1. (a) Provisions for deferred payments on account of the purchase price of program units may be allowed when warranted by the investment objectives of the program, but in any event such arrangements shall be subject to the following conditions:

   1. (1) Installment payments, subsequent to the initial payment required by the terms of the offering, shall be made in not more than 3 payments and the full amount of the purchase price shall be paid not later than 9 months after the date on which such programs commence operations.
   2. (2) Selling commissions payable on the units shall be paid only as and when the allocable part of the purchase price is paid by the participant.
   3. (3) Such installments shall be contractually binding obligations of the buyer whether or not a promissory note is taken.
   4. (4) If a promissory note is taken, the program shall not sell or assign it at a discount.

2. (b) In the event of a default in the payment of any installment due on an installment sale, the participant's percentage interest in the program should not be subject to forfeiture, but may be subject to a reasonable penalty for failure of the participant to meet his commitment. Provisions which conform to the following will be considered reasonable:

   1. (1) A proportionate reduction of the participant's percentage interest in the program based on the ratio of his unpaid capital contribution as to the total capital contribution of all participants in the program; or,
   2. (2) A subordination of the defaulting participant's right to receive revenues from the program until those non-defaulting participants who have paid the defaulting participant's assessment have received an amount of revenues from all revenues of the program equal to 300% of the proportionate amount of the defaulted capital contribution which they paid.

Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25140, Corporations Code.

History

1. Editorial correction adding Note filed 11-8-82 (Register 82, No. 46).