insurance requirements.

A “life of well bond” or a “life of production facility bondâ€? is required for oil production facilities who have outstanding liabilities to the state or who continually violate existing laws, as stated by California’s AB 1960. The bond needs to ensure that the facility will properly plug and abandon the well, safely decommission the facility, and that financing for any spill and incident cleanup will be provided with limited costs to the state. Once the facility has been properly decommissioned, the bond will be released. This law became effective on January 1, 2009.

With the AB 180, effective on July 1, 2009, foreclosure consultants are now required to register with the Department of Justice and to obtain a $100,000.00 surety bond. The bond is in favor of the State and to protect the homeowner in case the foreclosure consultant violates the new or existing law in any way. The SFAA and the AIA local counsel worked together on this bill to improve the bond requirements, which makes this bond more available and easier to underwrite.

A wholesaler license is compulsory for any company or business that brokers, distributes or transacts the retailing or return of dangerous drugs or dangerous devices into or inside California to other wholesalers, pharmacies or practitioners.

A licensed manufacturer that only dispenses drugs of their own manufacture, all of which have an accepted new drug manufacturing application on file with the FDA (Food and Drug Administration) are free from having to acquire this surety bond obligation. If you need to document this exemption all you need to do is provide the California State Board of Pharmacy a list of manufactured drugs which would include the respective NDC Number (National Drug Code, which is a universal product identifier for human drugs) along with a statement certifying that the business only distributes its own products.

Any contender for initial licensure or license renewal as a wholesaler or nonresident wholesaler (previously known as an out-of-state distributor or dispenser) must present a surety bond of $100,000 made payable to the Pharmacy Board Contingency Fund. All new businesses and/or companies must do one of the following three (3 )options in order to get their license: 1) Obtain the required $100,000 surety bond, 2) obtain an ILOC (Irrevocable Standby Letter of Credit) or 3) provide a Cash Deposit in Lieu of Bond. The ILOC is a document issued by your bank that essentially acts as an irrevocable guarantee of payment to an obligee. This means that if you do not perform your obligations, your bank pays. ILOC’s cannot be cancelled or amended without all the parties in agreement. A Cash Deposit In Lieu of Bond is essentially the principle (or Assignor as they are know in this instance) providing the required cash dollar amount to the California State Board of Pharmacy that is equivalent to that of the surety bond requirement. It is understood that the Board is not authorized to give back the cash deposit until sixty days beyond the date upon which an owner no longer licensed by the Board, or ceases to do business as a wholesaler.

If your company and/or business own several subsidiary companies that are reflected as the owners of wholesalers, then you are only required to have one bond. Simply provide the California State Board of Pharmacy a copy of the organization chart documenting the ultimate owner of the subsidiary companies verifying the familiar ownership.

In the future should the company or business be able to demonstrate their annual gross receipts of $10,000,000 or less, a new and lesser bond amount of $25,000 may be secured in lieu of the initial $100,000 bond amount.