(a) This rule applies to conduct surety bonds, performance bonds, excise tax bonds, and bonds for alternating brewery proprietorships and contract brewing arrangements ("bonds").

(b) Submission of Bond with Application.

(1) When required by the Alcoholic Beverage Code to submit a bond, an applicant for an original or renewal license or permit shall submit with its license or permit application the required bond or alternative form of surety, as authorized under this section.

(2) Failure to submit the necessary bond or alternative form of surety in proper form will result in denial of the application.

(c) A bond required under the Alcoholic Beverage Code must be executed only on forms prescribed by the TABC with the licensee or permittee as principal, a qualified surety company doing business in this state as surety, and the state as payee.

(d) All bonds shall be payable in Travis County.

(e) A license or permit holder shall obtain, submit, and maintain a separate bond for each license or permit it holds.

(f) A licensee or permittee required to furnish a bond under this section may furnish, in lieu of all or part of the amount of the bond required, one or more certificates of deposit or savings accounts assigned to the state or one or more letters of credit. If an assignment of a certificate of deposit, savings account, or letter of credit is furnished in lieu of a bond, the executive director or their designee shall keep it in the agency's possession. Interest earned on a certificate of deposit or savings account is not subject to the assignment and remains the property of the owner of the certificate of deposit or savings account.

(g) A certificate of deposit or savings account furnished in lieu of a bond by a licensee or permittee must be assigned to the state, in a manner approved by the executive director or their designee, to secure payment to the state.

(h) A letter of credit furnished in lieu of a bond by a licensee or permittee must be on a form approved by the executive director or their designee and contain any conditions required by the executive director to secure payment to the state.

(i) Qualifications of Surety Company.

(1) A surety company, to qualify to provide bonds under this subchapter, must be licensed by this state and in "good standing" with the State Board of Insurance, Comptroller of Public Accounts, Secretary of State, and any other regulatory agencies with jurisdiction over its affairs.

(2) In addition to the requirements of Alcoholic Beverage Code §§11.11 and 61.13, a bank or credit union must have a physical facility in this state to accept cash deposits, make cash advances to customers and carry out day-to-day operations within this state.

(j) Each bond required by this subchapter must cover the permit or license period and must be maintained until it is released or forfeited or, if it is a bond required by §33.45(b), until it is terminated by the surety pursuant to Alcoholic Beverage Code §11.71.

(k) Release of Surety.

(1) Upon expiration of the license or permit, its voluntary cancellation, or upon the applicant's subsequent approval for exemption from the surety requirement, the licensee or permittee may request the release and return of the security supporting their license or permit.

(2) The release of the surety will not be unreasonably withheld; however, the surety company, bank, or credit union is not released from its obligation until it receives written notice of the release from the commission.

(3) The executive director may not release a surety bond until the surety company has paid and discharged in full all of its liabilities on the bond to the state as of the date of cancellation.

(l) General Provisions regarding Bond Forfeiture.

(1) When a permit or license is revoked, the commission shall notify the permittee or licensee in writing of its intent to seek forfeiture of the bond.

(2) Upon entry of a final order against the permittee or licensee or upon waiver of hearing by the permittee or licensee, the commission shall notify the surety company to remit to the state the full amount of the surety required within ten days after notification.

(m) For purposes of this subchapter, an order issued pursuant to an agreement of the parties in which the permittee or licensee waives its right to a hearing is a final adjudication of the violation that is the subject of the agreement and order.

(n) Violations of the Code or commission rules by the legal entity in the name of which a bond or other surety is held or by any of its officers, directors, or partners are counted toward and may result in cancelation, forfeiture, or exemption from the requirement to post a bond or other surety.

(o) In a joint venture, regardless of the type of legal entity formed, prior violations by any participant in the joint venture will disqualify the joint venture from exemption from the requirement to post a bond or other surety.

(p) Neither the bondholder nor any officer, director, or partner of a bondholding entity may be granted a new license or permit until a forfeited bond or other surety is paid.

(q) The commission may seek forfeiture of a bond due to cancellation of the license or permit for any reason, including cancellation for multiple violations of Alcoholic Beverage Code §§102.31 and 102.32.

Source Note: The provisions of this §33.40 adopted to be effective December 31, 2020, 45 TexReg 8771