CITE

    15 USC Sec. 80a-54                                          01/05/2009

EXPCITE

    TITLE 15 - COMMERCE AND TRADE
    CHAPTER 2D - INVESTMENT COMPANIES AND ADVISERS
    SUBCHAPTER I - INVESTMENT COMPANIES

HEAD

    Sec. 80a-54. Acquisition of assets by business development
      companies

STATUTE

    (a) Permissible assets; percentage
      It shall be unlawful for a business development company to
    acquire any assets (other than those described in paragraphs (1)
    through (7) of this subsection) unless, at the time the acquisition
    is made, assets described in paragraphs (1) through (6) below
    represent at least 70 per centum of the value of its total assets
    (other than assets described in paragraph (7) below):
        (1) securities purchased, in transactions not involving any
      public offering or in such other transactions as the Commission
      may, by rule, prescribe if it finds that enforcement of this
      subchapter and of the Securities Act of 1933 [15 U.S.C. 77a et
      seq.] with respect to such transactions is not necessary in the
      public interest or for the protection of investors by reason of
      the small amount, or the limited nature of the public offering,
      involved in such transactions -
          (A) from the issuer of such securities, which issuer is an
        eligible portfolio company, from any person who is, or who
        within the preceding thirteen months has been, an affiliated
        person of such eligible portfolio company, or from any other
        person, subject to such rules and regulations as the Commission
        may prescribe as necessary or appropriate in the public
        interest or for the protection of investors; or
          (B) from the issuer of such securities, which issuer is
        described in section 80a-2(a)(46)(A) and (B) of this title but
        is not an eligible portfolio company because it has issued a
        class of securities with respect to which a member of a
        national securities exchange, broker, or dealer may extend or
        maintain credit to or for a customer pursuant to rules or
        regulations adopted by the Board of Governors of the Federal
        Reserve System under section 78g of this title, or from any
        person who is an officer or employee of such issuer, if -
            (i) at the time of the purchase, the business development
          company owns at least 50 per centum of -
              (I) the greatest number of equity securities of such
            issuer and securities convertible into or exchangeable for
            such securities; and
              (II) the greatest amount of debt securities of such
            issuer,
          held by such business development company at any point in
          time during the period when such issuer was an eligible
          portfolio company, except that options, warrants, and similar
          securities which have by their terms expired and debt
          securities which have been converted, or repaid or prepaid in
          the ordinary course of business or incident to a public
          offering of securities of such issuer, shall not be
          considered to have been held by such business development
          company for purposes of this requirement; and
            (ii) the business development company is one of the 20
          largest holders of record of such issuer's outstanding voting
          securities;
        (2) securities of any eligible portfolio company with respect
      to which the business development company satisfies the
      requirements of section 80a-2(a)(46)(C)(ii) of this title;
        (3) securities purchased in transactions not involving any
      public offering from an issuer described in sections 80a-
      2(a)(46)(A) and (B) of this title or from a person who is, or
      who within the preceding thirteen months has been, an affiliated
      person of such issuer, or from any person in transactions
      incident thereto, if such securities were -
          (A) issued by an issuer that is, or was immediately prior to
        the purchase of its securities by the business development
        company, in bankruptcy proceedings, subject to reorganization
        under the supervision of a court of competent jurisdiction, or
        subject to a plan or arrangement resulting from such bankruptcy
        proceedings or reorganization;
          (B) issued by an issuer pursuant to or in consummation of
        such a plan or arrangement; or
          (C) issued by an issuer that, immediately prior to the
        purchase of such issuer's securities by the business
        development company, was not in bankruptcy proceedings but was
        unable to meet its obligations as they came due without
        material assistance other than conventional lending or
        financing arrangements;
        (4) securities of eligible portfolio companies purchased from
      any person in transactions not involving any public offering, if
      there is no ready market for such securities and if immediately
      prior to such purchase the business development company owns at
      least 60 per centum of the outstanding equity securities of such
      issuer (giving effect to all securities presently convertible
      into or exchangeable for equity securities of such issuer as if
      such securities were so converted or exchanged);
        (5) securities received in exchange for or distributed on or
      with respect to securities described in paragraphs (1) through
      (4) of this subsection, or pursuant to the exercise of options,
      warrants, or rights relating to securities described in such
      paragraphs;
        (6) cash, cash items, Government securities, or high quality
      debt securities maturing in one year or less from the time of
      investment in such high quality debt securities; and
        (7) office furniture and equipment, interests in real estate
      and leasehold improvements and facilities maintained to conduct
      the business operations of the business development company,
      deferred organization and operating expenses, and other
      noninvestment assets necessary and appropriate to its operations
      as a business development company, including notes of
      indebtedness of directors, officers, employees, and general
      partners held by a business development company as payment for
      securities of such company issued in connection with an executive
      compensation plan described in section 80a-56(j) of this title.
    (b) Valuation of assets
      For purposes of this section, the value of a business development
    company's assets shall be determined as of the date of the most
    recent financial statements filed by such company with the
    Commission pursuant to section 78m of this title, and shall be
    determined no less frequently than annually.

SOURCE

    (Aug. 22, 1940, ch. 686, title I, Sec. 55, as added Pub. L. 96-477,
    title I, Sec. 105, Oct. 21, 1980, 94 Stat. 2278; amended Pub. L.
    100-181, title VI, Sec. 626, Dec. 4, 1987, 101 Stat. 1263; Pub. L.
    104-290, title V, Sec. 505, Oct. 11, 1996, 110 Stat. 3446.)

REFERENCES IN TEXT

      The Securities Act of 1933, referred to in subsec. (a)(1), is act
    May 27, 1933, ch. 38, title I, 48 Stat. 74, as amended, which is
    classified generally to subchapter I (Sec. 77a et seq.) of chapter
    2A of this title. For complete classification of this Act to the
    Code, see section 77a of this title and Tables.

AMENDMENTS

      1996 - Subsec. (a)(1)(A). Pub. L. 104-290 substituted "from any
    person" for "or from any person" and inserted before semicolon ",
    or from any other person, subject to such rules and regulations as
    the Commission may prescribe as necessary or appropriate in the
    public interest or for the protection of investors".
      1987 - Subsec. (a)(1)(B). Pub. L. 100-181 substituted "described
    in section" for "described in sections".